Ghana Gas Debt Rises Due to VRA Payment Difficulties

The Ghana National Gas Company Limited (GNGLC) is grappling with a mounting debt crisis, primarily due to the Volta River Authority’s (VRA) inability to fulfill its debt service obligations. As of June 30, 2024, GNGLC’s outstanding debt to the Ghana National Petroleum Corporation (GNPC) has surged to over US$626 million, a sharp increase from US$559 million in the same period the previous year. This marks a concerning 12.1% rise in debt, significantly higher than the 7.4% growth seen in the first half of 2023.

This uptick, highlighted in a Public Interest Accountability Committee (PIAC) report for the first half of 2024, is attributed to the VRA’s ongoing financial challenges, which have hindered its ability to pay for the gas supplied by GNGLC. The amount of raw gas delivered by GNGLC from GNPC also saw a slight decrease, falling to 22,158,283.5 MMBtu in the first half of 2024, down from 22,730,386.7 MMBtu in the same period the year before.

Although the invoiced value of gas supplied in the first half of 2024 reached US$144 million, up from US$139.3 million in 2023, GNGLC only received a credit note of US$121 million. This has left a US$22 million outstanding debt for the period, which, when added to the opening balance of US$604 million, results in a total debt stock of US$626 million.

The PIAC report underscores the severe implications this escalating debt has on the operational viability of both GNGLC and VRA, while raising concerns about potential breaches of the Petroleum Holding Funds (PHF) statutory framework, as proceeds from natural gas sales are a vital source of revenue for the fund.

Compounding the issue, payments received by GNGLC through the Cash Waterfall Mechanism (CWM) have also fallen short. By the end of June 2024, cumulative payments amounted to only US$10 million, covering invoices from November 2023 to April 2024. This is a significant drop from the US$18.2 million received during the same period in 2023, further worsening GNGLC’s financial situation and increasing its debt exposure.

The PIAC has stressed the urgency of addressing the VRA’s financial troubles and improving the efficiency of the CWM to stabilize the long-term financial health of these key players in Ghana’s energy sector. Resolving these issues is seen as essential to preventing further debt escalation and ensuring the viability of the sector.