By Jacob Dagbee
As people in every part of the world, citizens in
the West Africa Sub-Region seek a higher standard of living, which can only be possible
with access to commercially sustainable energy services and energy security.
Energy is the pivot or the fulcrum around which the economic development of
every country revolved. This is because energy is what drives the turbines in
the industry for the manufacturing of goods and services, fuels bumper harvest
in the agriculture sector through the usage of machines such as tractors,
combined harvesters, facilitate the movement of agricultural produce to the
market centres to reduce post-harvest losses, light and cool/ warm homes and
offices and most importantly aid the transportation of people to and fro their
economic activities.
Many professionals and academics in the energy
sector have given diverse definition for energy security however for the
purpose of this study the definition given by Barton etal (2005) will be used.
They defined energy security as “a
condition in which a nation and all, or most of its citizens and businesses
have access to sufficient energy resources at reasonable prices for the
foreseeable future, free from serious risk of major disruption of service”[1].
Energy security has been the vanguard of policy formulation and implementation
for both exporting and importing countries. Energy importing countries will be
much concerned about the major drain on their balance of payment which always
has a direct correlation on the inflation rate in the country. The country will
at the same time be concerned about energy supply security to meet the local
demand. It is within this context of
energy security that the World Bank and other shareholders of the West Africa
Gas Pipeline in order to ensure the energy security of the sub-region initiated
this project to transport natural gas from Nigeria to Benin, Togo and Ghana. The paper will adopt an analytical approach of energy
production and consumption in Ghana as its methodology in relation to the
research question.
The aim of this article is to examine the challenges facing the
WGPL-P which might probably account for the delays in meeting the target of the
project as well as take an introspective analysis of the problems the project
is currently facing and hence not able to achieve the objectives of the
project.
The questions that this paper seeks to ask are in two faces. 1)
What are the consequences of the challenges facing the West African Gas
Pipeline project on the domestic energy consumption of Ghana and how has it
affected the economy in the energy mix of the country. 2) The Second question
the paper seeks to ask is how the country is planning to get alternative source
of energy (Gas) to meet the domestic energy consumption in the economy.
Energy Security in the
West African Sub Region
Countries
in West Africa like many other countries in the world face many of the same
challenges as a result of factors such as economic growth and the need for
fuelling energy demand to feed the domains of the economy. Apart from few
exceptions such as Nigeria the other countries in the West African Sub-region do
not have or developed sufficient national energy resources to meet domestic
consumption so they have become dependent on imports from other countries, this
led to the development of the West African Gas pipeline Project with the
primary aim of augmenting the energy deficit of these countries. It is indeed
an undeniable fact that, the West African Sub-region energy sector is dominated
by state companies which lack commercial incentives and innovations and tend to
be ineffective and inefficient; prices for fuels such as LPG and diesel,
kerosene, and electricity are deeply subsidized, encouraging inefficient use of
energy at the same time discouraging extra investment in energy supply, and in
the end often resulting in energy shortages and energy/power rationing[2].
This
trend of energy security in these countries in the West African Sub-region is
an affront to industrialization and the potential killer of small scale
business and the folding up of some companies as result of under capacity
production. This situation leads to a major loss of revenues to the government
in these countries. For example in 2007, due to power/energy rationing programme made the Internal Revenue Services
( IRS) in Ghana to lose an estimated
amount of ¢140 billion of revenue which could have been collected as tax for the government. The reason was that, low
earnings were recorded by most of the companies due to the power rationing.
These revenues could be taxed by the IRS for the government[3].
The
primary energy mix among the West African sub-region countries estimated total energy consumption in 2005
varied from 0.034 quadrillion British thermal units (Btu) in Benin which
recorder the least consumption to 1.068 quadrillion Btu in Nigeria which
recorded the highest consumption rate. The
figures for other countries in the sub-region include: Ghana 0.149 (Btu), Togo
0.036 (Btu) and Côte d’Ivoire 0.113 quadrillion Btu. Respective figures for
Africa and the World are 14.35 and 442.31 quadrillion Btu[4].
The Figure below shows the share of energy consumption of the five countries in
the West African Sub-region.
Source: EIA
From
the figure, Nigeria, as the largest country and the biggest economy in the
sub-region, has the highest share of total energy consumption in the sub-
region accounting for more than two thirds of total consumption. The other countries’
shares in the region are much smaller: Ghana accounts for just over 9%, Côte
d’Ivoire 7%. Togo and Benin record little over 2% each respectively. In totality
all the five countries jointly account for 87% of total energy Consumption in
the region[5].
West African Gas
Pipeline Project
Natural
Gas is, like oil, a form of petroleum produced by chemical reactions
underground in the remains of organic material from earlier ages. But there is
one major difference. Natural gas is bulky, difficult to handle, and expensive
to transport. There are two ways of transporting natural gas, by pipelines or
in tankers. In pipelines, gas flows from one end where the pressure is high to
the other end where it is lower[6].
