Globeleq Partners Gov’t Of Egypt To Develop Large-Scale Green Hydrogen Project
Globeleq, the leading independent power company in Africa, has signed a Memorandum of Understanding with the New and Renewable Energy Authority (NREA), the General Authority for Suez Canal Economic Zone (SCZONE), the Sovereign Fund of Egypt for Investment and Development (TSFE), and the Egyptian Electricity Transmission Company (EETC), to jointly develop a large-scale green hydrogen facility within the Suez Canal Economic Zone.
Globeleq, as lead developer and investor, will develop, finance, build, own and operate the green hydrogen project.
It will be developed in 3 phases, totalling 3.6 GW of electrolysers and around 9 GW of solar PV and wind power generation.
The first phase will involve a pilot project using a 100 MW electrolyser, and will initially focus on green ammonia fertilisers, while considering other end-uses of green hydrogen in the medium and longer term, including green fuels.
Globeleq intends to enter into long-term off-take agreements with leading and creditworthy Egyptian and international companies, while supporting their decarbonisation plans.
Capitalising on Egypt’s best-in-class wind and solar PV resource, well-developed infrastructures, and the Egyptian Government’s investment-friendly regulatory framework, Globeleq aims to competitively produce hydrogen for exports and the local market.
Egypt’s unique geographical location, at the crossroads of Africa, Europe, and Asia, with about 13% of the global trade flowing through the Suez Canal, puts the country in a position to become a global green energy hub.
Globeleq has been investing in Egypt since 2003 and currently owns the ARC for Renewable Energy S.A.E. 66 MWp solar PV plant located at the Benban Solar Park near Aswan.
Globeleq aims to support the country’s ambitious renewables strategy by developing new solar PV, wind, battery energy storage, seawater desalination and green hydrogen projects in Egypt.
The British Ambassador to Egypt, Gareth Bayley OBE, indicated: “Globeleq is a leading British investor, 70% owned by British International Investment and 30% Norfund, which are respectively the UK and Norway’s development finance institutions. The company has been investing in Egypt for nearly 20 years and we are delighted with the signing of this MOU, which underscores once again the strong relationship between the UK and Egypt. The project also supports both countries’ leadership and ambitions in renewable energy and combating climate change. We look forward to continue working with Globeleq and all the stakeholders involved.”
The Norwegian Ambassador to Egypt, Hilde Klemetsdal, added: “With Globeleq’s ambitious plans, Norway continues to strengthen our investments in green hydrogen in Egypt. This is an example of just the kind of industry solutions that are required for translating the green transition into action. We value our strong cooperation with the Government of Egypt towards the green shift and the fight against climate change.”
Mike Scholey, CEO of Globeleq, said: “Bold and rapid collective action is required to put the world on a sustainable pathway. Egypt is a key country for Globeleq, and we are excited to support the Government of Egypt’s ambitious green agenda and contribute to the fight against climate change.”
Waleid Gamal Eldien, Chairman of SCZONE, mentioned: “The new agreement with Globeleq is a continuation of our commitment to implement Egypt’s vision in the transformation for green economy. The Egyptian government has ambitious energy transition plans, in addition to hosting COP27, and active steps are being taken to make SCZONE a major hub for green hydrogen. We are pleased to partner with Globeleq, one of the major renewable energy companies in the UK and globally, and this partnership reflects the interest of the global entities specialised in investing in such projects as they choose SCZONE as a destination for investment in green fuel projects, to serve the African and international markets.”
Ayman Soliman, CEO of the Sovereign Fund of Egypt, commented: “The partnerships we are witnessing are a translation to the state’s integrated strategy to diversify energy sources and localise green hydrogen production with all its components covering upstream and downstream stages, with the aim of transforming Egypt into a regional green energy hub. Our objective is to maximize the use of Egypt’s renewable energy resources in partnership with global specialised developers, whereby the goals and strategy of The Sovereign Fund of Egypt are realised. We are glad to partner with Globeleq as one of the largest British international companies working in the field of new and renewable energy and infrastructure, with a special focus on energy projects in Africa, and has vast experience in working in Egypt.”
France Accuses Russia Of Using Gas As ‘Weapon Of War’
France accused Moscow on Tuesday of using energy supply as “a weapon of war” as Russian gas giant Gazprom reduced deliveries to one of its main utilities and prepared to halt flows along a major pipeline to Germany.
