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Parliamentary Committee rejects $1.5 billion GNPC-GENSER loss claim

Nazir Hamzah August 22, 2023

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The Parliamentary Select Committee on Mines and Energy has concluded its investigation into the Ghana National Petroleum Corporation (GNPC) and Genser Energy Ghana Limited (GEGL) deal, debunking unfounded claims of irregularities and losses.

Parliamentary Committee debunks $1.5b loss in GNPC-GENSER deal, lists 11 benefits

This inquiry was initiated in response to allegations made by the African Centre for Energy Policy (ACEP) and the IMANI Center for Policy and Education in July 2022, asserting that the deal resulted in a loss of $1.5 billion for Ghana.

The Committee’s report, however, reveals significant benefits for the nation that far surpass this claim.

The Committee’s findings should ideally resolve the matter if it were a mathematical rather than political issue.

Nonetheless, the Ranking Member of the Mines and Energy Committee, Honorable John Abdulai Jinapor, maintains his disagreement with the Committee’s conclusions.

He still contends that the Gas Sales Agreement (GSA) between GNPC and Genser Energy will lead to substantial losses for the State.

ACEP and IMANI had raised concerns regarding this GSA, alleging that Ghana would incur a massive loss of $1.5 billion due to the arrangement. These claims suggested that GNPC sold gas to Genser at significantly reduced rates compared to its purchase price, implying a subsidy.

Following an extensive 11-month investigation, the Parliamentary Committee refutes these allegations and declares that the GSA is not a “sweetheart contract.” The Committee identifies flaws in the computation methods employed by ACEP and IMANI.

These civil society organizations calculated a hypothetical loss based on a contractual sum of $2.79/MMBtu. However, this price incorporates offsets from a capacity charge of $3.29/MMBtu.

The Committee finds the arrangement to be highly advantageous for the nation, highlighting 11 key economic benefits associated with the deal.

These range from enhancing energy security to job creation, developing future industries, and attracting foreign direct investment, all of which contribute to Ghana’s economic growth.

While Mr. Jinapor disputes these national benefits, he has yet to present alternative mathematical calculations to substantiate his viewpoint.

Key findings from the report [excerpts]:

GNPC stands to save approximately US$1.462 billion, as it would lose this amount if GEGL moved to WACoG Net Back.
The GNPC/GEGL Gas Transmission Agreement would save GNPC US$1.462 billion, and if Ghana had borrowed instead, it would have cost US$1.625 billion.
Relocating the Ameri plant to Kumasi and making it operational would reduce transmission losses by US$480 million.
Exporting NGLs using Takoradi Port would increase port revenue from cargo fees, port dues, and other services.
There would be a reduction of 1.15 million tons of carbon dioxide per year, as flaring would decrease due to UP01 and PP03, bringing all flared gas onshore for processing and utilization, along with an additional 0.225 million tons of power generation in Kumasi, saving about 40MW of transmission loss.
Substituting CNG for diesel in the industry would lead to a 75% reduction in fuel costs.
GEGL’s clients have extended the life of their mines by 10 years since engaging GEGL due to reliable and quality power.
Structuring GEGL’s pipeline network around future industries would expedite their development.
Over US$400 million in export revenue from NGL/LNG processing and export would be generated annually.
A direct investment of over US$980 million in Ghana, resulting in the same amount of forex invested.
Approximately 250 direct and 950 indirect jobs would be created from GEGL’s business activities.