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Plans to bring Ghana’s gas resources online first are almost a reality with the arrival of FPSO Kwame Nkrumah, probably signalling the dawn of reliable energy supplies.
The state-of-the-art floating production storage and offloading vessel FPSO Kwame Nkrumah (named after Ghana’s first president who had a vision of harnessing the country’s energy resources for rapid industrialisation) arrived in the country on June21st amidst surprisingly subdued celebrations - but certainly undampened high spirits of Energy Minister Dr. Joe Oteng-Adjei who plans to bring Ghana’s gas resources online; first, from the Jubilee Field that is set to turn sub-Sahara Africa’s first independent country into a significant oil producer by the close of 2010.
The haste to deliver Jubilee’s natural gas to the 125MW thermal generating plant - the Osagyefo barge at Effasu in the Western Region (also named after the first president) - is prompted by an urgent need to revamp the country’s beleaguered energy sector which is suffering from years of underinvestment and non-cost recovery.
Oteng-Adjei’s plan of utilising gas first did not go without a significant - albeit unjustified - bashing from the local press, which questioned the possibility of harnessing Jubilee Field gas without the establishment of infrastructure such as offshore pipelines, processing facilities, and onshore liquefied petroleum gas (LPG) and pipeline facilities needed to capitalise on gas production.
Chief Executive Officer of the Volta River Authority (VRA) - Ghana’s main producer of electric energy - Kwaku Awotwi explains that the original plan of establishing the gas infrastructure with a processing plant situated onshore at Bonyere, 62km from the Jubilee Field, with interconnecting onshore pipes to the Effasu and Aboadzie thermal plants, was being temporarily circumvented since it would take a couple of years to materialise.
“Prefabricated pipelines will be hooked-up directly from the Effasu barge to the FPSO for delivery of natural gas directly from the field to the thermal plant, and that should not take too much time to accomplish,” Awotwi explained.
The VRA boss’s excitement about the Jubilee gas is understandable since it fits snugly into his plan of delivering an additional 500MW of power to the current 1,900MW total production to help address a debilitating supply shortfall that has hit the country since 2007, forcing high-intensity power users such as the mining companies to resort to private thermal generation that in some instances increased their power costs by 60 percent.
Ghana’s electric energy suppliers - including the VRA, sole power transmitter GRIDCo and the major distributor Electricity Company of Ghana (ECG), asked for a 154 percent upward adjustment of electricity end-user tariffs to enable them meet major investment and operational activities that would ensure the delivery of adequate and better quality power.
They got an 89 percent increase, effective June 1st 2010, from the Public Utilities Regulatory Commission (PURC), the sector’s regulator.
The tariff increase has however met a severe backlash from the public, especially from the country’s industrial sector.
President of the Association of Ghana Industries (AGI) - the country’s powerful private sector advocacy organisation - Nana Owusu-Afari said the tariff increases could lead to the collapse of some high energy-intensive industries including the textiles, plastics, steel and cement industries.
“The tariff adjustments culminate in increases of 131 percent for lower voltage consumers – mostly the small and medium-sized enterprises (SMEs) – to as high as 200 percent in the high voltage consumer class,” he disclosed.
The country seems to be caught in a catch-22 situation. The electric energy suppliers say without the revenue from the tariff adjustment, there can be no meaningful improvement in power delivery.
The VRA has said the increase in tariff coupled with the expected arrival of gas put it in a better position to curb the unwarranted interruptions which hitherto have characterised the country’s electric energy delivery.
The VRA expects that its reserve margin, previously at an abysmal low of 10 percent, will soon be greatly increased; and it should also be in a position within three months to supply gas to a private thermal plant, the Asogli thermal plant, for the production of 200MW of power.
Government hopes that with delivery of Jubilee gas to VRA, which is expected to enable the production of an additional 200MW from the Western Region, cheap energy will be made available to prevent any further need for tariff adjustment for a long while.
The oil and gas production partners on the Jubilee Field, earlier in 2009, agreed to provide the first 200 bcf of natural gas to the state-run Ghana National Petroleum Corporation (GNPC) at no cost to help fund the development and construction of the initial gas infrastructure.
Government also expects that the quick delivery of Jubilee gas to VRA will help it overcome challenges it has been encountering with natural gas deliveries from Nigeria through the West Africa Gas Pipeline project (WAGP).
The WAPG project, originally expected to come on-stream in 2005, only had trickles of gas reaching its final destination in Ghana a couple of months ago.
The project costs have increased exponentially. Ghana said that its share of the WAGP will cost US$1billion instead of the US$600 million earlier announced. The new cost was due to the unexpected delay in implementation of the project, which has resulted in a 70 percent premium over the original budget.
Analysts say fast-tracking the delivery of significant gas deposits recently discovered offshore Ghana’s Western Region will greatly enhance its ambitious plan of producing 5,000MW of electric energy by 2015 - targetted to make the country a significant electric power exporter to the sub-region since Ghana’s total power requirement by 2015 is estimated to be approximately only 2,500 MW.
The experts say the delivery of Jubilee gas to the Osagyefo barge may be the first toddling steps towards transforming the country into an energy superpower in the West African sub-region, but they are quick to point out that gross inefficiencies in the transmission and distribution sectors also ought to be tackled with similar haste – if the country is not to continue losing an estimated 40 percent of all electric power produced.
Pull-quote Government hopes that with delivery of Jubilee gas to VRA, which is expected to enable the production of an additional 200MW from the Western Region, cheap energy will be made available to prevent any further need for tariff adjustment for a long while.
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