European governments are scrambling to respond to soaring energy costs for businesses and households and to find alternatives to Russian supply to store for winter.
Western nations fear that Moscow is driving up gas prices to try to weaken their resolve in opposing its invasion of Ukraine, a tactic Ukraine’s President Volodymyr Zelenskiy on Monday dubbed economic terrorism. Moscow denies it is doing this.
“Very clearly Russia is using gas as a weapon of war and we must prepare for the worst case scenario of a complete interruption of supplies,” France’s Energy Transition Minister Agnes Pannier-Runacher told France Inter radio.
She was speaking after French utility Engie (ENGIE.PA) said it would receive less gas from Gazprom from Tuesday because of an unspecified contractual dispute.
Europe is already on notice that supplies will be squeezed as Gazprom shuts off the Nord Stream 1 gas pipeline to Germany from Wednesday to Friday for maintenance.
French Prime Minister Elisabeth Borne on Monday urged companies to draft energy savings plans by next month, warning they would be hit first if France is forced to ration supply of gas and electricity.
European energy ministers will hold an emergency meeting on Sept. 9 to discuss the crisis.
Germany is willing to consider a price cap on gas, several Italian newspapers reported on Tuesday, citing a text message sent by the German economy minister to energy ministers across Europe.
An Economy Ministry spokesperson said that Germany will discuss how to break the extreme spiral in gas prices at the energy ministers meeting but did not comment directly on the details of the report.
Italian Prime Minister Mario Draghi, the former European Central Bank chief, has been pushing for such a price cap, and has also called for steps to decouple the cost of electricity from the gas price.
Such a move would allow European households to get the benefits from electricity produced from cheaper sources such as renewables.
There was some respite on Tuesday when benchmark Dutch wholesale gas prices eased as Europe almost reached its target of gas stores being 80% full and traders took profits following record high prices last week.
The front-month gas contract was down 3% at 259 euros/MWh on Tuesday morning, off all-time highs hit last week, and is trading at levels more than five times those seen a year ago.
The rising cost of the crisis was illustrated when EU member Austria said that it was preparing to pump billions of euros into the electricity company that supplies much of the capital Vienna after a price surge on power markets left it unable to afford the guarantees needed to cover market transactions.
Wien Energie, owned by the City of Vienna, asked the federal government for help at the weekend and the city has identified an “acute financing need” of 6 billion euros.
The Hague in the Netherlands, home to EU law enforcement agency Europol, last week said it would ask for a temporary exemption of EU sanctions against Russia, as it struggles to find a replacement for its contract with Gazprom.
Sanctions order governments and other public bodies to end existing contracts with Russian companies by October 10.
Source :Reuters
ExxonMobil Posts $17.9bn Profit In Q2 Due To Rising Energy Prices
US oil and gas supermajor, ExxonMobil has posted a net income of $17.9bn for the second quarter of 2022, against $4.69bn in the same quarter a year ago, due to soaring oil and gas prices.
ExxonMobil’s total revenues soared to $115.68bn from $67.7bn in the corresponding quarter of 2021.
The firm reported a cash flow from operating activities of $20bn versus $9.65bn in the previous year, benefiting from higher realisations and margins, increased production, and tight cost control.
In a statement issued on Monday, August 29,2022, it said its capital and exploration expenditures were $4.6bn for the second quarter and, $9.5bn in this year.
ExxonMobil Chairman and CEO Darren Woods said: “Earnings and cash flow increased production, higher realizations, and tight cost control.”
“Strong second-quarter results reflect our focus on the fundamentals and the investments we put in motion several years ago and sustained through the depths of the pandemic.
“Key to our success is continued investment in our advantaged portfolio, including Guyana, the Permian, global LNG, and in our high-value performance products, along with efforts to reduce structural costs and improve efficiency,” he added.
Exxon announced shareholder distributions of $7.6bn for the second quarter.
This includes dividends of $3.7bn.
Woods added: “We’re also helping meet increased demand by expanding our refining capacity by about 250,000 barrels per day in the first quarter of 2023, representing the industry’s largest single capacity addition in the US since 2012.
“At the same time, we’re supporting the transition to a lower-emission future, growing our portfolio of opportunities in carbon capture and storage, biofuels, and hydrogen.”
Last month, ExxonMobil announced that it had made two new oil discoveries in the Seabob-1 and Kiru-Kiru-1 wells.
