Defined regulations necessary to attract investment – Gas actors
Stakeholders in the gas sector have called for a well-defined regulatory environment that will help attract the necessary funding and investment to the sector.
Stakeholders argue that although the country and the West African sub-region boast large volumes of gas reserves, the right investments needed to unlock demand for the product were not currently available.
Discussing the problems of the gas industry at the 7th edition of the Ghana Gas Forum, they felt that the required investment in the sector could be hampered by the lack of an appropriate regulatory environment in the sector.
The Managing Director of Integrated Gas and Energy Services, Mr. Emmanuel Anyaeto, for his part pointed out that across West Africa, there were no regulations in the industry that attracted investors.
He said most of the regulations in place are about sharing and income generation.
He said debt was also another problem that deprived the industry of much needed investments.
âDebt is a problem for us in this part of the world. Most industries are not commercially viable due to local debts and many producers and distributors across West Africa owe a lot of money.
“So how do financiers finance projects in a heavily indebted industry?
He therefore called for a regulatory framework that manages debts in the value chain.
Stable regulatory environment
The President of the Nigerian Gas Association (NGA) and CEO of Shell Nigerian Gas, Mr. Ed Ubong, also added his voice to the need for a clear regulatory environment, noting that investors like a stable regulatory environment.
He said anything Ghana does on the regulatory side should demonstrate that the government is not making decisions that appear to be about-turns.
âWhat investors want to see is a clear roadmap and a stable framework, which will then allow them to make investment decisions that can span 10 to 15 years to see if they can get a return on their capital. .
Clear legal framework
The Chairman of the Board of The Gas Consortium, organizers of the forum, Dr Nii Darko Asante, said that a clear legal and regulatory environment was essential to attract the investments necessary for growth.
To justify the financial investment, he said investors need to know what form of protection and monopoly will be provided.
âWe haven’t really defined whether a particular region where there is a market will use a monopoly mode of distribution or whether that will allow competition within that same area.
“So if you invest in provisioning infrastructure, will you have some sort of monopoly to allow you to recoup your investment before the competition comes in or can someone else come in after you have?” invested to unlock the market? He asked himself.
He said the regulatory environment, however, must ensure that whoever is granted a monopoly does not abuse it and that when there is competition, that competition remains fair.
He said regulation should not seek to overprotect the investor, which could lead to a sort of permanent cushion that perpetuates inefficiencies and monopoly abuses.
“So yes, some protection has to be provided, but the timeframes have to be clearly defined and this has to be agreed before the person invests and be specified in advance,” he said.
Dr Nii Darko Asante pointed out that requiring investors to finance the gas sector was something that would work, but whoever made the investments would have to recoup their investment from their customers.
âIn this case, whoever regulates the price should make sure that this cost is captured,â he said.
âSome kind of protection must also be provided to those who have already invested and also protect those we call on to invest again.
“So that any private entity that invests in the direction that is in our national and regional interests has some assurance that it will have sufficient time to recover its investment,” he noted.
He said one way to make sure the cost wasn’t too high for the client was to give tax incentives to investors.
Mr. Ed Ubong also called for the need to include pricing in all discussions on gas regulation.
He said the NGA believed gas stability would be achieved, however, as the industry operates in a commercial setting involving a willing buyer and seller.
“So let the market sit down, discuss and agree on what it wants to do in terms of price,” he added.
Axxela Group Strategy Director, Mr. Fisayo Duduyemi, also added that the regulatory environment should be aware not to attempt to artificially fix prices as this was an early warning signal for retailers. first investors.
Ghana National Gas Company (GNGC) Managing Director Dr Ben Asante said the company is putting measures in place to ensure that there is a legal impetus to drive the sector, in the form of a law.
He said there was a gas bill, which the GNGC said would become law within the next two years.
âWe have solicited contributions from stakeholders and we hope that the bill will soon become law,â he said.
“We therefore hope that this bill passes first through the Cabinet, then through Parliament in the first half of next year,” he noted.
Mr. Duduyemi said the gas regulation bill proposed by the GNGC should be exposed to stakeholder contributions.
He was convinced that once adopted, the gas bill could be a good instrument to attract investment to the country.
The Director of Technical Affairs of the West African Gas Pipeline Authority (WAGPA), Mr. Alain Sedjro Houha, explained that while some countries in the sub-region did not have a clear regulatory framework for the sector, WAGPA did. ‘a set of regulations for the movement of gases throughout the sub-region.
He said that this regulation came as a result of the signing of a treaty between Ghana, Nigeria, Benin and Togo.
He noted that the treaty required each country to put in place an enabling environment and that it should be the same in all four countries.
âThe treaty is the main document of the West African gas pipeline project. It provides a legal and regulatory framework that recognizes the West African Gas Pipeline Company (WAPCO) as a company to build, own and operate the pipeline.
“The treaty also establishes a framework for settling disputes and commits to transporting natural gas between the four countries,” he said.
Lessons from Nigeria
Sharing some regulatory lessons from Nigeria, a Nigeria Gas Marketing Company (NGMC) director, Mr. Lawrence Chukwu, said the petroleum industry law had just been sanctioned by the country’s president.
He said the new law was a deliberate move by the country to move away from the petroleum-centric petroleum law, which had been in existence for a few decades, and targeted not only petroleum, but other derivatives as well, by especially gas.
âIf you look at our Oil Industry Act, one area to encourage investment is to make sure the industry is sane.
âIf you come up with a reason that assures investors that they can put their money in and get it back over time, they will surely invest,â he said.
He said that NGMC, due to its financial capacity, guarantees many investments in the sector.
âMost of the buyers will be reluctant to make investments, but NGMC has a very large financial capacity and because of this we can guarantee some investments and pay for them,â he said.
He said most of the industry’s assets were paid for by NGMC, adding that “we move in space, we find the customers, we bear the cost of the infrastructure, and we connect the customers.”
He pointed out that what investors didn’t like was investing in infrastructure because most of them wanted their investments back immediately.
âBut with NGMC, most investors rely on us for collateral and we are working on sharing. This is something Ghana can borrow from us.
âWe are taking the risk because we understand Nigeria and the space better. Most of the investors who will come to Ghana to invest may not understand the Ghanaian environment and they will need the locals who understand what is going on in the space to provide insurance, âhe explained.