Prioritise locally produced gas over imported LNG -Ghana Upstream Petroleum Chamber

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David Ampofo

The CEO of the Ghana Upstream Petroleum Chamber, David Ampofo, has said there is sufficient locally produced natural gas offshore in addition to imports from Nigeria to satisfy the demand for gas in the country now and in the medium term.

He said, “the importation of LNG is rather late in the day as it was conceived at a time when there was an insufficient and irregular supply of gas. Today, the Jubilee, TEN, Sankofa fields and WAGP can more than provide for the country’s needs”.

Mr Ampofo said as part of governments effort to attract foreign direct investment into the oil and gas industry, the policy for managing natural gas resources associated with oil production, can send a positive or negative  signal to investors. He said oil recovery is directly linked to gas recovery, making the failure to evacuate the gas offshore Ghana, compromise the production of crude oil and reduce oil revenues. “It is a big disincentive to investors in the oil and gas industry if domestic gas is not fully harnessed”.

On the subject of LNG imports being cheaper, Mr Ampofo said “it would be helpful to have an indication of the cost benefit analysis on LNG import to Ghana in relation to price”, adding “to compare locally produced gas to imported LNG on a one-on-one basis does not really paint an accurate picture. There are so many other allied benefits to the economy that are associated with domestic production of oil and gas born out of significant foreign investment”.

Below is the full text of question and answer session with David Ampofo, Chief Executive Officer of Ghana Upstream Petroleum Chamber on whether the country needs an LNG facility.

Q: Why the need for this LNG facility in the first place? Is Domestic gas not reliable?

A: As I understand it, there were periods in the past during which there was an irregular supply of gas from offshore Ghana and Nigeria. That is no longer the case.

Q: Will the LNG plan provide energy security?

A: Ghana’s energy security challenge is to ensure the supply of adequate and reliable modern forms of energy for economic development. Gas has increasingly become the resource of choice and we have it in abundance. Today, the Jubilee, TEN and Sankofa fields and the imported gas from Nigeria more than provide for the country’s needs. In my view, government’s capacity to support the evacuation of the significant un-utilized domestic gas from our oil fields is key to Ghana’s energy security. That is certainly good for Ghana.

LNG imports if destined for the domestic market will take market share from domestic producers who have made major investments in partnership with GNPC, discourage them from making additional investments since they have no guarantee that the gas will be utilized. FDI in the sector would further dry up. This is a good time in the life of the industry for government and GNPC to engage with industry and cross fertilize ideas for the future growth trajectory of the industry, seeing as we have had almost 15 months of COVID 19. The industry is undergoing real change that we should be keeping an eye on; not to mention the energy transition underway.

Q: Does the imported LNG gas offer Ghana value for money?

Unfortunately, we don’t know the fiscal terms of this agreement. The Chamber has little information on this project. It would be beneficial for GNPC to engage with industry so we are all aligned with the policy framework for managing our gas resources within the bigger energy environment.

We don’t know if this is a Take or Pay agreement. Another take or pay arrangement would really be hard on the system. GNPC and Government since this year has been able to fully utilize the Take or Pay gas from Sankofa taking full advantage of the existing infrastructure that allows the gas produced in West to flow to the East.  So how much cheaper is this LNG going to be? We just don’t know. Arguments that imported LNG will safeguard energy needs and usher in an era of cheaper gas are worth examining further.

Q: Where is the high projected gas demand that justifies imports coming from?

A: Again, we are not so sure where it’s coming from. The Ministry of Energy have estimated the total gas demand for 2021 at 350mmscf/d. Jubilee, TEN, Sankofa and the imported gas from Nigeria at full capacity have capacities that can even over supply the needed gas. Probably, LNG can be imported to augment any shortfalls but not when there is an abundance of domestic gas.

Q: Does domestic gas have any importance over imported LNG gas?

A: Absolutely. Ghana should focus on fully develop our offshore potential. Locally produced gas provides additional benefits such as the condensate and LPG yield to GNGC. In fact it is estimated that over 30% of LPG distributed in Ghana comes from offshore through GNGC. There are so many allied businesses associated with the domestic producer creating significant investments in the economy.

Also, we should know that oil recoveries are directly linked to gas evacuation. The failure to evacuate the gas compromises the production of crude oil and is a big disincentive to investors in the oil and gas industry. So it’s crucial that domestic gas is adequately evacuated for optimal profits from crude to be realized.

Q: How can the Chamber help on this matter

A: The Chamber will be publishing a Position paper detailing what industry concerns are. Together we can all situate the various developments into an overarching energy policy framework. Such transparency and policy alignment provide impetus for future investments.

Q: So should government stop the LNG import?

A: I don’t think it is our place to say yes or no. But we feel it is important that industry be heard. GNPC is a partner to all the International Oil Companies operating in Ghana. So, coming together to discuss this dispassionately can only be good for Ghana.

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