Source: https://energynewsafrica.com
Ghana: NPA Charges Shell To Fix Cars Damaged By Fuel Mixed With Water
Ghana’s petroleum downstream regulator, National Petroleum Authority has commenced investigations into the sale of fuel laced with water by Shell’s Service Station at Atimpoku in the Eastern Region.
According to the regulator, a sample of the fuel from the station has been sent to its head office laboratory for investigations while other segments are going to the Ghana Standards Authority.
This is contained in a statement issued by the NPA after a video shared by a customer of the station on social media went viral.
The Customer is heard saying that he filled his car tank with fuel from the station and tried to turn on the engine, but the ignition failed to start.
Curious to find out the cause of the problem, the customer brought an empty bottle and asked the attendant to fill the bottle only for them to discover that the petrol is laced with water.
In the video, the man claimed that while he was there and wondering about the issue a lady also came to the station to lodge a complaint that her car has stopped after buying fuel from the same station few minutes ago.
Shell on Sunday shut down the station after the incident came to the attention of Management.
In a statement on Monday, Shell said it has commenced investigations into the incident adding that all necessary remedial steps will be taken before the station is reopen.
“We remain committed to providing best quality fuels to our customers,” it said.
Meanwhile, NPA is demanding that Shell fixes the affected vehicles and compensate customers.
Source: https://energynewsafrica.com
In a statement on Monday, Shell said it has commenced investigations into the incident adding that all necessary remedial steps will be taken before the station is reopen.
“We remain committed to providing best quality fuels to our customers,” it said.
Meanwhile, NPA is demanding that Shell fixes the affected vehicles and compensate customers.
Source: https://energynewsafrica.com Nigeria: Japan, Israel Partner Nigeria To Produce Electric Motorcycle
Nigeria has entered into a partnership agreement with Israel and Japan to begin manufacturing of electric motorcycles.
This is the West African nation’s first step toward creating an eco-friendly environment by reducing carbon emissions in the transport industry.
The Israeli Ambassador to Nigeria, Michael Freeman who disclosed this said the partnership would address the numerous issues impacting Nigeria’s transportation and environmental sectors.
The collaboration is expected to introduce the first car in 2023.
“The first attempt to domesticate certain technologies in this country, especially in the automobile industry, has not worked with continuous importation. NASENI has come into this now with the perfect partners, Japanese and Israeli companies whose technologies are proven and known,” a report by theelectricityhub.com quoted Prof. Mohammed Haruna, Executive Vice Chairman of NASENI saying.
Dr. Ayal Raz, a representative of the Israeli company Peramare Enterprise, observed that Nigeria is a safe place to invest.
Mr. Sasi Shilo, Chief Executive Officer, SIXAI, and Japanese Partner, stated that his business is eager to support Nigeria in developing a sustainable nation using clean and safe technology in addition to supporting the African continent as a whole.
According to Mr Madisca Haruna, Managing Director of LINKSMAN International LTD, the project aims to achieve Goal 7 of the Sustainable Development Goals (SDGs) 2030, which aims to improve global cooperation and make access to sustainable energy research and technology more accessible.
British Household Energy Bills To Jump 80% To Over $4,000 A Year
British energy bills will jump 80% to an average of 3,549 pounds ($4,188) a year from October 2022, the regulator said on Friday, plunging millions of households into fuel poverty and businesses into jeopardy unless the government steps in.
Ofgem CEO Jonathan Brearley said the rise would have a massive impact on households across Britain, and another increase was likely in January as Russia’s move to throttle European supplies drives wholesale gas prices to record highs.
“This is a catastrophe,” Britain’s leading consumer rights champion Martin Lewis said, warning that people would die if they refused to cook food or heat their homes this winter.
Brearley said the government response needed to match the scale of the crisis with “urgent and decisive” action.
Prime Minister Boris Johnson, who has less than two weeks left in office, said his successor would announce “extra cash” targeted at the most vulnerable next month.
“But what I don’t think we should be doing is trying to cap the whole thing for absolutely everybody, the richest households in the country,” he told reporters.
In May, when price forecasts were significantly lower, the government announced a 400-pound ($472) discount on consumer bills for this winter.
The opposition Labour Party said that if it were in power it would freeze prices, which could cost around 60 billion pounds a year – almost as much as the COVID pandemic furlough scheme.
The pressures are being felt across Europe but in Britain, which is particularly dependent on gas, the price rises are eye-watering.
An annual average bill of 1,277 pounds last year will hit 3,549 pounds this year and leading forecaster Cornwall Insight said prices were likely to rocket again in 2023.
