Power and petroleum require critical attention

By Moses Dotsey Aklorbortu

The petroleum and power sectors of the economy, no doubt, are part of the critical areas that must be tackled if Ghana wants to move the economy forward and create wealth for the people.

Fortunately, development of the third independent oilfield is almost complete as developers await the arrival of the third floating, production, storage and offloading vessel (FPSO) for connection to the subsea infrastructure for the transmission of gas onshore.

Reliable power

These achievements will allow the country to rake in more revenue from its oilfield activities as they add value to associated gas for reliable power generation to support any industrialisation drive of the country.

Besides, feeding thermal plants at the Aboadze and Tema power enclaves, other industries such as fertiliser producers as well as other investors that will want to own their own power plants can tap into the gas resource for fuel to generate their own energy.

However, the development of oil blocks did not follow the systematic approach to ensure that all these physical downstream gas infrastructure were in place to realise the benefits in time and in the right measure. Curiously, the country’s thirst for revenue from the oil overrode the need for appropriate arrangements to avert the current situation of lack of shore- based gas infrastructure to propel growth.

Interestingly, Ghana is now negotiating certain vital issues. These include whether to rent or extend pipelines; cost of transportation, the price of gas, positioning of compressor stations and the completion of some vital onshore facilities. Since the celebrated discovery of oil in 2007, the country has made other finds that now put the estimated proven gas reserves at 5.5 trillion standard cubic (scf).

OCTP

With Eni’s Sankofa OTCP project, which is expected to pump first oil in August this year, Ghana is yet to decide on how the excess gas would be managed, especially in 2018 when the supply will far outstrip demand, going by current availability of gas-commissioned thermal units.

It is obvious, for instance, that in the past no serious attention had been paid to ensuring a reverse flow of extra gas between all FPSOs and hungry plants in the Tema (Kpone) Power Enclave. This discussion has just started among stakeholders in the petroleum sector.

Options

The inertia leaves the country with two options. First, to negotiate with the West African Gas Pipeline Company (WAGPCo) for a tie-in or buy the Tema-Takoradi ends of the pipelines from Itoki in Nigeria to use for the reverse flow.

The second option is to build or extend the existing lines from Aboadze or Prestea-Huni-Valley to the Tema Power Enclave.

Dual benefit

The fact is that in either way, whether the country chooses to carry out a reverse flow or extend lines from Prestea or Aboadze to Tema, comes with benefits. In the long run, both solutions will be required to ensure total stability of the system to keep the wheels of industry in constant motion.

Firstly, when the reverse-flow is done, it will save the country a lot of investments that could have been spent through relocating residents, should a new pipeline be constructed; community engagement, destruction of the environment, including digging through vegetation reserves and payment of compensations.

However, using the reverse flow may be an expensive venture because the cost of transporting the gas by WAGPCo and price of the product itself could make it too expensive to the extent of increasing the cost of generation.

Even though the price of the gas from Eni was informed by high capital expenditure (Capex) at the time of negotiation, it may go down because of the prevailing low Capex and the government’s decision to renegotiate it. However, the cost of transporting it using WAGPCo is still high.

Ghana, which has equity stake in WAGPCo, had expressed the interest in buying the Tema-Takoradi lines, but other stakeholders declined to sell it, hence the need for further and better negotiations.

One Village, One Factory

Secondly, the option of extending the pipeline from Western to Greater Accra can cause delays in meeting the deadline and environmental and safety requirements. It may appear a long-term vision and not suitable for the short term. However, it could come with very strategic benefits to the country.

The One Village, One Factory policy can provide a stimulus for gas appropriation, making a good case for extending the lines in a reversal flow to Tema for power generation. In addition, those communities that will have the lines passing through them could also benefit, as factories can utilise gas for their own power production. From Atuabo in the Ellembelle District of the Western Region, these lines will span across thousands of communities.

That will be the best starting point for siting of these factories with mini-plants to generate power for own use. A ceramic factory in the Western Region currently uses lean gas from Atuabo to power the factory.

The team

That notwithstanding, the Ministry of Petroleum and Power, to be led by Mr Boakye Agyarko, if he is approved by Parliament, will no doubt have the uphill task of finding lasting solution to teething challenges. These include the non-payment for supplementary gas supply from Nigeria, Ghana-Ivory Coast border delimitation, the abandoned Effasu power barge, debt negotiation with WAGPCo, labour issues, local content issues, alignment of Bulk Storage and Transportation Company, and the Ghana National Gas Company with the Ghana National Petroleum Corporation (GNPC).

Perhaps, chiefly among the gamut of issues is to hold negotiations with WAGPCo else the country stands to lose greatly.

The gas infrastructure

From the projections of the Eni project, the country has to ensure that onshore gas infrastructure is in place to receive, transport and transform the gas into power for growth.

Currently, the country’s power sector has an installed capacity of more than 3,600 megawatts (MW) of power with projection of daily power needs of about 2200MW daily. Therefore, there is no need to increase generation units.

What is needed are effective free-flow and cost efficient supply of fuel to these plants, which were commissioned on both light crude oil (LCO) and natural gas.

The blessing

Fortunately, all the discoveries came with associated gas. There is also natural gas at all the fields – jubilee, OCTP-Eni project and Tweneboa, Enyera and Ntomme (TEN) fields.

The difficulty here is that, Ghana has to do more to ensure that there is interconnectivity between the pipelines from the western corridor to Preastea Huni-Valley, Aboadze and Tema. Ghana has no option to ensure the appropriate structures are in place to utilise the resource.