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Atuabo gas plant: A game changer?

Aug 12
10:08 2014

Ghana's ability to utilise indigenous gas for electricity generation must be celebrated, but not over-relied on – at least not for now.

Obviously, being well briefed on recent developments at the Atuabo Gas Plant project, President John Mahama, in taking a decision for an IMF bailout for Ghana’s severely-troubled economy, mentioned the utilisation of indigenous gas - in electricity generation - as one of the immediate and critical measures to return the country’s economy to competitive ways.

Clearly too, the logically relevant question to ask would have been how soon indigenous gas will come on stream, since the project had been bedevilled with all manner of challenges ranging from political scheming to funding challenges that had caused delays of well over two years in completing the project.

But, presto, within days of the president’s announcement comes the breaking news of the Atuabo Gas Processing Plant’s first test run, signifying near-completion of the much-awaited facility.

The immediate rhetoric from government commentators has been how significantly the facility, which has the capacity to generate about 140 million standard cubic feet of natural gas a day, and is estimated to save the country more than $500 million annually when it is substituted for light crude oil in the generation of power will provide cheaper electricity to end-users – and even stretching it a bit too far to the development of a petrochemical industry. These, indeed, are all realistic aspirations but the extent to which they are realisable within the short to medium-term prompts the question as to whether the nation is not being over-reliant on the Atuabo Gas Processing Plant for an economic upturn.

One way to think about the Atuabo Gas project – the processing facility that will receive and process associated gas from the Jubilee oilfield operations and deliver dry gas to the Volta River Authority (VRA) thermal plants in the Western Region – is to crunch the numbers and figure out what contribution it will be making to electricity production.

The Jubilee operations produces 120 million standard cubic feet daily (MMscfd) and utilises 30MMscfd for the energy requirements of the Floating, Processing, Storage and Offloading (FPSO) oil production facility, therefore that leaves 90MMscfd to be processed by the Atuabo Gas plant and delivered to VRA. But the VRA’s demand for gas for power generation is in the region of 400MMscfd. With an average delivery of 50MMscfd by the West Africa Gas Pipeline Company (WAPCo) – based on its historic performance – VRA would have a shortfall of 260MMscfd in its gas requirement.

That certainly should mute celebrations about cheap electricity anytime soon.

Another indigenous gas source that can possibly be tied into the Atuabo facility is the ongoing TEN (Tweneboa-Enyenra-Ntomme) oil production project, which at peak will deliver 80MMscfd of associated gas but first gas is not expected till 2017

Yet another source of indigenous gas that could fill part of the gas supply gap would be the Italian major, ENI, operated dedicated gas field, Sankofa. ENI has been recruiting in Ghana these past couple of months, indicating that work could be started on developing the field, making a possible first delivery in 2017. 

In the medium term, Sankofa will peak at 180MMscfd, meaning the country could be looking forward to about a total of 400MMscfd from all the sources currently available to it. Given that currently, Ghana’s total installed thermal generation capacity stands at 2,754MW and electricity demand is estimated to be growing at 12% annually, with increasing resort to thermal generation due to a loss of appetite for pursuing investments in the remaining medium and mini-sized hydro resources scattered around the country, the need for gas will certainly heighten.

The country is targeting 5,000MW by 2016 and most of the new thermal plants – 70% to 80% - will be gas fired plants.

It is therefore obvious that planned investments in gas development and gas commercialisation will even not be enough for Ghana in the short to medium term.

Another way to look at the Atuabo project is whether all bottlenecks to its smooth operations have been cleared.

Obviously, the country has not been able to solve the Jubilee gas ownership problem satisfactorily. In the contract with the Jubilee partners, GNPC is the owner of the share of Ghana’s gas. But the mandate that established the Ghana Gas Company gives the latter the power to own gas, build infrastructure, transport gas and sell gas. 

The question remains as to whether GNPC will continue to be the owner of the gas on behalf of the country or will ownership be transferred to the Ghana Gas Company? That is an issue that is still outstanding.

Aside that, Ghana is yet to sign an agreement with the Jubilee partners over the evacuation of gas.

The VRA is supposed to be the primary user of the Jubilee gas and yet there has not been any signed gas purchase agreement between VRA and Ghana Gas or GNPC and whoever the final owner will be. 

So there are some operational steps to take, even with the imminent commencement of operations by the Atuabo Gas facility soon, this year. And these are no simple issues; if we are to wait till gas is delivered before we start running around to sign those appropriate agreements, we may be bogged down with legal impediments that would dampen our celebrations.

And as it stands now, we may be asking too much of the Atuabo Gas Plant to be the game-changer in our economic sluggishness. We will have to encourage more dedicated gas exploration and commercialisation by fine-tuning our legal and regulatory regime, while also investing in more gas delivery infrastructure to make the dream of cheap electricity and a petrochemical industry more realistic.

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