It expects bills to peak in the second quarter at 6,616 pounds and households could pay around 500 pounds a month for energy in 2023, a higher sum than rent or mortgage for many.
The surge has ballooned inflation to a 40-year high and the Bank of England has warned of a lengthy recession. Despite the dismal outlook, Britain’s response has been hampered by the race to replace Johnson that runs until Sept. 5, focused on the votes of Conservative party members keen on tax and spending cuts.
The two candidates – Foreign Secretary Liz Truss and former finance minister Rishi Sunak – have clashed over how to respond, with the front-runner Truss initially saying she would rather cut taxes than give “handouts”.
Both sides have acknowledged that the poorest in society will need support and the government went further on Friday in saying that households should look at how much energy they use – after previously saying people would know what to do.
The Labour party said the country could wait no longer for action. “This is a national emergency,” finance spokesperson Rachel Reeves said.
Truss and Sunak have suggested suspending environmental levies or cutting a sales tax – both ideas dismissed by analysts as far too little to blunt the big hit to household budgets.
Increases in wholesale prices are passed on to British consumers through a price cap, calculated every three months, that was designed to stop energy suppliers profiteering but is now the lowest price available for 24 million households.
Such is the volatility in the sector that almost 30 energy retailers have gone out of business and Ofgem said most domestic suppliers are not making a profit.
Supplier E.on said Britain should accelerate its move away from gas and better insulate its draughty Victorian-era housing stock, while rival Scottish Power urged the government to set up a deficit fund to keep bills down and spread the cost over a 10-15 year period.
Ofgem said customers who could not pay their bills would be offered affordable repayment plans by their supplier.
They would only be forced to move to prepayment meters, which charge above-average rates, as a “last resort”, it said.
The market is too unstable to forecast the next cap for January, Ofgem said, but conditions in the gas market in winter meant prices could get “significantly worse” through 2023.
Source: BBC
Ghana: Shell Shuts Down Atimpoku Station Over Fuel Mixed With Water
The Shell filling station at Atimpoku in the Asuogyaman District in the Eastern Region of Ghana has been shutdown, energynewsafrica.com can report.
This follows a video shared by a customer of the station on social media where he is heard saying that he filled his car tank with fuel from the station and tried to turn on the engine but the ignition failed.
Curious to find out the cause of the problem, the customer brought an empty bottle and asked the attendant to fill the bottle only for them to discover that the petrol is mixed with water.
In the video, the man claimed that while he was there and wondering about the issue a lady also came to the station to lodge a complaint that her car has stopped after buying fuel from the same station few minutes ago.
Confirming the development to energynewsafrica.com, Corporate Communications Manager for Vivo Energy, Shell’s licensee, Shirley Tony Kum said the issue has come to their attention adding that the station has been shut down.
“This has come to our attention and I have been managing it since afternoon. It is a technical issue and our team will investigate the cause. In the meantime, the station has been closed down till the problem is resolved,” she explained.
According to her, alternative arrangements had been made for some affected customers to arrive at their destinations safely.
Source: https://energynewsafrica.com
Texas To Begin Plugging 800 Orphaned Wells With $25 Million Of Federal Funding
The Department of the Interior announced that Texas has been awarded an initial grant of $25 million from the infrastructure investment and jobs to begin work to plug, cap and reclaim orphaned oil and gas wells across the state.
The state of Texas has indicated that it will utilize this funding to plug 800 documented wells, which were selected based on their higher risk as indicated by greater depth and hydrogen sulfide emissions.
Funds will be used to acquire equipment and vehicles, and hire personnel, including four administrative positions and 20 inspectors to witness contracted well plugging.
Additionally, Texas plans to use this funding to develop a methodology to measure and track methane and other gases.
Source: worldoil.com
Nigeria: Shell, Exxon, Others To Withdraw Billion-Dollar Nigerian Lawsuits
Shell Plc, ExxonMobil Corp., Chevron Corp. and Equinor ASA plan to withdraw multibillion-dollar lawsuits against Nigeria’s state energy company after finalizing new terms for deepwater oil production in Africa’s largest crude oil producing nation.
In letters to two New York federal judges on Aug. 22, the oil majors said they had agreed to settle with the Nigerian National Petroleum Co. and will terminate ongoing litigation once the new arrangements take effect.
