Concerns Grow Over VRA/Tano Gas Sales Contract

Concerns are growing over the future of the gas sales contract with the government represented by the Volta River Authority (VRA) and Tano Energy/First Oil as signing is being hampered by critical delays.

The petroleum agreement between the government and the Tano Energy/First Oil was approved by Parliament in July 2002 and signed by the parties in August 2003.

It provided for Tano Energy to develop the North/South Tano Fields and produce the fuel to fire the Osagyefo Power Plant Barge to be located at Effasu-Mangyea.

The agreement had three conditions precedent before becoming effective - approval by Parliament, signing by the parties and the negotiations of gas sales with an off-taker. But the minister of energy, Dr. Kwesi Nduom told The Chronicle that the third condition precedent had not been met as of now.

Tano Energy/First Oil, partners in the North and South Tano offshore gas development were itching to spend about $100 million but the disagreement over the numbers contained in the final draft agreement has made the partners have second thoughts.

Dr. Nduom told The Chronicle that Tano Energy/First Oil made representations to the ministry as to the level of investment they intended to make towards the development of the North/South Tano Fields and whilst negotiations on gas sales were going on Tano Energy/First Oil wrote for consent to assign their rights on the agreement to another company even though the rights had not yet accrued to them.

"This seriously undermines whatever seriousness they are attaching to the project", he added.

Chronicle findings have revealed that topside and platform design for the development of the shallow-water North Tano gas field is on hold pending a sales contract for the initial 26 million cubic feet of gas per day, which has been slated to flow ashore to the VRA's 125 megawatts barge-mounted turbine.

Information reaching the paper also indicates that the assigning of the right to another company by Tano Energy/First Oil may be due to cutting of the gas sales numbers to the bone therefore questioning the viability of the project.

A source close to Tano Energy/First Oil has revealed that their financial backers are considering alternative projects in Gabon and elsewhere.

The Osagyefo Power Barge, which was constructed at the cost of $110 million in 1999, is yet to produce any power.

At a news conference a few months ago Dr Nduom said the sustainability of gas reserves at Effasu to fuel the barge had not been proven.

He, however, disclosed that Tano Energy/First Oil were only one of many companies that showed interest in the North/South Tano Development.

He said it was the ministry's intention to put the Power Barge on line as soon as possible and all options for developing the Tano Fields in the shortest possible timeframe were being reviewed.