Sources close to the team that met N-Gas officials last week to negotiate the payment terms said the $171.5 million is to be paid in three tranches from now to ending of February 2016
Last Friday, VRA paid $9.5 million out of the $181 million debt for gas supplied from August 2014 to this month. This means the balance to be paid is $171.5 million.
The debt covers gas supplied to VRA and the cost of supply and transportation of the gas from Nigeria to Ghana.
As of July this year, VRA owed banks to the tune of over $1.3 billion, and it will be very difficult for VRA to secure a loan from any bank in Ghana to pay its debt to N-Gas.
This means the Government of Ghana, which is the 100 per cent owner of VRA, will have to look for money to bailout VRA to ensure that N-Gas does not cut supply to Ghana.
N-Gas deferred a plan to slash gas exports to Ghana beginning last Friday over an outstanding debt of $1 million, compelling Ghana to pay $9.5 million and ask for time to pay the rest.
VRA received gas and pipeline-related transportation service totaling $231 million, but paid only $50 million, with an outstanding balance of $181 million.
VRA, therefore, owes WAPCo $103 million.
Ghana gets about 25 per cent of power through gas from Nigeria, which flows through the pipeline via Benin and Togo, and the threat by N-Gas to reduce volumes by 70 per cent would have raised the cost of supply.
VRA’s power generation problems are a sign of the budgetary stress facing Ghana, a country that is following an International Monetary Fund programme to restore fiscal balance.
VRA stopped paying its bills in August 2014.Prior to that, VRA had been borrowing money from Ghanaian banks at high interest rates to fund the payments, resulting in over $1.3 billion debt owed the banks.
The power crisis stems from a fall in supply from hydro sources, government underpayment to the Electricity Company of Ghana, residents’ illegal consumption and tariffs too low for VRA to recoup its costs.
N-Gas is a company jointly-owned by Nigerian National Petroleum Corporation, Shell Petroleum Development Company and Chevron Nigeria Limited.
The company buys gas from oil companies in Nigeria and transports the gas to its customers in Benin, Togo and Ghana through the $1 billion WAGP, which is operated by the West African Gas Pipeline Company.
The International Project Agreement signed in May 2003 by WAPCo and the governments of Benin, Ghana, Nigeria and Togo, with the secretariat of the Economic Community of West African States as witness, provides that N-Gas be allocated a space in the pipeline that could transport up to 200 million standard cubic feet of gas per day.
WAPCo is owned by Chevron West African Gas Pipeline Ltd (36.9%), Nigerian National Petroleum Corporation (24.9%), Shell Overseas Holdings Limited (17.9%), Takoradi Power Company Limited (16.3%), Societe Togolaise de Gaz (2%) and Societe BenGaz S.A. (2%).