Alex Mould
Ghana’s track record of poor negotiation of gas sales agreement is to blame for the country’s inability to rake in more revenue for development, a report has revealed.
“It is only in Ghana that using our own gas produced offshore in the Western Region and transported to Tema will cost as more than gas produced from Russia, Qatar or elsewhere and shipped to Ghana as LNG and regasified at additional cost will be priced less,” the report said.
“Sadly that is the pricing reality between Sankofa gas from ENI and Tema LNG gas from Russia’s Rosneft,” it added.
According to the report, the Sankofa gas field is a prime example of how poor negotiation of gas sales agreement is rendering the country poorer.
“ENI, the international operator, was guaranteed a 20% return for a project that will deliver gas at prices higher than the cost of crude oil,” it revealed.
It said that LNG provides what it calls ‘an unwelcome reference point’ in negotiations between the government and oil and gas operators, adding “if the upstream players can’t provide gas cheaper than LNG why should Ghana countenance developing these resources.”
“The oil and gas companies would prefer that LNG didn’t exist and that the discussions were based on crude oil or worse still diesel and gasoline prices,” it said.
The report said that “under the terms of the Sankofa agreement signed in 2016 under the John Mahama government, GNPC committed to pay $9.3/MMbtu for gas delivered at the gas platform and a further $2.7/MMbtu for processing and transportation to Tema.”
It said “a total price of nearly $2.7/MMbtu or $80/bbl, this price is inflated annually by US inflation metrics and US gas prices.”
The report said that “a comparison between Sankofa gas and other sources of fuel such as gas from Jubilee, TEN, LNG and even crude oil, should be based on delivered market price, the cost of getting the product to the market in a condition ready for power generation.”
It further explained that “when compared on a like for like basis the Sankofa price is laid bare as potentially the worst contract signed by any Ghanaian government entity.”
The report said that “ENI and the local and international ‘think tanks’ working on its behalf have often used the well head price to confuse and understate the true cost of this economically damaging contract.”
It, however, concluded that “the Sankofa gas sales agreement is a major threat to Ghana’s ability to deliver low cost power,” adding “ENI and Tullows desire, therefore, to distract attention from the realities of the contract and instead attempt to discourage the nations step towards energy freedom through LNG are understandable, but why are credible organisations supporting this approach and why are Ghanaians not supporting this important project?”
A Daily Guide Report