Smoothening the Gas Demand & Supply Scenario: The Case for Realistic Planning to Improve Confidence in Ghana’s Gas Market & Reduce Risks on Public Finances

The importance of natural gas to Ghana is established to be enormous; for power generation and in recent times, for industrial growth. In the electricity sector, more than 50% of demand rely on thermal plants which can use natural gas, the cheapest among the fuel options. The Ghana Grid Company (GRIDCo) estimates that the growth in generation and demand on the grid will depend largely on thermal plants, estimated to reach about 2700MW by 2022. The commitment of government therefore has been to increase the availability of natural gas to allow fuel switching from diesel, Residual Fuel Oil (RFO), Heavy Fuel Oil (HFO), light crude oil etc. The industrial consumption largely remains aspirational. Today, only about 8mmscfd of gas is consumed by industry in Ghana. There are existing businesses that can switch to the use of gas, but they remain impacted by either access to transmission infrastructure or the economics of the fuel.

Ghana looks to two sources for supply of gas; imports and domestic production. The imports will come from Nigeria through the West Africa Gas Pipeline (WAGP) and Liquefied Natural Gas (LNG). The domestic sources are expected to come from producing oil and gas fields in the short to medium term, and the long term, from additional investments in the offshore basins of Ghana to discover more oil and gas resources.

In the past, the Nigeria gas was not reliable mainly on account of pipeline attacks and debt from default in payments for gas supplied to VRA. This situation, coupled with high demand projections from the energy commission, brought to the fore policy decision to diversify the imports through LNG. In recent times, supply has been fairly stable under a new arrangement to offtake gas through the issuance of letters of credit (LC). In addition, government is proceeding with two LNG projects which continue to send mix signals to the finances of government and the investors in the local gas market. This is fuelled by the potential of oversupply of gas which poses risk to the cash flows of the local suppliers.

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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