COTE D'IVOIRE ELECTRICITY GENERATION FALTERS,

C O N F I D E N T I A L SECTION 01 OF 02 ABIDJAN 000560

SIPDIS

SIPDIS

COMMERCE FOR MARIA RIVERO
STATE PASS TO USTR CONNIE HAMILTON
EMBASSY ACCRA FOR WARP
TREASURY FOR DAN PETERS

E.O. 12958: DECL: 05/22/2017
TAGS: ENRG ECON IV PGOV PREL
SUBJECT: COTE D'IVOIRE ELECTRICITY GENERATION FALTERS,
AFFECTING REGION

REF: A. ACCRA 847


B. MAY 22 WAGP EXECUTIVE BRIEF EMAILED BY J STRAUSS

Classified By: EconChief EMassinga, Reasons 1.4 (b, d)


1. (SBU) Summary. Privately-owned national electricity
distribution company CIE and the Ministry of Energy and Mines
continue to squabble over who is to blame for shortfalls in
investments needed to boost natural gas production to meet
national and regional energy needs. CIE, owned by French
firm Bouygues, blames the Ministry (which owns gas producer
PETROCI and power generation assets) for failing to invest
the relatively modest $30-40 million to ensure adequate gas
supply for the short and medium term. Gas shortages,
combined with low reservoir levels at hydroelectric dams,
have caused power generation to be cut, leading to sharp
reductions in electricity exports in the first half of 2007.
The Energy Ministry, for its part, wants to see the West
African Gas Pipeline (WAGP) extended to Abidjan, and has
asked USAID to help with a feasibility study. Long-term,
both domestic and regional demand for Ivorian power is slated
to remain firm, even when the WAGP comes on line,
necessitating better regional planning and more
infrastructure investments. In the short term, Cote
d'Ivoire's electricity generation problems will be felt
throughout the region for the next several years. End
Summary.

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Perspective of National Energy Company CIE
==========================================


2. (SBU) Emboff met with the Chairman of the Board of the
national electricity distributor CIE (a subsidiary of French
conglomerate Bouygues; power generation remains in the hands
of the state, and CIE is contracted to manage distribution)
Marcel Zadi Kessi on April 30. Discussing the recent local
press reports predicting either very tight electricity
supplies or even outages beginning in June, Kessi offered a
candid and broad assessment of the national energy situation
and government failings leading to the current state of
affairs and the inevitable regional impacts. Kessi presented
a detailed internal report (which the company provided to
journalists and served as the source of many of the press
reports on the subject) that laid out the growing national
demand, the state of the national generation capacity, and
the steps CIE will take to address predicted shortfalls in
the summer of 2007 and beyond. National demand in 2006
increased by 7.4 percent, despite the effects of the
political crisis that divided the country in two. For 2007,
CIE expects demand to increase by another 6 percent, with
average demand reaching 756mw, up from 729mw in January.


3. (SBU) Total installed electric power generation capacity
is 1210mw, divided almost equally between thermal (606mw) and
hydraulic (604mw). Weak rainfalls, however, have reduced
hydro capacity by 110mw. Moreover, the inability of the
national gas company to deliver adequate gas supplies from
offshore, along with removal from production several key
gas-fired turbines for maintenance, have taken a further
140-350mw off-line. Heavy fuel oil can be used to make up
for gas supply interruptions, but only to mitigate peak
demands, as the cost per kwh of using fuel oil is two to
three times that of gas. The country has been warned to be
prepared for possible power outages in June as the national
power grid will be operated with just the barest minimum of
cushion; a surge in demand or a sudden outage at one of the
thermal plants will trigger rolling blackouts. Ivorians in
the Abidjan region, despite the long-standing political
crisis, are not used to the prolonged periods of energy
instability chronic in the region.