The move came 10 days after the firms renewed leases with the Nigerian government and production-sharing contracts with the NNPC for the permits at the heart of long-running disputes over the allocation of crude.
Equinor and Chevron filed a suit in the US four years ago asking a court to enforce a $1.1 billion award issued by an arbitration tribunal against the NNPC in 2015. Shell and Exxon initiated similar proceedings in New York in 2014 over a $1.8 billion arbitration award. Both penalties followed allegations by the majors that the NNPC took crude beyond its entitlement under contracts signed in 1993 that were designed to incentivize the companies to develop deep offshore blocks.
Lawyers for Equinor and Chevron asked the judge to suspend the case until the end of October “to allow sufficient time for the conditions to be satisfied and for the settlement agreement to become effective.” Once that happens, the companies “expect to withdraw this action,” the letter said. Exxon and Shell anticipate being able to do the same after 60 days, they said in a separate letter.
The extension of Equinor’s license on Aug. 12 “was an important milestone” that “secures continued production and cash flow,” a spokesman said by email. “All outstanding disputes in Nigeria have also been resolved” as part of the renewal agreement, he said. Shell and Chevron declined to comment while Exxon and the NNPC didn’t immediately respond to requests for comment.
Source:Worldoil.com
Ghana: I Never Discussed BOST Issues With President Akufo-Addo—Former Energy Ministry Chief Director Replies Kevin Taylor
A former Chief Director of the Ministry of Energy in the Republic of Ghana, Lawrence Apaalse, has denied discussing issues related to Bulk Oil Storage and Transportation (BOST) Company Limited with President Nana Akufo-Addo when he met the latter about three months ago.
According to Mr. Apaalse, his visit to the Jubilee House, the seat of Government, was in June to thank President Nana Akufo-Addo on his nomination as Ghana’s candidate for election to the United Nations Commission on the Limits of the Continental Shelf (CLCS).
He explained that “the discussions, on that day, centred on logistics and general government support to ensure a smooth election as one of five Africa’s representatives to the CLCS.”
Mr Apaalse’s reaction followed claims by Kevin Ekow Taylor, a US-based Ghanaian social media commentator, that during his (Apaalse’s) meeting with President Nana Akufo-Addo, he raised concerns about purported corruption at BOST and requested President’s intervention.
Kevin Taylor further alleged that Mr. Apaalse’s contract was not renewed because of the issues he had raised about BOST and sought the President’s intervention.
However, in his response, Mr. Lawrence Apaalse explained: “My post-retirement contract with the Ministry ended on 5th April 2022, and I left the Ministry the same day. So I could not have been moved out of the Ministry in April as a result of a report made in June of the same year to the President.”
“I also express shock as to how such an official visit could be turned into such public falsehood AND call for a retraction of the story,” he concluded.
Energynewsaafrica.com can also confirm that Mr. Lawrence Apaalse indeed left the Ministry in April.
During a Staff Durbar held in his honour on 5th, the country’s Minister for Energy, Dr. Matthew Opoku Prempeh announced that Mr Apaalse was leaving the Ministry to pursue an international carrier in the global maritime space.
Source: https://energynewsafrica.com
Germany Approves Energy-Saving Measures For Winter
The German government has approved a set of energy-saving measures for the winter which will limit the use of lighting and heating in public buildings.
The government aims to reduce gas usage by 2% through the new rules.
Germany’s economy minister said the rules could save private households, companies and the public sector around €10.8bn (£9.1bn) over two years.
It is part of efforts to reduce the country’s dependency on Russian gas.
Before Russia invaded Ukraine, Germany got 55% of its gas from Russia but it has reduced this to 35% and vowed to end imports completely.
However, it remains a huge market for Moscow and paid almost €9bn (£7.7bn; $9.6bn) for Russian oil and gas in the first two months of the war.
Russia has also cut flows of gas through the key Nordstream 1 pipeline to Germany to 20% of capacity, raising fears it may turn off the taps this winter.
Germany’s Economy Minister Robert Habeck told reporters that his country wanted to free itself “as quickly as possible from the grip of Russian energy imports”.
But he added: “Overall the [new] measures save energy. However, not to the extent that we can sit back and say, ‘That’ll do now.'”
Starting from September, public buildings apart from institutions like hospitals are to be heated to a maximum of 19C and the heating may be turned off completely in entrances, corridors and foyers.
Public monuments and buildings will also not be lit up for aesthetic reasons and businesses could be banned from keeping their shops illuminated at night.
