WEST AFRICA: Cheaper power a step nearer as work begins on gas pipeline

ACCRA, 5 Sep 2005 (IRIN) - Construction has begun on a 700 km pipeline that will transport Nigerian natural gas from the oil fields of the Niger Delta along the West African coast to Ghana, via Benin and Togo and promises cheaper and more reliable power for millions of residents by the end of 2006.

The West Africa Gas Pipeline is part of the West African Power Pool, an ambitious project launched by the regional economic body ECOWAS in 2000, which aims to increase the trade in energy between member states and encourage investment in the power sector.

The pipeline is expected to cost US $617 million, project officials say.

The World Bank, which is backing the project with a US $40 million soft loan, said in a recent report that lack of access to reliable power was a major constraint to development in West Africa.

Power cuts, locally known as “lights off”, are a near daily occurrence for residents of the Ghanaian capital, Accra.

Project officials say that the gas pumped into the country from the end of next year will mean power is not so much at the mercy of swirling global energy markets, and more people will have a stable, affordable power source.

Fuel prices went up 50 percent in Ghana earlier this year, pushing up transport and food costs and unsettling many of Ghana's 20 million people.

“This project gives us access to a long-term, reasonably-priced source of energy as an alternative to crude oil, which we have over depended on and whose pricing tends to be very volatile,” said Ghanaian President John Kufuor at a sod-cutting ceremony for the pipeline.

Oil prices have surged from around US $40 at the end of 2004 to record levels of US $70 a barrel last month and Ghana spends a huge chunk of its national budget importing crude oil to its energy and transport sectors.

“The rising unstable world crude prices are threatening to erode the country’s economic gains,” said Trade and Industry Minister Alan Kyerematen at a recent forum in the country's second-largest city, Kumasi.

But that could soon be a thing of the past, the energy ministry says. It reckons that the gas pipeline could save the government up to US $2.5 billion over the next 20 years.

Ghana will be connected to the 678 km pipeline at Tema Port, the main industrialised area on the outskirts of Accra, and Takoradi Port, 350 km west of the capital.

An opportunity to kick-start economic development?

“Tema is the hub of the Ghanaian fishing industry. Its industrial estates and factories would also have the highest point of demand for gas which we estimate will double over the next two decades,” Kofi Asante Okai, the pipeline's external affairs manager, told IRIN.

And there have already been other knock-on effects from the pipeline, even though construction is in the early stages.

According to London-based publication, Africa Confidential, the Ghanaian government has taken possession of Volta Aluminium Company in Tema, a move only made viable by the prospect of cheap gas to run the smelter.

A thermal power station at Takoradi will also get a boost from the new gas imports, officials at the energy ministry told IRIN. The power station has been operating below capacity, due to high crude oil prices, but should be able to ramp up production once it has the new gas imports to consume.

Ghana is keen to have a reliable alternative to crude.

Oil reserves found in Ghanaian waters have so far not been large enough to exploit for commercial purposes and although Ghana is carrying out further explorations of its coastline, industry experts say the new gas pipeline will considerably ease the government's energy headaches.

An economic and financial impact assessment of the project, undertaken by IPA Energy Consulting of the UK, calculated that Ghana stands to save some US $223 million from the fuel switch to gas.

The pipeline project has environmental benefits too.

The gas that will eventually be transported along the pipeline is currently flared at source in the Niger Delta. The giant columns of burning gas can be seen for miles around and according to environmental group Friends of the Earth, the perennially burning flares have committed more greenhouse gases to the atmosphere than all of the rest of Sub-Saharan Africa combined.

The Nigerian government has promised to end gas flaring completely by 2010, in part by selling gas through the pipeline, but also by processing it into liquefied natural gas with investment from multi-national oil companies.

According to statistics compiled by Ghana's energy ministry, the region's greenhouse gas emissions will be reduced by up to 52 percent once the pipeline is operational.

Four main share-holders will own and operate the pipeline company: Chevron-Texaco West African Gas Pipeline Ltd, Nigeria’s National Petroleum Corporation, Shell Overseas Holding Ltd and Ghana’s Takoradi Power Company Limited.

The pipeline -- which will be laid partly along the sea bed 15 to 20 kilometres off the West African coastline and partly on land -- will supply Benin, Ghana, Nigeria and Togo with an initial daily capacity of 200 million cubic feet of gas but can rise to 470 cubic feet to meet the anticipated growth in demand.

[ENDS]