Importing LNG makes economic sense for Ghana – report

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IT would make economic sense for Ghana to import liquified natural gas (LNG) because supplying natural gas from the west of the country to the industrial east would be too expensive, according to a report that assesses the future of the country’s energy and power sectors.

The report released this week by UK-based Pangea Risk, a specialist risk analysis firm, looks at the opportunity presented by LNG versus domestic supply of natural gas in Ghana.

The survey said that the infrastructure for supplying natural gas from offshore blocks in the west of the country to the east ‘is not fit for purpose, making domestic gas supply across the country costly and prone to disruptions’.

The report noted the delivery in January of a floating regasification unit from China to the Tema LNG Terminal, which would be able to supply 2.5 million tonnes of natural gas annually for power generation and industrial use in Ghana and West Africa.

The LNG Terminal would enable gas to be supplied at an estimated price of $6.90 per million British Thermal Units (MMBTU), while gas produced locally and landed at Tema would cost almost double this price once gathering and transport costs are included, according to Pangea Risk.

Energy experts have noted that gas pipelines are too impractical and costly and, therefore, the best way to get gas to the consumer is to cool this natural resource and turn it into liquid, which would make it easier to store and ship overseas.

The Tema LNG project has received support from the African Development Bank (AfDB), which has noted that power is currently the single largest impediment to Ghana sustaining high GDP growth.

It said the LNG project would lead to the expansion of the country’s electricity grid.

The London-based International Growth Centre (IGC) reported that electricity shortages had led to a 10 per cent drop in the monthly productivity of Ghana’s small and medium-sized manufacturing firms.

The IGC said that firms were willing to pay more to avoid power outages, indicating that investments in electricity generation, production, and distribution infrastructure would be commercially viable even if they brought higher electricity tariffs.

According to the US Agency for International Development (USAID), Ghana has over 4,000 MW of installed generation capacity, though availability is seldom more than 2,400 MW due to inadequate fuel supplies and infrastructure.

The Pangea Risk report said: ‘Based on energy data, imports of liquefied natural gas would be more cost effective, more reliable, and cleaner than domestic sources of gas.

‘The inclusion of LNG in the energy mix is therefore critical for Ghana’s growth and development and is good news for Ghana’s clean energy transition, with gas further displacing heavier fuels while spurring economic growth.’

Robert Besseling, the CEO of Pangea Risk, said: ‘Ghana’s approach to energy security is an example to other African economies.

‘By diversifying its sources of energy, it encourages reliability and competitive pricing, which will allow for more consistent power generation to boost its economic performance. ‘By selecting gas as a transition fuel and connecting to the global LNG supply chain, Ghana has secured first-mover advantage in the push for a greener future,’ he added.

‘Ghana now has an opportunity to switch its energy mix from a costly and unreliable supply of polluting fossil fuels to cleaner LNG and become an LNG hub to feed the region,’ Pangea Risk said.

Shell, which has been in the LNG business for over 50 years, will be the source for Tema LNG, which will then deliver straight to the Ghana National Petroleum Corporation (GNPC).

Ghana’s domestic supply is primarily located in three fields: Jubilee, Sankofa, and Tweneboa–Enyenra–Ntomme (TEN) plus some external supply from the West African Gas Pipeline (WAGP) Company in Nigeria.

The Pangea Risk report said: ‘The eastern side of the country has struggled to secure reliable gas supply from Nigeria through the West African Gas Pipeline (WAGP).

‘Ghana has come to symbolise West Africa’s chronic overreliance on imported petroleum products for power generation.

‘Gas is increasingly becoming one of the main fuel sources for power generation in Ghana, where the energy mix has been largely dominated by petroleum products.

‘Currently, Ghana is unable to utilise all its domestic gas supply from the west, which is the result of inadequate investment in gas infrastructure and reliability of supply,’ the report added.

The Pangea Risk survey went on: ‘Harnessing more natural gas resources for future electricity generation will significantly lower electricity production costs and thus reduce the need for fuel subsidies for the power sector.

‘The development of LNG-to-power supply in the industrial east of the country will lead to a substantial additional fiscal revenue stream for the government.’

It added that an improvement to the reliability of Ghana’s power supply would also speed up economic growth.

 

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