Private swimming pool heating could also be banned. And the country will give coal and oil cargo priority over passenger travel on railways meaning passengers will have to wait.
“We have a shortage situation on the rails right now,” Transport Minister Volker Wissing said. “That means that if additional fuel transports are temporarily necessary we would have to prioritise them.”
Germany also plans to run publicity campaigns to tell locals how they can cut down on their own consumption.
And amid concerns about winter shortages, the country is setting up two liquefied natural gas terminals on the North Sea coast to improve storage.
Most European Union member states have committed to voluntarily reduce gas use by 15% this winter – although this will become mandatory if there are serious shortages.
Meanwhile, Spain has already brought in rules limiting use of air conditioning and heating temperatures in public and large commercial buildings, as it seeks to save energy.
On Wednesday, Switzerland’s energy minister said it would “certainly make sense” for the country to align with the EU’s plan in order to prevent an energy crisis.
Switzerland’s electricity commission has also recommended that households stock up on candles in case of blackouts caused by changes in Russian supplies.
Earlier this month Swiss energy Minister Simonetta Sommaruga said she would try to enact a plan to have the heating turned down in public buildings.
Source:BBC
Ghana: Fuel Pricing: Some Facts You Need To Know (Article)
By: Abass Ibrahim Tasunti
The price of fuel at the pump is of interest to every Ghanaian because of its direct impact on our daily lives. Whether you drive a personal car or use public transport, the changes in the prices of fuel affects your cost of living. Fuel is a key ingredient required to power the economy, and therefore its level of consumption has a direct relationship with how strong an economy is; a rise in the consumption of petroleum products is usually an indication of a growing economy. The United States of America (U.S.A) consumes the most oil in the world and is the world’s biggest economy, followed by China which is the world’s second largest oil consumer and therefore the second largest economy in the world. Therefore, a product of this nature which has such a direct impact on every citizen’s life, and has no close substitutes will always be of utmost importance to consumers, and hence the need to know what goes into how much we pay for it and what drives the changes in its price.
Who Determines The Price Of Fuel In Ghana?
The price of fuel in Ghana is determined by a formula that takes into consideration the following factors:
Prior to the implementation of the Price Deregulation in July 2015, when the pricing of petroleum products was controlled, government often intervened in the pricing of petroleum products by subsidising, and thereby preventing the passing on of the full price changes, particularly price increments, to consumers. As a result of these interventions by governments, ex-pump prices used to remain unchanged over longer periods, while the level of subsidies kept accumulating. This sometimes created the impression that fuel prices were stable during those periods, when it was rather the interventions by government that were preventing the changes from being seen at the pump.
However, after the implementation of the price deregulation policy which removed government’s direct intervention in the pricing of petroleum products, in the form of subsidising, ex-pump prices have been changing frequently (i.e. almost every pricing window) in response to the changes in the world market prices and the exchange rates.
Why Price Deregulation? How Has It Benefited The Country?
Regulation of prices allowed governments to intervene in the pricing of petroleum products by preventing the BIDECs and OMCs/LPGMCs from passing on price increases to consumers at the pumps. To ensure that these companies were able to recover their cost of investment to be able to pay their suppliers and continue supplying products regularly to consumers, government was required to reimburse them.
However, because governments did not make budgetary provision for subsidies, these payments were mostly delayed and resulted in liquidity challenges for oil importers (BIDECs) and thereby threatening their ability to supply products to meet demand. The removal of subsidies has addressed this threat and has allowed the suppliers of petroleum products to fully recover their investments which have led to the interrupted supply of petroleum products to Ghanaians. The growth of the economy relies on the availability of petroleum products and therefore this threat to supply had to be addressed. Also, the discomfort that accompanied shortages of petroleum products is highly undesirable and after several consultations, it was generally agreed that it was better for petroleum products to be available at the right price than to subsidise their prices and not have them available.
Another major challenge faced by the petroleum downstream industry when prices were regulated had to do with exchange rate losses. The NPA used to determine the exchange rates for the pricing of petroleum products. Due to the rapid depreciation of the Ghana Cedi against the US Dollar, the exchange rate used by the NPA was mostly below the rate at which the BIDECs eventually procured US Dollars to pay their suppliers. The BIDECs used to make claims for these exchange rate losses from government because they could not apply the actual exchange rates at which they procured US Dollars in pricing their products. This burden was taken off government because Price Deregulation allows the BIDECs to determine the exchange rates to use in pricing their products and therefore they are required to manage this risk by themselves.
