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05.03.2009 Business & Finance

Energy sector faces financial challenges – Duffuor

By gna

Government on Thursdays says the energy sector is facing financial challenges due to the re-imbursement of subsidies for electricity supply to Volta Aluminium Company (VALCO) and other residential consumers.

Dr Kwabena Duffuor, Minister of Finance and Economic Planning, who announced this to parliament when he presented the 2009 budget statement, said government had been making significant budgetary allocations to cover the capital investment programs of the Volta River Authority (VRA) and Electricity Company of Ghana (ECG).

“An immense proportion (76 per cent) of the Sovereign Bond proceeds was earmarked under the Government of Ghana (GoG) 2008 Supplementary Budget to cover capital expenditures for VRA, GRIDCO, ECG and Bui Power Authority (BPA).

“In addition, GoG has been providing direct payments to cover VRA working capital requirements for crude oil purchases for the thermal plants.”

He said that notwithstanding, the GoG budgetary transfers had not been adequate to cover revenue shortfalls and/or re-capitalize the three power utilities.

“Clearly, the current state of affairs is unsustainable and should not

be allowed to continue,” he said.
To arrest this situation, Dr Duffuor said government would develop and implement comprehensive remedial measures, especially re-capitalization, that would ensure the long term financial viability of VRA, GRIDCO and ECG.

He said government would launch a study to inform decisions on re-capitalization of the three power utilities.

The study plan, Dr Duffuor said would among others, sought to improve upon the financial operating ratios, reduce short term indebtedness and reduce arrears of each of the power utilities to suppliers and creditors.

On the oil sector, he said government was committed to achieving the production target as it expects the first production by the fourth quarter

of 2010.
The current projected working estimate is 120,000 barrels of crude per day, about 4% of Nigeria's average production.

The Minister said the Development Plan for the Jubilee Field (the oil exploration site in the Western Region) is nearing completion.

He said the Ghana National Petroleum Corporation (GNPC) would lead the effort in the commercialization of gas from the Jubilee Field and added that

the plan would involve the development of gas infrastructure, on-shore processing of gas and gas supply for power generation.

“The gas development shall be undertaken in parallel with oil development. The Government will pursue a non-gas flaring policy,” he said.

Dr Duffuor said government would pursue the expansion of Tema Oil Refinery's (TOR) capacity with private sector involvement and in addition

expand the capacity of the TOR to meet the growing demand.

“The Ministry will also support private sector initiatives in the establishment of a second Export-oriented Refinery,” he said.

He said the Bulk Oil Storage and Transportation (BOST) Company limited would expand the network of depots, increase strategic stock and also improve transportation of petroleum products across the country.

Dr Duffuor said in a similar manner, government would continue with the implementation of the Rural Kerosene Distribution Improvement Programme.

He said a number of ongoing critical projects such as the Obuasi-Kumasi 161 kV transmission line, Substation Upgrade Project and SCADA modernisation project would continue.

Also to be pursued, he said, is the 330 kV Aboadze-Tema coastal transmission line project and added “A third Bulk Supply Point Project and a second Bulk Supply Point Project in Kumasi will be initiated.”

He said the Regional Capitals Street Lighting Projects with focus on Kumasi, Accra, Sunyani, Tema, Takoradi, Ho, Wa and Bolgatanga would be undertaken this year.

Dr Duffuor said under the Ghana Energy Development Access

Project (GEDAP), materials and equipments for the implementation of the project have started arriving for work to commence this year.

He noted that under the GEDAP electricity supply is to be extended to 880 rural communities within the next two years.