4. (SBU) The results are predictable: Cote d'Ivoire is
sharply cutting exports of electricity, causing in large
measure the disruptions in Ghana (reftel A) and in TOGO that
have been reported in the regional press. CIE is reducing
power exports by 50 percent in March-June (140gwh in cuts).
More specifically, total 2007 exports to Ghana will be
500gwh, vs. the originally planned 550gwh, with the heaviest
cuts coming in the first half of the year: 47gwh vs. the
requested 270gwh. TOGO and Benin's exports will be reduced
to 150gwh, down from 200gwh as envisioned; again, the
heaviest cuts take place in the first half, with 40gwh
provided vs. 96gwh expected. Burkina and Mali will see

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similar cuts. Moreover, Ghana and Benin/TOGO are also being
"zeroed out" during working hours in the first half of 2007.
CIE and Ghana's VRA engaged in special negotiations to
provide extra power during the first three months of 2007 to
light the nation's 50th anniversary, but Ghana's demands were
not fully met, due (according to CIE) to the VRA's tardiness
in correctly identifying their energy needs. For the rest of
2007, CIE predicts (or perhaps just hopes) more rainfall and
more gas deliveries will boost generation of hydro and
thermal power respectively, enabling the return of high
levels of power exports.


5. (SBU) CIE sees the medium and long term situation in
stark terms. To meet demand projected through 2008, natural
gas supplies will have to rise to 157 million c/f per day
from 124 million c/f currently provided. National gas
production, which comes from national petroleum producer
PETROCI, remains low in comparison to oil production, as gas
in quantities available in Cote d'Ivoire cannot be exported,
and are thus only available for local use. According to
Kessi, PETROCI is dragging its feet to make needed
investments, even at the relatively modest amounts of $30-$40
million needed to fully furnish the currently installed
thermal power generation base and a new 110MW plant scheduled
to come on line in April 2008. The long term for the region
is even more dire: soon Cote d'Ivoire will not be able to
export power, probably beginning sometime in 2008. At the
same time, however, export orders from the region are slated
to remain at the 800-900gw per year level through 2011:
demand from SONABEL (Burkina) will soar from 150gw to 730gw,
while VRA and CEB reduce their combined demand from 750gw in
2007 to zero in 2010, principally due to the West African Gas
Pipeline (ref B).


6. (C) Kessi openly criticized the management of VRA and
other regional power companies for failing to plan for the
long term. Kessi also reiterated his critique of the Ivorian
Ministry of Energy for failing to invest sufficiently to
bring enough gas to the local market to supply the country's
electricity needs. He accused Ministry officials (many of
whom are the very same officials who have opposed Bouygues'
takeover of power distribution since privatization in 1990)
of not understanding the economics of the industry.

============================================
Perspective of Ministry of Energy and Mines
============================================


7. (C) Emboff met with Ministry of Energy Director General
of Energy Edde Alexandre several days after meeting Kessi to
discuss national and regional power concerns. Alexandre
demurred from returning fire in the blame game with CIE, and
posited that, while the government was committed to bringing
online enough Ivorian gas to meet short and medium term
needs, Ivorian gas is a too-expensive option long term.
Alexandre asked Emboff to help work with USAID to perform a
feasibility study examining the extension of the WAGP from
Takoradi to the Ivorian border, at which point PETROCI could
on its own extend the line to Abidjan-area power stations.
The Ministry is also planning to address long-term energy
needs through the construction of a $600 million dam (the
Soubre project) near the Liberian border, and is actively
pursuing financing from the International Financial
Corporation. Asked about the nuclear option in West Africa,
Alexandre said flatly that no regional power company could
afford the price tag.


8. (C) Comment. The region's power problems are
interconnected, perhaps to a far greater degree than irate
consumers in Ghana and elsewhere may realize. Corporate
officials and government leaders here appear to be aware that
addressing the long-term problems will require long-term
planning and investment, even if the form and timing of those
investments are still at issue. In the short term, however,
the simple hope for more rains and more natural gas in the
second half of 2007 does not inspire confidence that the
present situation will improve anytime soon. End Comment.
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