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Sun, Aug

PETROL AND MOBILE TELEPHONY TAXES TO RISE AS ENERGY BILLS SUCK AWAY CASH FOR ROADS

Business & Economy

The Minister for Finance, Ken Ofori-Atta, addressed Parliament today to ask for more money to meet mainly urgent and priority infrastructural demands as the huge costs of saving the financial sector and paying huge energy bills suck away cash for infrastructural projects such as roads.

The Minister for Finance, Ken Ofori-Atta, addressed Parliament today to ask for more money to meet mainly urgent and priority infrastructural demands as the huge costs of saving the financial sector and paying huge energy bills suck away cash for infrastructural projects such as roads.

This year alone, the government will pay US$1 billion subsidising the energy sector just to keep the lights on. Half of this will be for power that is not used but contracted.

The government has fallen short since last year of meeting the financial demands of its ambitious but necessary infrastructural programme because of the cost of energy and GHC14 billion so far spent to rescue the financial sector.

Last November, the Finance Minister got Parliament to approve GHC78,771,833,602.12. This is expected to go up by nearly GHC6 billion if the government is to get what it needs to deliver on all its programmes, amid the risks posed by funding of power bills and further reforms to the financial sector.

Purchase agreements

The petroleum purchase agreements (PPAs) signed by the John Mahama government were far in excess of the recommended 20 per cent reserve margin. The 30 PPAs inherited by the Akufo-Addo government would have given Ghana 10,000MW capacity over the next 13 years, against peak demand in 2017 of 2,400MW.

That year, the government reviewed 26 power purchase contracts, based on demand projections available at the time, which presumably, oddly, informed the move to buy up 10,000MW worth of contracts. The review led to a number of terminations and deferment of other agreements, saving the country an estimated US$7 billion in the process.

Currently, installed capacity is 5,083MW, dependable capacity is 4,593MW, and peak demand roughly 2,700MW. This puts installed capacity at twice what is required. The government must pay for 2,300MW of this whether or not it is used. Only 40 per cent of capacity is being utilised. This means that more than $500m (GHC2.5bn) is paid for power that is going to waste.

Excess gas

There is also the matter of gas. The government recognises that gas is a more cost-effective option than the heavy fuel oils on which the country relies, some 35 per cent cheaper. The intention is to shift predominantly to gas to generate power. A new policy is being worked on which could make gas the source of fuel for 80 per cent of all power generated. This would include domestic and imported supplies, mainly of liquefied national gas (LNG).

The Offshore Cape Three Points gas from Sankofa has a take-or-pay obligation of at least 154 million standard cubic feet per day (mmscf/d) at $51m. From next May, another 202mmscf/d take-or-pay obligations from Tema LNG will come on stream. The NPP inherited three LNG projects, two in Tema and one in Takoradi. This would have delivered in excess of 600mmscf/d, but negotiations and terminations have led to just one LNG project at Tema.

Ghana had contracted to take roughly 750mmscf per day by 2023. The current demand is roughly 250mmscf/d and it is projected that after the necessary infrastructure to feed the gas to a growing consumer base is put in place, this will rise to between 450 and 550mmscf/d by 2023. The question is how to renegotiate contracts to deal with the potential oversupply before 2023.

Government intends to raise the money through cutting down on administration costs, ensuring value for money and raising taxes on petroleum and mobile telephone use.

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