Even before the lavish opening of the 2022 FIFA World Cup in Qatar, the world had seen what well-managed oil and gas resources could do for a country. Having spent a staggering $200 billion to host the world’s biggest sporting showcase, Qatar has captured the global spotlight
The Gulf state’s discovery of natural gas in the middle of the 20th century was a game changer.
Today, about 99% of its economy is powered by gas, earning the tag, “world’s largest exporter of Liquefied Natural Gas” (LNG). With its world-class airline and major air transport hub, and stunning corporate and tourist infrastructure, one will not be faulted for believing that we can also drive our own development agenda through domestic gas.
This begs the question: Why is Ghana not doing more to tap into the immense benefits of its domestic gas resources?
The transformative potential of gas
Ghana’s gas reserves are not as significant as others in the region. However, current domestic gas capacity is more than 10 times the nation’s current consumption. Ghana’s estimated 1.5 trillion cubic feet (tcf) of gas reserves – while not near as extensive as Nigeria’s (approximately 200 trillion tcf) or Mozambique’s (over 100 trillion tcf of natural gas reserves) is more than enough to drive the nation’s energy agenda.
Across the African continent, natural gas has boosted economies on a large scale. Algeria, with its abundant gas reserves, is a net exporter of natural gas to Europe, as is Egypt. The extensive Algiers Metro (part of which is underground) and the newly built Cairo capital are projects that were financed respectively by these hydrocarbon riches.
Nigeria’s Lagos-Calabar railway could very well be a similar modern train service from Accra to Paga, seeing as both straight-line distances are just over 500km. If gas revenues are funding such projects in neighbouring African countries, Ghana cannot afford to miss out on these developments either.
Ghana’s Gas resources
In August 2023, Tullow Ghana Limited and the Jubilee Partners – Kosmos Energy, Petro SA, Ghana National Petroleum Corporation (GNPC), and Jubilee Oil Holdings – confirmed that they had signed an amendment to the Interim Gas Sales Agreement in Ghana, ensuring that gas was sold at the low-cost price of $2.90 per Metric Million British Thermal Unit (MMBtu), the very price of Jubilee gas referenced back in the 2017 Jubilee Plan of Development.
Because of what this means for funding national development programmes, the government, especially deserves praise for its foresight. Achieving massive industrialisation is not possible without a regular supply of cheap energy sources.
While this short-term agreement terminates before the fourth quarter of 2023, it is a signal of intent that Ghana is ready to utilise domestic gas as a reliable and sustainable energy source to power the nation’s industrialisation ambitions.
Oil and gas stakeholders in Ghana are optimistic that acceptable commercial terms for the export of future long-term volumes of locally drilled gas will be agreed upon before the expiration of this interim agreement (set to expire by the end of September 2023). This step in the right direction signals a willingness to prioritise the domestic gas value chain in the long run.
However, plans are also far advanced for Ghana’s industries to be powered by imported LNG. Presently, a terminal worth over $400m is already under construction, with plans to import LNG from oil giant Shell.
While this will boost gas availability, the associated costs of importing gas hold long-term implications.
The UK Guardian recently published a story titled, “Will Ghana’s gas gamble perpetuate a cycle of fossil-fuel-related debt?” In it, the writer, Chloé Farand, outlined a bleak outlook into what on the surface would have looked like a boost to the industrialisation plans the government has outlined. First, the importation agreement ties Ghana to a 17-year contract with Shell.
This is likely to result in future fossil fuel-related debt, from the high cost of import. This is an expense Ghana cannot afford amid economic struggles intensified by events on a global scale – from the COVID-19 pandemic to the Ukraine war.
Under the terms of agreement, the taxpayer would still be liable even if Ghana is unable to utilise the gas. Such contracts are notorious for hamstringing African governments, further deepening the poverty cycle many have become mired in.
Of note is the fact that the gas would arrive in a liquified form, making it necessary for the process of regasification with its environmental implications.
