Acep’s Comments on the Octp Gas Utilization Challenges

Background

In 2015 the government of Ghana approved the Plan of Development of the Offshore Cape Three Point (OCTP) Oil field. At the time, the country faced power challenges and unreliable supply of gas from Nigeria. The proposed seven billion Dollars ($7bn) OCTP investment had clear objective; to promote energy self-sufficiency, that is also clean, for Ghana’s sustained economic growth through the supply of natural gas. This objective was pursued by the government of Ghana even if it meant paying more for the gas. The World Bank provided an unprecedented $700-million security package, the largest ever by the Bank to Ghana, to guarantee the project and, by extension, the attainment of the objective. The World Bank, at the project initiation, indicated that the power sector was the primary market for the commodity and the justification for financing the project. Ostensibly, a robust plan and action to utilize the 171 mmscf of gas per day to generate 1000 MW of power was not negotiable to douse the risk of non-utilization of the gas that bore a monthly $52.9 million take or pay tag.1 In other words, government’s responsibility to pay $52.9 million every month, whether or not gas is utilized, was the incentive to nudge the government into action.

The issue

Unfortunately, Ghana is unable to consume all the 171mmscf of gas per day as planned. This is a manifestation of defective dutiful commitment to project, and confirms that Ghana failed to plan adequately for the commissioning of the gas. Misplaced gas infrastructure investment priorities and political excuses constitute the fundamental causes of the issue at hand.

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The Africa Centre for Energy Policy (ACEP) was established in 2010 to contribute to development of alternative and innovative policy interventions through high-quality research, analysis and advocacy in the energy and extractives sector in Africa.

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