The gas sale agreement (GSA) between the Ghana National Petroleum Corporation (GNPC) and Genser Energy Ghana Limited (GEGL) is expected to save Ghana $1.462 billion, according to a report by the Parliamentary Select Committee on Mines and Energy.
The committee, which investigated the agreement after allegations of a $1.5 billion financial loss brought up by policy think tanks, ACEP and IMANI, found that the deal was instead beneficial to the Ghanaian economy and had no record of unfavourable terms.
The deal allows GNPC to buy gas from GEGL at a lower rate than what is sold on the market and use it for various purposes for economic growth.
The report stated that the deal would save Ghana $1.462 billion by avoiding paying higher gas prices if GEGL moved to the Weighted Average Cost of Gas (WACoG) net back price.
The WACoG is a way of measuring how much it costs to produce and sell natural gas.
The report also stated that if Ghana had borrowed money to finance its own pipeline network, it would have cost $1.625 billion. Therefore, by keeping the GNPC-GEGL GSA, Ghana would save $1.462 billion over 16 years, which is the duration of the agreement.
It also clarified that the $1.5 billion loss claim made by ACEP and IMANI was based on a confusion between the penalties for contract termination and the loss for contract performance. The report explained that GNPC would pay GEGL a gas discount charge only for shortfall payments in case of non-delivery of gas, not for regular gas supply.
“ACEP-IMANI hypothesis is defeated by reason of the following: The above computation confuses the penalties to GNPC for contract termination (”Liquidated Damages”) under the GSA with the loss to GNPC for performing the contract (“GNPC Revenue Forgone”). The US$ l .5 billion was calculated using GEGL Pipeline Gas Discount Charge which is solely used for Shortfall Payments in the GNPC-GSA leading to this confusion. The reason is that, under current agreement, GNPC avoids payment of GTA Tariffs for 130mmscfd for 25 years (“·GNPC Costs Avoided”). If Genser is moved to 10 WACoG Netback, GNPC will pay Genser a GTA Tariff equal to WAGP or PURC tariff,” the report read.
The report also outlined other economic benefits of the GSA, such as a reduction in transmission losses by $480 million once the Ameri thermal plant is relocated to Kumasi and made operational using GEGL’s pipeline network, and an increase in port revenue due to the export of natural gas liquids (NGLs) via the Takoradi Port.