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Industry divided over reduced cost of gas

gas pipeline

There have been mixed reactions to government’s announcement of a 26% reduction in the cost of gas to businesses that rely heavily on the product.

While industry has wholly welcomed the move, some industry analysts have cautioned against the outstanding debts facing institutions involved in the supply of gas.

Citi Business News spoke to a couple of players involved in the sector and their perspectives have been backed with strong arguments which suggest possible ways that the government could use to ensure maximum benefit of its intended program.

President Akufo Addo first mentioned the reduction at the Commissioning of the Twyford ceramics factory at Shama over the weekend.

Per the reduction, businesses would buy a million British Thermal Units of gas at 6 dollars 50 cents, down from the 8 dollars 84 cents.

This also translates into some 26 percent reduction.

For industry, this is pleasant news as it will ultimately reduce the cost of power hence their operational costs.

The CEO of the Association of Ghana Industries (AGI), Seth Twum Akwaboah said,

“The reduction is good for businesses and it has positive impact on the cost of electricity and therefore reducing the cost of production and we consider that to be important for businesses and I also like the President’s emphasis on industrial consumers.”

But the Executive Director of KITE, Ishmael Egyekumhene and the Vice Chairman of the Public Interest and Accountability Committee (PIAC), Kwame Jantuah share divergent views on the immediate benefits of the move.

Mr. Egyekumhene explained possible reasons for the reduction as, “There is a foundation volume of gas that the Jubilee partners give to the government at no cost but in the build-up, GNPC actually charges Ghana Gas for the gas supplied.”

Mr Jantuah believes otherwise as he argues that, “It sounds like the government is trying as much as possible to satisfy Ghanaians through words but the government needs to be clear and explain to the people that for certain reasons, they will be able to reduce gas rates by a certain percentage.”

VRA indebted to Ghana Gas

According to the semi-annual report of the Public Interest and Accountability Committee, for 2017, VRA owed Ghana Gas to the tune of 107.18 million dollars with interest.

Ghana Gas in turn also owed GNPC to the tune of 132.03 million dollars.

A situation analysts believe requires pragmatic solution to turnaround the fortunes of the companies.

Regarding the use of the energy bond to settle the debts, Mr. Ishmael Egyekumhene and Kwame Jantuah had these to say.

“The debt that VRA is owing to Ghana Gas, those debts must be cleared because the country would have to pay the loans that it secured to build the gas processing plant,” Mr. Egyekumhene stated.

The PIAC Vice Chairman also maintained, “Let’s make sure that we pay these debts once and for all so that everybody knows the state of the companies involved. I am not too happy with the fact that we are playing yo-yo with tariffs. We cannot do that at all!”

Meanwhile, the AGI is optimistic that the affected institutions should put in place mechanisms to absorb them from any potential shock due to the reduction.

By: Pius Amihere Eduku/citibusinessnews.com/Ghana

Ghana Business News