According to Mike Fulwood in an article titled, “Does Ghana Need LNG?”, written for The Oxford Institute for Energy Studies (OIES), “The risk is that a variable supply of LNG to Ghana and potential problems relating to the chain of contractual arrangements could mean that the importation of LNG is seen as less than a success, sending a message to other countries that LNG is not reliable when the real lesson is that Ghana probably doesn’t need the LNG in the first place.”
Taking Advantage of Domestic Gas
Key to this industrialisation dream is Ghana’s gas fields, which will power the existing Aboadze and Sanzule thermal plants at costs much cheaper than we are presently paying. The gas-rich Sankofa field, a joint venture between Eni, Vitol, and GNPC, is mainly non-associated gas and provides a dedicated supply of domestic natural gas.
The Tweneboa, Enyenra, and Ntomme (TEN) fields and the Jubilee fields, operated by Tullow on behalf of its Partners, also hold copious reserves of both associated and non-associated gas resources.
With the anticipated long-term gas sales agreement as an important catalyst for future investment, we can ensure that Ghana is able to utilise and export natural gas rather than flaring it – a practice that has severe environmental ramifications.
Contributions to the West Africa Gas Pipeline (WAGP) will not only make more energy available in the sub-region but will also serve as an extra source of foreign exchange. Moreover, utilising gas as an energy source is cost-effective, maximises resources, and boosts revenue, further enhancing the country’s economic prospects.
Additionally, the projected savings from gas – over $1 billion – and over $400m revenue from domestic gas export per year, can accelerate economic growth, providing the government with a unique opportunity to allocate resources for strategic development initiatives.
This is even before one considers the hundreds of direct and indirect jobs that will come from the new domestic gas industry. Whether this results in funding flagship projects like One District, One Factory (1D1F) or a nationwide road infrastructure, domestic natural gas has the potential to change the trajectory of the economy.
Government is Key
However, achieving optimal gas production necessitates concerted efforts and substantial investments in developing gas resources from Ghana’s oil and gas fields. The TEN Enhancement Plan to be delivered under a revised plan of development for the TEN field, is vital in arresting the decline of the field.
Officials of Tullow stated to Ghana’s parliament recently that there is potential to supply cost-competitive gas in the long term. The plan aims to unlock untapped hydrocarbon reserves and intensify domestic exports.
It will also provide additional gas resources from both the TEN and Jubilee fields for power generation and energy security. In 2020, the World Bank in its 2020 “Ghana – Sankofa Gas Project” Report, made a point that the Eni and the Sankofa Partners’ gas project “is enabling natural gas usage to its full capacity of 171 mmscf/d, and contributing to Ghana’s energy security, reduction of pollution by limiting Heavy Fuel Oil consumption and saving more than $100 million of the budgetary spending every year due to the substitution of more expensive fuels with natural gas.”
Central to these aspirations is the development of production, storage, and transportation infrastructure for natural gas processing, export, and delivery. The country needs more midstream infrastructure projects such as the Western Corridor Gas Infrastructure Development Project (WCGIDP), upgrading the current gas processing plants’ capacity beyond 300 mmscf/d, gas pipelines to transport gas from the western corridor to the middle belt of the country, and other midstream gas infrastructure.
Recently, the Parliamentary Select Committee on Mines and Energy released its report on an enquiry into the multi-year gas sales agreement between GNPC and Genser Energy Ghana Limited (GEGL). It was alleged by the African Centre for Energy Policy (ACEP) and IMANI that Ghana stood to lose over $1.5 billion with GNPC’s sale of domestic gas to GEGL.
While both sides of the aisle disagree on the veracity of these claims, this enquiry is a clear indication that Ghanaian lawmakers have a finger on the pulse of the nation’s energy issues and are ready to act in the best interest of the state.
We are at the threshold of a historic decision that could impact future generations. Do we want debt or development? Look no further, domestic gas – not imported LNG – is the answer and it is critical that we don’t let this opportunity evaporate.
By Annie Adu
Source: myjoyonline.com
