Global oil shock threatens Ghana's power-sector gains

Ghana faces higher electricity-generation and fuel-import costs after Brent crude traded at about US$103.18 per barrel on September 18, approximately 86 percent above the US$55–US$56 average used in the country’s 2026 energy projection.

The price surge could increase the cost of operating thermal power plants when liquid fuels are required, placing pressure on government’s efforts to reduce generation expenses and prevent another accumulation of power-sector debt.

The Energy Commission projected fuel procurement for thermal power generation at approximately US$1.54billion in 2026 under its base-case scenario. The estimate covered the natural gas and liquid fuels required to operate the country’s thermal plants.

The projection was prepared under expectations of a substantially more favorable global energy market. The actual cost will now depend on the duration of the oil-price increase, the availability of domestic gas and imports through the West African Gas Pipeline, and the extent to which power producers are required to use more expensive liquid fuels.

Natural gas remains the main fuel for Ghana’s thermal generation system. Interruptions to domestic production or supplies from Nigeria could, however, force dual-fuel plants to increase their consumption of light crude oil or distillate fuel, exposing the power sector more directly to the international price surge.

Government estimates that switching power generation from expensive liquid fuels to natural gas has generated approximately US$500 million in savings. Renegotiated agreements with independent power producers have produced an additional US$250 million.

The increase in crude prices does not directly eliminate the entire US$750 million because part of the savings resulted from revised contractual terms. Sustained high prices could nevertheless reduce the benefit of the fuel-switching programme whenever gas shortages require power plants to return to liquid fuels.

The additional cost pressure follows government’s settlement of about US$1.47 billion in legacy energy-sector obligations in 2025. The payments covered debts owed to independent power producers and gas suppliers, as well as the restoration of the World Bank’s partial risk guarantee for the Sankofa Gas Project.

Government has also indicated that it is current on monthly payments to independent power producers. Higher generation expenses could test its ability to maintain those payments, particularly if revenue collected by the Electricity Company of Ghana remains insufficient to meet the sector’s full financial obligations.

The settlement of the legacy debts and renegotiation of power-purchase agreements were intended to restore confidence among power producers, improve electricity reliability and stop the accumulation of new arrears.

A prolonged increase in generation costs could weaken those gains by widening the difference between the cost of supplying electricity and the revenue recovered from consumers.

The immediate protection for the power sector is the availability of natural gas. The Energy Commission expects domestic gas from the Jubilee and Sankofa fields, together with supplies from Nigeria, to meet a substantial portion of thermal-generation requirements in 2026.

The Commission projects raw gas deliveries from the Jubilee Field to the Atuabo Gas Processing Plant at approximately 120 million standard cubic feet per day, while non-associated gas exports from the Sankofa Field are expected to average 260 million standard cubic feet per day.

Ghana is also expected to receive approximately 100 million standard cubic feet of gas per day from Nigeria. Any disruption to these supplies would increase the risk of power plants turning to liquid fuels at a period of elevated international prices.

Pressure from the global oil market is already affecting Ghana’s downstream petroleum operations. BOST Energies has reduced diesel and petrol exports to Burkina Faso and Mali to prioritize domestic supply.

BOST supplied Burkina Faso with 40,000 tonnes of the 80,000 tonnesof fuel requested for July and August. Mali received 10,000 tonnes, although it requested an additional 40,000 tonnes for August and September.

BOST Managing Director Afetsi Awoonor said fuel remained available but at a high cost, with growing domestic diesel consumption placing additional pressure on supplies and efforts to keep prices stable.

BOST controls approximately 30 percent of Ghana’s fuel market, with diesel accounting for about two-thirds of its supplies. The company’s decision to reduce exports indicates that the oil shock is beginning to influence commercial supply decisions within the domestic market.

Higher diesel costs would extend the pressure beyond the power and petroleum industries. Mining companies depend on diesel to operate heavy equipment and transport ore, while construction firms use the fuel for earth-moving machinery, generators and the movement of building materials.

Manufacturers which rely on road transport, backup generators and petroleum-based raw materials could also face higher production and distribution costs. These expenses could reduce operating margins, delay expansion plans or force companies to adjust the prices charged for their products.

The agricultural sector is exposed through mechanized farming, irrigation, haulage and the movement of produce from farming communities to processing centers and urban markets. Fishing companies and commercial transport operators would also face increased operating expenses if the global price rise is fully reflected in domestic fuel costs.

Ghana could receive some relief through higher crude-oil export earnings. International prices above US$100 per barrel could improve receipts from the country’s Jubilee, TEN and Sankofa fields and increase government petroleum revenue.

The benefit will be limited by declining national production. The Energy Commission projects Ghana’s crude output to fall by 6.7 percent, from approximately 37.33 million barrels in 2025 to 34.83 million barrels in 2026.

Average production is expected to decline to about 95,428 barrels per day as mature fields record lower output and new investments take time to produce additional volumes.

Ghana therefore faces a mixed outcome from the global oil shock. Higher prices could increase earnings from crude exports, but the country will also pay more for imported petrol, diesel, liquefied petroleum gas and other refined products.