Defined regulations needed to attract investments — Gas Stakeholders

Stakeholders in the gas sector have called for a well-defined regulatory environment that will help attract the needed financing and investments into the sector.

The stakeholders contend that while the country and the West African sub region boast of large volumes of gas reserves, the right investments needed to unlock the demand for the commodity was currently unavailable.

Discussing the issues in the gas industry at the 7th edition of the Ghana Gas Forum, they believed that the required investment in the sector could be hindered by the absence of a proper regulatory environment in the sector.

The Chief Executive Officer of Integrated Gas and Energy Services, Mr Emmanuel Anyaeto, for his part, emphasised that across West Africa, there was no regulation in the industry that attracts investors.

He said most of the regulations in place had to do with revenue sharing and revenue generation.

He said debt was also another issue that was starving the industry of the much needed investments.

“Debt is a problem for us in this part of the world. Most of the industries are not commercially viable due to local debts and a lot of producers and distributors across West Africa are owed a lot of money.

“So how do financiers finance projects in an industry that is highly indebted?

He therefore called for a regulatory framework that manages the debts in the value chain.

Stable regulatory environment

The President of the Nigerian Gas Association (NGA) & CEO of Shell Nigerian Gas, Mr Ed Ubong, also added his voice to the need for a clear regulatory environment, noting that investors love a regulatory environment that was stable.

He said whatever Ghana was doing on the regulatory side should demonstrate that the government is not taking decisions that appear to be flip flopped.

“What investors want to see is a clear road map and framework that is stable, which will then allow them to take investment decisions that can span 10 to 15 years to see if they can make returns on their capital.

Clear legal framework

The Board Chairman of The Gas Consortium, organisers of the forum, Dr Nii Darko Asante, said a clear legal and regulatory environment was essential to attract the needed investment for growth.

To justify financial investment, he said investors needed to know what form of protection and monopoly would be provided.

“We haven’t really defined whether a particular region where there is a market will use a monopoly distribution method or whether it will allow for competition within that same zone.

“So if you invest in the supply infrastructure, will you have some sort of monopoly to allow you recoup your investment before competition comes in or can anybody else come in after you have invested in unlocking the market?” he questioned.

He said the regulatory environment must, however, ensure that whoever is given a monopoly does not abuse it and where there is competition, that competition would remain fair.

He said the regulations must not seek to over protect the investor, which may lead to some sort of permanent cushion that would perpetuate inefficiencies and abuse of monopoly.

“So yes, some protection must be provided, but timelines must be clearly defined and it has to be agreed on before the person invests and be specified upfront,” he said.

Pricing issues

Dr Nii Darko Asante pointed out that requiring investors to finance the gas sector was something that would work, but that whoever makes the investments would have to recoup his investment from its customers.

“In this case, whoever will be regulating the price should ensure that this cost is captured,” he stated.

“Some sort of protection must also be provided to those who have invested already and also protect those that we are calling to invest again.

“So that any private entity that invests in the direction which is in our national and regional interests has some assurance that they will be given adequate time to recoup their investment,” he noted.

He said that a way of ensuring that the cost was not too high to the customer was granting some tax incentives to the investors.

Mr Ed Ubong also called for the need to include pricing in any gas regulatory discussions.

He said the NGA, however, believed that gas stability would be reached the industry operates in a commercial framework that involves a willing buyer and a willing seller.

“So let the market sit down, discuss and agree on what they want to do in terms of what their price,” he added.

The Chief Strategy Officer of Axxela Group, Mr Fisayo Duduyemi also added that the regulatory environment must be conscious about not attempting to artificially fix prices because this was an early red flag for early investors.

Gas Bill

The Chief Executive Officer of the Ghana National Gas Company (GNGC), Dr Ben Asante, said the company was putting in place measures to ensure that there is a legal impetus to drive the sector, in the form of an Act.

He said there was a draft Gas Bill, which the GNGC anticipates would become law in the next two years.

“We have been soliciting stakeholder inputs and we hope the bill would soon become law,” he stated.

“We are therefore hoping that this bill first goes through Cabinet and then to Parliament sometime in the first half of next year,” he noted.

Mr Duduyemi, said the proposed Gas Regulatory Bill by the GNGC must be exposed for stakeholder contributions.

He was confident that when passed, the Gas Bill could be a good instrument to attract investment into the country.

WAGPA regulation

The Director of Technical Affairs at the West African Gas Pipeline Authority (WAGPA), Mr Alain Sedjro Houha, explained that while some individual countries in the sub region lacked a clear regulatory framework for the sector, WAGPA had a set of regulations for the movement of gas across the sub region.

He said this regulations came about following the signing of a treaty between Ghana, Nigeria, Benin, and Togo.

He noted that the treaty required every country to put in place an enabling environment and it should be the same across the four countries.

“The treaty is the main document for the West African Gas Pipeline project. It provides a legal backbone and regulatory framework that recognises the West African Gas Pipeline Company (WAPCO) as company to build, own, and operate the pipeline.

“The treaty also establishes a dispute resolution framework and commits to transit natural gas between the four countries,” he stated.

Lessons from Nigeria

Sharing some lessons from Nigeria with regards to regulation, a Director at the Nigeria Gas Marketing Company (NGMC), Mr Lawrence Chukwu, said the Petroleum Industry Act had just been assented to by the president of the country.

He said the new Act was a deliberate move by the country to move away from the oil centric Petroleum Act that had existed for some decades, and seeks to not only look at oil, but also other derivatives, especially gas.

“If you look at our Petroleum Industry Act, one area to incentivise investments is to ensure that there is sanity in the industry.

“If you bring sanity that ensures investors that they can put their money and recoup it overtime, they will surely invest,” he stated.

He said the NGMC, due to its financial capacity guarantees lots of investments in the sector.

“Most of the off takers will be reluctant to make some investments but NGMC have very large financial capacity and because of that we can guarantee some investments and pay for them,” he stated.

He said most of the assets in the sector were paid for by the NGMC, adding that “we move into the space, we find the customers, we bear the cost of the infrastructure and get the customers connected.”

He pointed out that what investors did not like was investing in the infrastructure because most of them wanted to recoup their investments immediately.

“But with NGMC, most of the investors rely on us for the guarantees and we work on the sharing. This is something Ghana can borrow from us.

“We take the risk because we understand Nigeria and the space better. Most of the investors who will be coming to Ghana to invest may not understand the Ghana environment and they will need the locals who understand what happens in the space to provide some assurances,” he explained.