OBG talks to Joe Oteng-Adjei, Minister of Energy

Interview: Joe Oteng-Adjei

What sort of operational constraints does the West African Power Pool (WAPP) face?

JOE OTENG-ADJEI: Fundamentally, the issue facing the West African power sector is attracting investment for energy infrastructure. Although WAPP has been successful in drawing investors for some of its transmission projects, there is still a large need for investment, especially in generation capacity within the sub-region.

WAPP has the potential to improve the level of access to commercial energy services within the sub-region. However, infrastructure investments are capital intensive and require the investment climate to improve in the member countries and across the region. Price subsidies, high system losses, the poor financial status of state enterprises and implementation of simple regulatory frameworks are all among the constraints that must be addressed. Adjusting the cost of natural gas and electricity so as to allow cost recovery is needed. This in turn would attract investment in power plants, pipelines and other infrastructure. However, this must be complemented by enhancing communications with consumers and visibly improved service quality.

What can be done to encourage greater generation, transmission and distribution in rural areas?

OTENG-ADJEI: Steps have been taken by the government to encourage independent power producers (IPPs) to invest in additional generation, as well as transmission and distribution. However, IPPs have raised some concerns, including the uncertainty of gas availability, pricing, off-taker and financial credibility. These issues are currently being tackled.

In your opinion, what are the primary causes for load-shedding in recent months?

OTENG-ADJEI: The primary causes for load-shedding are a shortfall in power generation and an increase in demand, which sometimes leads to load being shed. Gas supply from the West Africa Gas Pipeline has been quite erratic in 2012, averaging around 55m standard cu feet per day (mmscfd) instead of a contractual volume of 110 mmscfd at an expected minimum of 90 mmscfd.

Supply has stabilised, but it has been consistently below the minimum 90 mmscfd, and since the Volta River Authority (VRA) thermal facilities are now dual-fired (light crude oil and gas), the unreliable supply of gas causes frequent switching between crude oil and gas. This has given rise to a number of mechanical problems in the VRA units. Most of these problems have been fixed, but do reoccur from time to time. However, discussions are ongoing with gas suppliers in Nigeria to respect the contractual volumes.

In the next six months, 480 MW of new capacity is expected to come on-line. Of that, VRA is likely to add 240 MW, and the Bui Power Authority and CENIT Energy, a subsidiary of the Social Security and National Insurance Trust, are expected to add another 240 MW.

How do you envisage the local content policy?

OTENG-ADJEI: The extent to which local people can participate in the oil and gas sector is limited in respect of technology, finance and human capital. It is the nation’s duty to adequately and holistically empower its citizens through the formulation and implementation of good policies, hence the policy framework on local content and local participation.

In this regard, the policy aims to strengthen the capacity of local financial institutions to compete with their foreign counterparts, build the relevant local capacity for the oil and gas industry, as well as diversify the economy. The policy also seeks to promote the use of Ghanaian goods and services, transfer technology and know-how, as well as indigenise knowledge and ownership. Of course, we will need foreigners in some key areas, but this must go hand in hand with ensuring local sustainability. Thankfully, Ghana discovered oil and gas at an opportune time when we have an enviable democracy, a promising economy which thrives on a stable political environment, good governance, a welcoming climate for business and the rule of law.