The implementation of the Price Deregulation policy has introduced keen competition to the petroleum downstream industry which has benefited the consumer. Prior to the implementation of this policy and companies enjoyed the same suppliers’ premiums and margins, and ex-pump prices were the same at almost all retail outlets. However, due to the level of competition that has accompanied this policy there are variations in ex-pump prices which benefits the consumer. Most companies seek strategies that will enable them offer products to consumers at the least possible cost and price.
Conclusion
Bringing transparency to the pricing of petroleum products in Ghana has become necessary to ensure that consumers are well-informed and empowered to understand what goes into how much they pay for fuel. This article has shown what the components of the pricing formular used in Ghana are and which of these components that are the main drivers of the frequent changes seen in fuel prices at the pumps. It has also provided some background information on the price deregulation policy. The goal of this article and future ones like it is to make a concept which for a long time has been considered very technical easily understandable to the layman.
About the Author:
Abass Ibrahim Tasunti heads the Economic Regulation Department at the National Petroleum Authority (NPA). He has over 11 years’ experience in the petroleum downstream industry in Ghana.
- The world market price of each petroleum product;
- The freight cost from source to Ghana, storage costs and all other associated costs incurred before supply to retail outlets (referred to as the Suppliers’ Premium);
- The Ghana Cedi (GHS) to US Dollar (USD) exchange rate;
- The taxes/levies on each petroleum product; and
- The margins on each product.
Prior to the implementation of the Price Deregulation in July 2015, when the pricing of petroleum products was controlled, government often intervened in the pricing of petroleum products by subsidising, and thereby preventing the passing on of the full price changes, particularly price increments, to consumers. As a result of these interventions by governments, ex-pump prices used to remain unchanged over longer periods, while the level of subsidies kept accumulating. This sometimes created the impression that fuel prices were stable during those periods, when it was rather the interventions by government that were preventing the changes from being seen at the pump.
However, after the implementation of the price deregulation policy which removed government’s direct intervention in the pricing of petroleum products, in the form of subsidising, ex-pump prices have been changing frequently (i.e. almost every pricing window) in response to the changes in the world market prices and the exchange rates.
Why Price Deregulation? How Has It Benefited The Country?
Regulation of prices allowed governments to intervene in the pricing of petroleum products by preventing the BIDECs and OMCs/LPGMCs from passing on price increases to consumers at the pumps. To ensure that these companies were able to recover their cost of investment to be able to pay their suppliers and continue supplying products regularly to consumers, government was required to reimburse them.
However, because governments did not make budgetary provision for subsidies, these payments were mostly delayed and resulted in liquidity challenges for oil importers (BIDECs) and thereby threatening their ability to supply products to meet demand. The removal of subsidies has addressed this threat and has allowed the suppliers of petroleum products to fully recover their investments which have led to the interrupted supply of petroleum products to Ghanaians. The growth of the economy relies on the availability of petroleum products and therefore this threat to supply had to be addressed. Also, the discomfort that accompanied shortages of petroleum products is highly undesirable and after several consultations, it was generally agreed that it was better for petroleum products to be available at the right price than to subsidise their prices and not have them available.
Another major challenge faced by the petroleum downstream industry when prices were regulated had to do with exchange rate losses. The NPA used to determine the exchange rates for the pricing of petroleum products. Due to the rapid depreciation of the Ghana Cedi against the US Dollar, the exchange rate used by the NPA was mostly below the rate at which the BIDECs eventually procured US Dollars to pay their suppliers. The BIDECs used to make claims for these exchange rate losses from government because they could not apply the actual exchange rates at which they procured US Dollars in pricing their products. This burden was taken off government because Price Deregulation allows the BIDECs to determine the exchange rates to use in pricing their products and therefore they are required to manage this risk by themselves.
The implementation of the Price Deregulation policy has introduced keen competition to the petroleum downstream industry which has benefited the consumer. Prior to the implementation of this policy and companies enjoyed the same suppliers’ premiums and margins, and ex-pump prices were the same at almost all retail outlets. However, due to the level of competition that has accompanied this policy there are variations in ex-pump prices which benefits the consumer. Most companies seek strategies that will enable them offer products to consumers at the least possible cost and price.
