GNPC Justifies Investment in New LNG Regasification Plant
The Ghana National Petroleum Corporation (GNPC) has said the new regasification plant being constructed at the Tema Liquefied Natural Gas (LNG) Terminal will safeguard the country’s future energy needs and usher in an era of cheaper gas.
The Floating Regasification Unit (FRU) of the terminal arrived in the country on the 7 January 2021 and is the first of its kind in sub-Saharan Africa. It has, however, been met with criticism by industry experts and CSOs along the energy sector for having the potential to increase the menace of unutilised gas and negatively affect development of local gas resources.
But GNPC’s CEO, Dr. Kofi K. Sarpong, justifying the investment in the new facility, said it offers an opportunity to secure the country’s future energy needs by increasing the energy mix for power generation and industrial use, as well as fuel for vehicles.
“The new LNG is cheaper than Sankofa and it is cheaper than the gas coming from Nigeria although prices can change anytime but as I speak, the formulation is cheaper than the one coming from Sankofa. The only ones which are cheaper are Jubilee and TEN but they cannot give you the volumes you need because of production constraints and challenges from the Ghana Gas plants,” he said.
Buttressing his point, he said gas demand has gone up significantly in the past two years, from about 211 million standard cubic feet (scf) in 2019 to 296 million scf in 2020 and expected to exceed 300 million scf in 2021. These volumes come from the Jubilee, TEN and Sankofa fields as well as from Nigeria through the West Africa Gas Pipeline.
This level of growth, according to him, cannot be matched by local production alone. “People make the mistake that we are producing so much gas domestically and therefore, there is no need for LNG. What GNPC is doing is highly competitive and in four years, demand should outstrip the current supply.
We are not likely to increase supply from our domestic sources because the Jubilee and TEN are wet gas and when they produce, it must pass through the Atuabo Plant for it to be converted into dry gas. The plant however, has a capacity of about 150 million cubic feet, which means that you cannot pass more than that volume through Atuabo.
The other one is dry gas from Eni and it is dry because they have a processing mechanism that extract the liquid from the gas. So, if you are talking about Jubilee and TEN fields, I would say that there is a constraint there. If we want to produce more from there then it means we need another processing plant like Atuabo which I am sure the Ghana Gas Company may be looking at,” Dr. Sarpong explained.
On whether the new LNG facility could impede the development of domestic gas resources, Dr. Sarpong answered in the negative, saying: “One reason we need LNG is to increase the energy mix for power generation. We can have upset conditions in the domestic production fields and it has happened a couple of times when one is not able to come on-stream.”
He added that: “in Tema where we have installed the LNG plant, the demand for gas is 250 million scf a day, which explains why we still take from Nigeria and from the West to add up to gas requirements in Accra.
There are power plants with installed capacity of about 1500MW and that will need about 260 million scf a day. We cannot get that alone from the West, we have to even transport some along the West Africa Gas Pipeline which costs us more money and it is a major issue in terms of cost. When you add that to the Sankofa gas, it is way too expensive,” he indicated.
Explaining further, Dr. Sarpong said talks of Jubilee gas being cheap are often misplaced because when the field’s foundation volumes, which is free to the country, are finished, maybe in about two years, a value will be put on it.
Meanwhile, a number of CSOs including the Institute for Energy Security (IES), have also expressed concerns that the Tema LNG Terminal could worsen the unutilised gas menace, which the country pays about US$700 million for. “If you bring in gas on pay-or-take basis, it will definitely increase the burden on government but ours is not like that,” Dr. Sarpong assured.
Tema LNG Regasification Terminal
Located within the Tema Port, the FRU of the terminal will operate in conjunction with infrastructure that allows for cost-efficient processes and without affecting maritime and port traffic. Dr. Sarpong explained internal usage of the facility may even require additional infrastructure to make distribution easy.
“We have carefully agreed with the suppliers to start from a lower level of about 75million cubic feet. In the second year, we will move to 125million cubic feet when we must have identified enough users to absorb that volume.
In the third year we will move up to 150 million and in the fourth we will go to 170 million and by the fifth year, we will be doing about 200 million. So we are using a more cascading kind of approach where you start from a lower level and then build up as demand increases,” he noted
The facility has potential to be scaled up to process 600 million standard cubic feet of gas a day but the actual contracted capacity to the country is 250million cubic feet of gas, according to GNPC. The gas will be supplied by Shell which controls about 30 percent of the global LNG market.