ACEP pushes for procurement of LNG
One of the country’s finest think tanks in the energy sector, African Centre for Energy Policy (ACEP), has made a strong case for the government to facilitate the procurement of a lean natural gas (LNG) facility, critically considering its scalability, timing, cost and the siting of the project.
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“ACEP is of the view that the financial risk of importing LNG is lower than the risk of not importing it,” it said, and added that “Ghana’s energy sector is suffering today because the country lacked the boldness to take risks at the time some analysts estimated domestic supply of gas would be enough for power generation”.
In a comprehensive paper detailing the need for LNG as the main source of power to transform the energy sector in the country with the title ‘Liquefied Natural Gas (LNG) Supply To Ghana: The Politics and The Reality – An Advisory Paper for the Government’, ACEP strongly argued that LNG would provide greater security of supply with diversity of sources.
Recommendations
In making a point for its position, ACEP appreciated the challenges the government of Ghana had faced over the years in deciding on the need for an LNG facility.
It said: “The gas supply scenario definitely poses some risk which demands very careful analysis on mitigation measures”. Subsequently, the energy think tank said recommendations from its analysis were key to be considered.
LNG is needed
It said Ghana needed LNG to provide extra gas supply security even in 2018 when local supply could be just enough for the time-of-use demand scenario. Indigenous supply was still not diversified enough to provide confidence for uninterrupted supply from the fields, it added.
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Nigeria Gas
ACEP observed that gas supply from Nigeria did not hold any reliable promise. It said, “The suppliers have not delivered on foundational volume over the years, largely influenced by growing demand for gas in Nigeria and export of LNG,” saying that “The current supply of only about 9mmscfd doesn’t give any assurance for the future. Nigeria National Petroleum Corporation (NNPC), which is a major player in the West Africa Gas Pipeline Project (WAGPP), is now exploring the opportunity to export LNG to Ghana through WAGL.”
Location of the LNG facility
It said there were contentions for the suitability of the Tema Port for the siting of the LNG facility, both in terms of actual technical viability and for causing disruption to port operations, adding that a study by an internationally accredited oil and gas engineering consultancy “…suggests that high-pressure gas cannot be safely evacuated from the built-up area of the Tema Port.”
Regardless of how remote the risk may be, ACEP recommends that siting of the facility outside the port should be considered.
ACEP argues that the port is a major revenue basket for the state and any activity that risks the size of revenue from the port should be considered carefully. “The fiscal challenges of the country will worsen if the port doesn’t function as required. There is no reason for port activities to suffer when there are viable alternatives,” it added.
Government should reserve the right to procure LNG
The report said the current trend in the LNG market presents an opportunity for Ghana to take advantage of the falling prices, negotiate stable prices, not be subjected to the volatility in the crude oil market, and in effect make greater savings.
Scalability
On the issue of scalability, ACEP said gas demand scenario for Ghana was largely influenced by the power sector. “This leaves the country largely unable to estimate future demand by other sectors,” it said.
Against the much talked about industrialisation agenda of the government, ACEP said the procurement of LNG facility should be able to account for gas needs that could not be assessed in the short term. “The remedy is to ensure that the facility that will be contracted has the potential to scale up supply with attendant benefits from economy of scale rather than two LNG facilities, which will be more expensive,” it added.
Managing the risk of potential gas glut
“The Ghana Gas Master Plan identifies other potential industrial uses of gas, including the textile, cement, steel, paper and fertiliser industries. There is the need for a proactive policy shift to activate those demands. This will align with Ghana’s industrialisation agenda and ensure that gas drives industry with its climate benefits,” it said.
QPR is recommended
ACEP said based on the strength of the three main proposals and available information used for the analysis, “ACEP is of the view that the QPR project presents greater value on the strengths of price, siting and optionality for Ghana to procure its own LNG.
Introduce competitive bidding for future LNG contracts
ACEP proposes that future contracts should ensure that there is fairness, transparency and competition for such contracts. That way, the company with the best value to Ghana will be selected.