Conclusion
Bringing transparency to the pricing of petroleum products in Ghana has become necessary to ensure that consumers are well-informed and empowered to understand what goes into how much they pay for fuel. This article has shown what the components of the pricing formular used in Ghana are and which of these components that are the main drivers of the frequent changes seen in fuel prices at the pumps. It has also provided some background information on the price deregulation policy. The goal of this article and future ones like it is to make a concept which for a long time has been considered very technical easily understandable to the layman.
About the Author:
Abass Ibrahim Tasunti heads the Economic Regulation Department at the National Petroleum Authority (NPA). He has over 11 years’ experience in the petroleum downstream industry in Ghana.
UK Energy Crisis Is ‘Bigger Than The Pandemic’
The United Kingdom will have to find an answer to soaring energy bills soon or risk a humanitarian crisis.
But freezing gas and electricity prices over the next two winters could cost the government over £100 billion ($118 billion), more than it spent paying millions of people’s salaries during the pandemic.
Earlier this year, the UK government tried to protect households against 90% of the expected increases in energy bills through tax cuts, energy bill rebates and direct payments. But natural gas and power prices have shot up since then, as forecasts of future increases.
Researchers at the Institute for Government said Tuesday that the government would need to spend an extra £23 billion ($27 billion) to protect households against about 90% of the expected rises in energy bills until April 2023. Offsetting the same proportion for the year to April 2024 would cost another £90 billion.
That forecast chimes with the cost of a proposal by Scottish Power, one of the UK’s biggest energy companies. It has called on the UK government to protect millions of households by freezing their bills for two years, according to report by the Financial Times.
The average annual bill currently stands at £1,971 ($2,318) — up 54% so far this year — but is forecast to shoot past £3,500 ($4,117) when the upper price limit is fixed Friday for the last three months of this year. Analysts at Auxilione, a research firm, say the average household could be paying as much as £6,433 ($7,579) a year for natural gas and electricity come next spring if the government doesn’t intervene.
Scottish Power says the UK government should cap energy bills at £2,000 ($2,356) and give money to suppliers to meet the much higher costs of gas and electricity on wholesale markets.
The £100-billion cost of the subsidy would come from increased government borrowing, funded by general taxation over the next decade or more, the Financial Times said, citing unnamed sources familiar with the matter.
“It is going to be truly, truly horrific for a large number of people,” Keith Anderson, CEO of Scottish Power told STV, a Scottish TV station, on Monday, referring to the price increases.
“This is bigger than the pandemic. It’s a big national crisis,” he added.
The UK government’s pandemic furlough scheme, which ran for 18 months, cost almost £70 billion ($82 billion). In March 2020, when the outbreak of the coronavirus pandemic shuttered businesses, the government agreed to subsidize workers’ salaries to prevent mass layoffs.
So far this year, the government has offered about £33 billion ($39 billion) in support to households to help with energy costs, through a mix of tax cuts, energy bill rebates and direct payments, the Institute for Government said in its report published Tuesday. The UK government says it is doing more.
“We know the pressures people are facing with rising costs, which is why we have continually taken action to help households by phasing in £37 billion worth of support,” a spokesperson for the Department of Business, Energy and Industrial Strategy said.
“We are giving a £400 discount on energy bills this winter and eight million of the most vulnerable households will see £1,200 extra support. While no Government can control global gas prices, over 22 million households are protected by the price cap, which continues to insulate households from even higher prices,” the spokesperson added.
But alarm is spreading within the UK energy industry. On Tuesday, Philippe Commaret, an executive at France’s EDF, a major player in the UK market, told the BBC that, without more support, about half of UK households could fall into fuel poverty from the start of next year, meaning that they would have to spend more than 10% of their disposable income on energy.
Leaders of the UK National Health Service warned last week of a “humanitarian crisis.” Many people could fall sick this winter as they “face the awful choice between skipping meals to heat their homes and having to live in in cold, damp and very unpleasant onditions,” they said.
Wholesale natural gas prices started increasing last year as countries reopened from their pandemic lockdowns, causing a global spike in demand.
Russia’s invasion of Ukraine in late February, and the resulting energy crunch, has only pushed prices further up. Western countries have banned Russian coal and oil imports, and Europe is desperately trying to wean itself off Russian natural gas.
June was the first month on record that the United Kingdom did not import any fuel from Russia, traditionally one of its major suppliers, according to data released Wednesday by the Office for National Statistics.
Eye-watering prices have caused 29 smaller energy suppliers in the UK to go bust since last summer. Those that have survived have passed on much of the cost onto their customers.
Source: CNN