New regasification facility wasteful, likely to exacerbate gas pain – IES

Photo: Nana Amoasi VII, Executive Director-IES. Credit: IES

The Institute for Energy Security (IES) has questioned the decision to build a regasification facility at Tema Liquefied Natural Gas Terminal – warning that it could worsen the unutilised gas situation confronting the economy.

The country forks out an estimated US$700million yearly to pay for gas it does not use but contracted on pay-or-take basis, and the energy think-tank says the regasification facility can only exacerbate the situation, since it is likely to lead to imports of more gas.

“With ample proof that there is sufficient supply from domestic sources to meet the country’s gas needs, contracting a regasification facility at this moment is a misplaced priority and wasteful. It is wasteful in the sense that it is going to worsen the excess supply situation, resulting in more cost to the country in the face of the take-or-pay clause embedded in the liquefied natural gas (LNG) import contract,” IES’s Executive Director, Nana Amoasi VII, told the B&FT.

The Tema LNG Regasification Terminal, which arrived in the country at start of the year, is expected to lead to a rise in gas imports of about 1.2 billion cubic metres (bcm) this year, according to Fitch Solutions.

This, the IES argues, does not bode well for a country struggling to put already existing gas resources to economic use.

“The decision to build an LNG regasification facility in the country for purposes of importation is hasty and needless. There is absolutely no linkage to the short-term and long-term needs of the country. The decision to procure the facility at this moment will only contribute to the excesses, and come at a cost to the country,” he lamented.

Nana Amoasi VII further pointed out that raw gas exported to Ghana National Gas Company (GNGC) from the three domestic producing fields – Jubilee, the TEN and the Sankofa-Gye-Nyame (SGN) fields – in 2020 represent less than 38 percent of produced gas compared to reinjected and flared gas which is in excess of 68,000 million standard cubic feet (MMscf), constituting 59 percent plus of produced gas.

“It is therefore clear that the country has failed to make optimal use of its natural gas resource while it struggles to off-take the gas, hence the decision to re-inject and flare,” he added.

The way forward

Ideally, Nana Amoasi VII explained, where there is ample evidence of enough gas resources, as in the case of Ghana, the country is better off prioritising investment into gas liquefaction rather than regasification.

“Ordinarily, where there is clearly an excess in supply of the commodity, and the excess is creating bottlenecks for production and cost to the off-taker, the excess gas production should rather provoke a search for new markets. Therefore, the most feasible decision for government to take is to export the excess gas. Gas liquefaction would therefore be the best choice, aside from pipeline transportation; given that the continuous re-injection and flaring of excess gas may unnecessarily distort the geology of the gas formation, harm the environment, and cause the country to lose money.

“Both natural gas liquefaction and regasification are strategic options open to the government of Ghana (GoG) within the natural gas sub-sector. However, the country’s short-term and long-term priorities must be set right, so the country does not pay for what it does not need immediately,” he said.

To him, the issue about supply of gas has well been addressed by domestic production. What is left to be solved, he noted, is the demand-supply equation factor: “Government must therefore stimulate demand by putting in place relevant gas infrastructure and regulatory policies to resolve the issue of unutilised gas, beyond the use of natural gas for power generation”.

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