Business News of 2014-01-27

Ghana's energy sector at crossroads

The Ghana Gas Company (GGC) and its Chinese contractors, Sinopec, have come under enormous pressure to complete the gas pipeline and processing plant, as volumes of supply from Nigeria have completely gone down, threatening electricity generation.

“We are at the crossroads,” the Energy Minister, Emmanuel Armah-Kofi Buah, declared at the project site at Atuabo, in the presence of all who matter in the energy sector.

Tullow Oil, operator of the Jubilee oil field, is equally concerned because the gas that is being re-injected into oil wells, awaiting the completion of the pipeline and plant, is standing in the way of attempts to crank up oil output to its peak of 120,000 barrels per day.

Sinopec has given indication that barring any hitches, it should deliver first gas by April ending. Mechanical completion of the plant, Sinopec said, is about 93 percent, and they are only “slightly behind schedule.”

In the meantime, flaring the gas appears the most likely option, but it is also the most dreaded solution as the, government appears keen on upholding its “zero flaring” policy. The Energy Minister insisted that other options are being explored, including the possibility of cutting oil production.

After touring the gas processing plant to familiarise themselves with the progress of work, the parties are going to meet to take a “final decision” on which option to pursue, the Minister said.

“We are all going to work closely with Ghana Gas to make sure that we can get this gas to flow. It is very critical; it is very urgent,” he told the press, adding: "It is very clear that while we are going to engage to deal with the issue of gas from Nigeria, our critical focus must be on the gas project.”

George Sipa Yankey, Chief Executive Officer of GGC, said the funding challenges regarding the $850million project have been resolved, and that until the mechanical completion phase is over, no payment is due the contractor.

“66 days to mechanical completion” was the message on notice to workers in all the offices of Sinopec on Friday when the Jubilee partners and power sector chiefs visited. Charles Darko of Tullow Oil and Ken Keag of Kosmos Energy said it was gratifying that “a lot of progress” had been made on the project, pledging their commitment to work with the schedules that have been established.

Yet even when Jubilee gas starts flowing through the pipeline, Ghana's gas needs will not be fully met, according to the Volta River Authority (VRA), which says the country will need between 230 and 850 million standard cubic feet per day in the next decade.

The Ministry of Energy has therefore been considering, for the long term, importation of Liquefied Natural Gas (LNG) to augment the country's gas needs. LNG is natural gas that has been converted to liquid form, usually for ease of storage or transportation.

Source: B&FT
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