Why Nigeria can’t meet Ghana’s gas demand
On April 30, West African Gas Pipeline Company (WAPCo) resumed natural gas deliveries to the three West African countries after completing repairs to its damaged pipe in Togo. The WAPCo pipeline is a regional high-pressure gas transmission system built to export Niger Delta gasto Benin, Togo, and Ghana. This venture, the first multinational joint venture pipeline in Sub-Saharan Africa, has the potential to meet growing electricity demand throughout the Bight of Benin. However the pipeline is still facing various operational challenges.
The damage to the gas pipeline on August 28 was not the first time WAPCo has failed to deliver on its promise of transporting gas to Ghana. In a statement about the stoppage, Ghana’s Ministry of Energy and Petroleum noted his country’s lack of confidence in the pipeline’s gas supply.
AFRICA’S LARGEST FOSSIL PROJECT
WAPCo is a 678-km-long regional high-pressure gas transmission system, built to export Niger Delta gas from the Lagos Beach terminal in Nigeria to Ghana, via Benin and Togo. WAPCo links up with the existing Escravos-Lagos pipeline at the Nigeria Gas Company’s Itoki natural gas export terminal in Nigeria and proceeds to a beachhead in Lagos. From there it moves offshore to Takoradi in Ghana, with gas delivery laterals from the main line extending to Cotonou (Benin), Lome (Togo) and Tema (Ghana). The Escravos-Lagos pipeline system has a capacity of 800 MMscfd, and WAPCo will initially carry a volume of 170MMscfd and peak over time to a capacity of 460 MMscfd.
WAPCo is the first such pipeline to be installed in sub-Saharan Africa. It is also one of the largest fossil fuel projects undertaken in Africa. This is a joint venture consisting of national interests, with Nigeria, Ghana, Togo, and Benin all taking part. The US’ Chevron has partnered with all four countries of the Bight of Benin to create a viable energy solution for the region’s growing energy demand.
THE AFRICAN MULTINATIONAL
The pipeline is owned and operated by the West African Gas Pipeline Company. Chevron is acting as the operation leader and has a working interest of 36.7%. Nigerian National Petroleum holds 25% working interest and is the second largest shareholder. Shell Overseas Holdings and Takoradi Power respectively have 18% and 16.3% shares in the company. The remaining 4% interest in the project belongs to Togo’s national energy company Societe Togolaise de Gaz and Benin’s national energy company, Societe BenGaz, at 2% each.
A 30 YEAR HISTORY
Inception of the West African gas export system dates back to 1982 when its development was proposed by the Economic Community of West African States (ECOWAS). The proposal was strengthened further in 1991 when a feasibility report, sponsored by the World Bank, held that such a project was commercially viable. Nigeria, Benin, Togo, and Ghana signed an agreement in 1995 and undertook the feasibility study for the project in 1999. A Memorandum of Understanding (MoU) was signed by the participating countries in the second half of 1999 and an Inter-Governmental Agreement was signed in early 2000. The project implementation agreement was signed in 2003. Besides this long negotiation process, the project met also important cost estimations failures.
FINANCIAL BACKERS
In November 2004, the World Bank approved two guarantees worth a total of $125m for the construction of the project. These two guarantees included $50m and $75m from the World Bank's International Development Association (IDA) and Multilateral Investment Guarantee Agency (MIGA) respectively. In December 2006, a $98m loan was approved by the European Investment Bank (EIB). The United States Agency for International Development (USAID) and the Overseas Private Investment Corporation (OPIC) also supported the project by providing $1.6m and $45m respectively
The project met several unexpected costs. It was completed at a cost of $900m, approximately $310m (or 52%) more than the originally estimated cost. Commercial operations began in March 2011. It has an initial capacity of 200 million cubic feet of gas a day (mcfd), which is expandable to 600 mcfd. The project continues to have the support of several international financing institutions--however it has also met serious unexpected costs.
CONTRACTORS
The engineering, procurement and construction (EPC) contract for the onshore pipeline and facilities of the WAGP was awarded to Willbros in December 2004. Bredero Shaw supplied the concrete weight coating for the offshore construction. In July 2008, France’s Entrepose was awarded the contract to build the compressor station at Lagos Beach in Nigeria. Project Consulting Services delivered front-end engineering design and drafting services associated with the offshore segment of the project. Horizon Marine Construction installed the offshore pipe from Lagos to Takoradi. Indeed, sub-Saharan Africa’s first international pipeline project has received technical ownership from a number of international contactors,though it has also met disruptions due to technical vulnerabilities.
Olgu Okumus
olgu.okumus@sciencespo.fr