Ghana Inks Deal with Gazprom to Add 1,000MW of Power to Current National Supply

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Ghana’s government has signed a new power deal with world’s largest gas producer, Gazprom, to add up to 1,000 megawatts to the national power supply.

The transaction, which was signed by Ghana’s Energy Minister, Boakye Agyarko, and the CEO of the Ghana National Petroleum Corporation (GNPC), Dr Kofi Koduah Sarpong, will save the country over $1 billion, according to the Energy Ministry.

The new Liquefied Natural Gas (LNG) deal between Ghana and Gazprom is seen as a major step towards making Ghana a net exporter of power to neighbouring countries.

The contract replaces two signed competing contracts for the same Tema LNG project by the previous President John Mahama led government, which were considered over-priced and over-sized for Ghana.

The history of electricity supply in Ghana is punctuated with several bouts of supply deficits – a huge attendant economic cost to the nation. Over the past decade especially, ensuring reliable and affordable electricity supply in Ghana has been extremely undermined by the limited access to reliable and economic fuel sources to power thermal plants.

The West African Gas Pipeline project was the first move by the power sector to displace crude oil and diesel as the principal fuel sources for the thermal plants. Unfortunately, supply of natural gas from Nigeria via this project has been gravely unreliable.

With the discovery of oil and gas in the country, the government recognizing the urgent need to cure the fuel supply risk in the electricity supply chain, invested in the Ghana Gas infrastructure to harness the indigenous gas.

The rapid growth in demand for electricity and quest for industrialization, however, has called into question the sufficiency of the current natural gas supply base in the country. The World Bank and Ministry of Energy estimate that a total of about 250 – 300mmscf/d of imported LNG will be needed by 2018 to undergird the supply of gas from the indigenous fields.

In a bid to meet this requirement, the erstwhile Mahama government entered into contracts with three different companies (namely, Quantum Power Ghana, West African Gas Limited and Kaheel) for the supply of LNG and the construction of its associated import terminal.

The aggregate contractual commitment made to these companies amounted to 1000 mmscf/d (only 25% of which was the country’s needs as prescribed by the World Bank and the Ministry of Energy at the time) or $25bn over the term of the contracts. From a broader perspective, this was equivalent to more than half of Ghana’s 2016 GDP.

This transaction will lead to the establishment of Gazprom’s first physical presence in Africa. The Gazprom Group has identified other significant energy related opportunities in Ghana where they believe they can add value in terms of the development and commercialization of the gas sector.

Their plan is to use Ghana as a regional hub into West Africa and ensure that Ghana benefits as a result. As afore-stated, Gazprom is the largest gas producer in the world with annual revenues —in excess of $100 Billion, more than twice the size of the GDP of Ghana

 

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