Tuesday, January 06, 2009

The West African Gas Project

The West African Gas Pipeline (WAGP) at last delivered its first gas to Ghana on December 11, 2008. The 680 - kilometre pipeline stretches from Nigeria, where the natural gas is sourced across Benin and Togo to Ghana. Benin and Togo will each take relatively small amounts of the fuel, with the bulk going to the industrial centres of Tema and Takoradi in Ghana. The initial 30 million cubic feet of gas per day is expected to help address recent power shortages in Ghana, which have forced some companies to suspend operations.
Coming some 26 years after the Economic Community of West African States (ECOWAS) proposed the development of a natural gas pipeline throughout West Africa as one of its key regional economic policies, this is heart-warming economic news.
As in all major projects in this part of the world, since construction began in 2005, the project has suffered repeated delays due to political and security reasons.
Chevron and Shell together own over 50 percent of WAPCo, the project operator. And the World Bank and its private insurance arm backed the project with guarantees, and the European Investment Bank provided a €75 million loan.
It is better late than never, they say. This project is a major achievement for ECOWAS, which did not have much to show for its 34-year existence.
The project has several benefits. For example a study, commissioned by Chevron, estimates that 10,000 to 20,000 primary sector jobs will be created in the region by the project. With the new and more stable power supply, fuelled by gas from the project, there will be further industrial growth with a potential for an additional 30,000-60,000 secondary jobs. Also in addition to the $1 billion in investment (WAGP and power facilities) already projected, the study sees approximately $800 million in new industrial investment occurring in the region.
The World Bank estimates that Benin, Togo and Ghana can save nearly $500 million in energy costs over a 20-year period as WAGP-supplied gas is substituted for more expensive fuels in power generation. For example, Ghana has estimated that it will save between 15,000-20,000 barrels per day of crude oil by taking gas from the WAGP to run its power plants.
Benefits of the project to the environment come in the form of reduced gas flaring in the Niger Delta because some of the flared gas now has economic use; and the fact that cleaner-burning gas supplied by the WAGP will replace petroleum products used in the generation of electricity.
However, we are not unaware of the fact that many local environmental groups in Ghana, Nigeria, and Togo have opposed the WAGP project because of its environmental and social impact. For example, Friends of the Earth-Ghana has stated that environmental impact assessments of the project were not given sufficient priority in feasibility studies. Considering the sensitivity of this issue, and in the interest of the people for which the project is meant, we urge the companies and beneficiary countries to look carefully into the grievances of the people.
Another controversial issue is Nigeria’s dilemma over gas exports when as a result of the Niger Delta crisis, it is unable to supply enough gas to its power plants. But we believe that with proper planning, Nigeria, from its abundant gas resources, should be able to satisfy local needs as well as exports to earn some more foreign exchange.
We highly commend ECOWAS, the participating countries and companies for this remarkable achievement, which will, in addition to its economics, increase bonding of countries in the sub region