There have been many cross-border pipeline projects both on-land and submarine
pipelines which some have been completed and others are still under
construction. Example include the Norwegian submarine gas pipeline to the
Continent, this crosses Danish, German, Dutch, and Belgian continental shelves to France, the Blue Stream pipeline
project which is completed to transport Russian natural gas to Turkey and
advance to Southern Europe, the Nord Stream gas pipeline project which connect
Russia to Germany and the west African gas pipeline which is the focus of this
paper.
The
West African Gas Pipeline Project (WAGP) is a Cross-Border Gas Project
connecting three West African Countries: Ghana, Benin and Togo via a 680kilometre
pipeline with Nigeria as the source of the natural Gas. Below is the graphical
representation of the project.
The
project is sponsored by the Worlds Bank with the fundamental aim of improving
the energy security in the West African sub region. It is estimated to cost
$600 million which the pipe line is projected to trade natural gas from Nigeria
for alternative fuels used by industrial, power, commercial and mining sectors
in the Sub-region[7]
and also promoting regional economic and socio-political
and economic cooperation that would propel economic growth and development of
the West Africa electricity market. The WAGP Project is designed to feature
three components: the first Component detailed the Pipeline Cost and Financing.
The Sponsors of the project estimated the Gas pipeline to cost approximately
US$590 million; extra compression-related costs were estimated to be
approximately US$l10 million over 20 years period. This said amount would be
needed if the capacity requirement rises from the initial 200,000 MMBtu/day to
the 474,000 MMBtu/day target by the Sponsors of the project under the agreed
demand predictions[8].
The second Component of the gas pipeline project detailed the Sources
of the Natural Gas. Nigeria's proven natural gas both associated and
non-associated gas reserves are conventionally projected at about 125 trillion
cubic feet. Out of this, it is estimated that about 1,300 billion cubic feet of
these reserves are produced annually, of which approximately 75% is Associated
Gas (AG) and most of which is flared (about 2,500 MMscf/day)[9].
The third Component of the project emphasizes the uses of the Natural
Gas. Natural Gas is used for heating buildings, heating water, cooking, drying
clothes lighting and industrial purposes of course some house hold appliances
are designed to use natural. The WAGP pipeline is being financed based on
amounts contracted upfront from the shareholders Chevron Texaco
West African Gas Pipeline Ltd, Nigerian National Petroleum Corporation, Shell Overseas Holdings Limited and Takoradi Power Company Ltd[10].
This article examined the implications of the West African gas Pipeline project to domestic energy supply and
security in Ghana giving its challenges. The paper also aims to find out
whether Ghana is devising alternative source of energy to meet its domestic energy
demands. This is the first installation of this article. Read, Learn, Share and Discuss!!!
[1]
Barton et al, (2005,eds) Energy Security: Managing Risk in a Dynamic Legal and
Regulatory Environment (Oxford University Press) pg.5.
[2]
Adenikinlu, A. West Africa Energy security Report ( 2008) available http://www.beg.utexas.edu/energyecon/IDA/Smart_Development/WAESR_Fall_08.pdf
last visited 14th of December 2011.
[3]
The Stateman: Power rationing cost Ghana ¢140bn in taxes: Ghana News
Agency:19/02/2007. Available at http://www.thestatesmanonline.com/pages/news_detail.php?newsid=2572§ion=2 last
visted 14th Dec. 2011
[4]
Adenikinju Adeola:West Africa Energy security Report Fall 2008 available at http://www.beg.utexas.edu/energyecon/IDA/Smart_Development/WAESR_Fall_08.pdf
last visited on the 14th of December 2011.
[5]
See Adenikinlu, A. Supra note 2
[6]
Hannesson, R (1998) Petroleum Economics: issues and strategies of oil and
natural Gas production: Quorum Books, 88 Post West, Westport. USA. Page 37
[7]
Michael Kapriko: The World Bank And The West African Gas Pipeline Project.
Sept. 29, 2010 available at http://www.africaportal.org/articles/2010/09/29/world-bank-and-west-africa-gas-pipeline-project
last visited 12th November 2011
[8]
The World Bank: 3A-West
African Gas Pipeline ( IDA S/UP) available at http://web.worldbank.org/external/projects/main?pagePK=104231&piPK=73230&theSitePK=40941&menuPK=228424&Projectid=P082502 last visited 12th
November 2011
[9]
The World Bank:
3A-West African Gas Pipeline ( IDA S/UP) available at http://web.worldbank.org/external/projects/main?pagePK=104231&piPK=73230&theSitePK=40941&menuPK=228424&Projectid=P082502 last visited 12th
November 2011
[10]
Ghana Web: Shareholders of west African Gas pipeline decide on project.
Available at http://www.ghanaweb.com/GhanaHomePage/business/artikel.php?ID=72297
last visited on the 13th December 2011.
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