Issues of Sustainability: Ghana Natural Gas Industry Development

Natural gas is a subcategory of petroleum that is naturally occurring, complex mixture of hydrocarbons, with a minor amount of inorganic compounds. There are three types of natural gases: non-associated gas, associated gas and gas condensate. Non-associated gas is from reservoir with minimal oil. Associated gas is the gas dissolved in oil under natural conditions in the oil reservoir. Gas condensate refers to gas with high content of liquid hydrocarbons at reduced pressures and temperatures. (Guo & Ghalambor, 2005).
Natural gas in the form of LPG (Liquefied Petroleum Gas) has been minimally used in many homes and industries over a decade ago in Ghana. Mainly for cooking, as an input to production, and most recently as an alternative to petrol for vehicular transportation, but not until the introduction of thermal electricity generation and a quest for a replacement for an expensive alternative to thermal plants fuel (light crude oil) that led policy-makers to consider natural gas for electricity generation in Ghana and a sudden focus on developing a natural gas market.
Most importantly coupled with the 2007 commercial discovery of hydrocarbons in Ghana with the associated, non-associated and gas condensates coming with crude oil as an after-thought reserves in the Greenfields of Ghana provides huge opportunities to monitized the gasfields since there is an already internal demand-bust for gas for power generation, domestic use, industrial purposes and fuel for transportation.
Akosombo hydroelectricity has been the main supplier of electricity in Ghana. The rapid increased in the demand for electricity with limited supply options culminated into the addition of thermal power generation in 1997 of the first fossil fuel power plant (Aboadze). Even though very expensive to sustain, thermal power is required as a supplement to Akosombo hydroelectricity plant which acts as the base-load electricity producer, ‘as necessity is the mother of inversion’. The thermal plants supplemented Akosombo as peak-load producers to curtail the possible blackouts and brownouts (commonly known as “dumsor dumsor”) as a result of the upsurges in demand variations and supply shortages.
The most important component of a successful natural gas industry development is a downstream off-taker (major) consumer that is a substantial market demand to act as a swing receiver of produced gas. This could be in the form of a large industrial demand, electricity generation, and domestic usage or for export in the form of LNG (Liquefied Natural Gas). In the case of Ghana there is an emerging and sustained demand for gas for internal electricity generation, industrial and domestic consumption. As a precursor for a natural gas market development, is the abundance of natural gas reserves that is technically, economically and politically proven available natural gas supplies, which Ghana can boost of a rigorous exploration, discovery and development of several natural gasfields offshore. Thanks to the activities of several and sudden trooping of many International Oil Companies in the coastal waters of Ghana in pursuit of the ‘blackgold’.
Current demand for natural gas outstrips supply options due partly to infrastructural inadequacies. Largely the country has inadequate infrastructure ranging from complex infrastructures to the very basic ones; reasons for this problem are multi-dimensional, emanating from: political, social, economic and developmental. But most importantly adequate infrastructure in the forms of: natural gas receiving and processing plants, storage tankers, pipelines and other transportation infrastructure are required for the efficient operations of a sustainable natural gas market. The building and maintenance of these integral infrastructures requires long term investment commitment from either government or the private-sector because this involves huge financial obligations.
However due to the urgency and the environmental impact of gas flaring in 2010 the Ghana National Gas Company was formed just as the Trinidad and Tobago National Gas Company of 1975 to develop the gas market and granted exclusive access/rights (natural monopoly) to take free gas from the Jubilee Partners and fields, transmit the gas from offshore to downstream and other distributional sales in Ghana as noted by Shepherd and Ball (2010).
The natural gas industry in Ghana is now at the verge of taking-off, with all the components of a gas market right in place. Trinidad and Tobago now has a well functioning natural gas market partly due to sustainable management and policy orientation and also abundance of gas reserves as well as resources. Japan has also developed a successful and a sustainable natural gas industry (LNG) even though they do not have gas deposits, all gas demanded are imported in the form of liquefied gas into Japan from across the world. Whilst at the same time Nigeria has massive gasfields but performed abysmally in building a sustainable natural gas market for internal consumption.
The success stories in Trinidad and Tobago, Norway, Israel, Colombia, Japan and Turkey did not occur in a random but through carefully planned, well executed conscious efforts from their perspective governments and public- private partnership to build their institutionally sound and networked natural gas markets. One might be quick to ask; these countries experience severe winter conditions and so are desperately in need of natural gas for industrial and home heating. Ghana spends US$ 27million on light crude importation instead of gas from the West African Gas Pipeline gas; the only gas supply into Ghana is disrupted as noted by the Energy Group Africa Region of World Bank Group (2013) for thermal power generation.
Ghana therefore needs to sustainably develop her natural gas industry through a conscious effort by building targeted local infrastructure, understanding the nature and global dynamics of the natural gas industry and managing all related risk and uncertainties that might be apparent in the future of the nascent industry.
Ghana faces deep-seated socio-economic development challenges as well as natural resource governance problems associated with the anticipated oil export earning windfall, as opined by Cook, (2013) on a congressional research service on “Ghana: Recent Development and US relation”. And it is eminent that Ghana is most likely to encounter several challenges in the development of the natural gas industry. As could be traced to the funding of the Ghana Gas National Company Limited Atuoba Gas project, which is been funded by a Chinese Development Bank loan facility. Seen from afar, funding for such projects of magnitude could not have come from the government of Ghana internally generated revenues which are competing with other sectors of the economy (health, education, agriculture). Project finance with it multi-dimensional aspect of risk comes with its own inherent problems and as to whether multi-national loans for such projects are the right option. Or the Atuabo Gas Project could have been funded with several other sources of funding and considering the best possible funding alternatives for the most significant component of building a sustainable natural gas industry in Ghana. Assuming the financial structure of the Ghana Gas project is wrong? What it means is that the foundation upon which the building blocks of the natural gas industry will be in shambles.
The question of using 100 percent multinational loan as the basis of building a national company is accompanied with a lot of managerial challenges and raises several questions on the efficient performance of such a company even though there are exceptions to all rules of thumps. Ghana have witnessed the mismanagement of several state-owned-enterprises (SOE) and their final collapse and been sold for very little, in the quest of privatization. As well, some massive government infrastructures are clouded with politics and are also either “white elements” or “castles in the desert”. Is it a prediction of doom or untold truths, that at its infancy the natural gas industry is on a feeble foundation and as matter of urgency there should be R&D in the industry and elements of sustainability in areas of global competitiveness, local infrastructure building and risk management.

Shafic Suleman, ERP.
Email: shafic.suleman@ucc.edu.gh
Tel: 0243 83 83 98
Student-UCC