Advancing energy self-sufficiency in Ghana

Ghana

Ghanaian Minister of Energy Dr. Matthew Opoku Prempeh talks to The Energy Year about Ghana’s strategy to become self-sufficient in exploration and production, why the energy transition needs to be understood in an African context and how the government is ensuring a multi-sourced, reliable supply of natural gas to promote clean energy access and industrialisation.

This interview is featured in The Energy Year Ghana 2022

What is Ghana’s strategy to become self-sufficient in the exploration and production of hydrocarbons?
Since the discovery of commercial quantities of oil in Ghana, the government has tried to expand Ghanaians’ participation in the oil industry, in both the upstream and downstream sectors. There’s been a huge agenda on capacity building for Ghanaians, including localisation of contracts and subcontracts, where local contractors participate in various fields. It’s not just about IOCs coming in to explore and produce.
In 2015, GNPC Explorco was set up as a fully Ghanaian exploration and production company, as a division of GNPC. However, it wasn’t taken seriously because of the cost involved in the exploration, as in Ghana the risk is 100% borne by the company doing the exploration. Exploration is very expensive, so we haven’t been able to make any forays into that. In 2019, GNPC was given a concession area to explore to support Ghana’s ambition, but then the effects of Covid-19 and the energy transition delayed any development.

How is the developed world’s push for an energy transition at odds with the African context?
During the pandemic, the energy transition became an even bigger issue globally. There’s a confluence of technology issues and a huge shift to clean energy. Environmentalists, CSOs and NGOs started putting pressure on banks and financial institutions to not lend to fossil fuel projects. There’s huge pressure on IOCs not to invest in new fields. Some have even declared that they won’t undertake any new exploration.
Africa has contributed less than 3% to the causative issues of climate change. We have the worst energy access, and the technology gap between East and West is huge. We understand the climate change issue and we want to participate in addressing it, but we should be allowed to exploit our natural resources for energy access. In Africa, we want access to the resources and technology to transition without being left behind. If we don’t have all the traditional financing institutions, Ghana needs to be able to be self-sufficient.
So what will happen to African countries? Some countries don’t have the money or the technological know-how to indulge in exploration or develop alternative clean energy. In the end, there will be a lot of stranded natural resources.

How can African nations collaborate to end energy poverty throughout the continent?
Africa is massive and we are discovering oil and gas in significant quantities. These are our assets and we need to look at developing them very carefully. We need to work together in unison to create a platform. The African Petroleum Producers’ Organisation has been set up so that our voice will be heard clearly.
We don’t want carbon released into the atmosphere, and there are carbon capture technologies that we can all deploy to ameliorate some of these hardships in poverty-stricken nations. With such technologies, they can utilise their natural resources without necessarily hurting the atmosphere. We certainly don’t want the developing world contributing to climate change. So, together with the West, we have to work together to transfer technology that we can deploy.

What role will natural gas play in Ghana’s commitment to clean energy generation?
Ghana is seeking to exploit its natural resources and use current technology to drive clean energy. This is where gas comes in. We don’t have the funds to embark on a clean energy transition. We will increasingly invest in clean and renewable energy by exploiting our gas resources to support that transition.
Gas is at the nexus of clean energy and fossil fuels. We are working to use gas to push our agenda in clean energy. In Ghana, most of our power generating stations are now fed by gas, but they are dual fuel – some are even tri-fuel. If we have a problem with the supply of gas, we must still be able to produce power for the country.

What are the key issues to tackle in order for gas to be a catalyst for industrialisation?
We want the gas in our fields to be monetised, but that depends on two things: policy and infrastructure. We have to make critical investments in gas infrastructure, such as the network of pipelines, compressor stations, receiving facilities and the whole network supplying gas everywhere, even CNG in petrol stations.
We have identified several sectors of the economy where we need to use and leverage our gas as affordable energy to boost economic growth and industrialisation. Gas will be essential for industries such as cement, manganese, steel, bauxite, aluminium and plastic to add value in-country. But first, we need gas as a feedstock for energy production. We must have that before getting into the fertiliser industry and providing ammonium urea and phosphates.
If we want to achieve socioeconomic development, we will need to offer a differential gas tariff for these industries to allow them to develop. We must ensure that our gas is not flared in the fields, but is sent to these industries.

Why is Ghana developing the infrastructure to import LNG while at the same time promoting natural gas production?
If we want to secure the availability of gas, we have to bring in competition. Competition that is well regulated has always been good for the consumer. Gas suffers a unique problem in that it has to go through pipelines. Ghana’s source comes from the country’s west. We’ve had three national blackouts during 2021 because of a compressor fault in the Atuabo gas processing plant. Even if gas-powered generation plants can also run on fuel, it takes around 12-24 hours to switch. So as the entire country’s gas comes from the west, if there’s a problem with the Atuabo plant, we end up with a country-wide power outage.
That’s why the government encouraged the development of the Tema LNG import terminal. GNPC receives all the gas from our oilfields. We want our NOC to be the offtaker of all types of gas so that the country has access to both very affordable gas and also more higher-priced gas sources, such as LNG. This strategy can give us a weighted average, which is acceptable for the economy, but more importantly, a diversified stream of gas supplies that will ensure the system’s reliability.

How is the nation ensuring multi-sourced, reliable supplies of natural gas?
We need multiple sources of gas coming into a well-regulated, open infrastructure. We need a transparent tariff to ensure that we don’t end up at the mercy of a force majeure catastrophe.
We’ve ensured that the West African Gas Pipeline has open access guidelines. It was originally meant for gas to be imported from Nigeria. Now that our own fields in the west are producing gas, we are sending gas through the Atuabo gas plant into the West African Gas Pipeline through the interconnection valve made functional through the Takoradi-Tema Interconnection Project. Even if the Nigerians didn’t supply gas for 10 years, the gas could still be supplied and developed through force majeure.

What are Ghana’s goals in terms of renewable power generation?
We should improve our energy access in line with the sustainable development goal of universal access. We want a 100% electrification rate because we’ve seen the transformative effect of energy on job creation, industrialisation and socioeconomic development.
We are moving towards clean energy. Within Ghana’s federal sustainable development goals, by 2030 we will have devoted at least 10% of our energy mix to renewable energy.
We have an abundance of sunlight, but this doesn’t mean we can deploy utility-scale solar, as Ghana is in a forested area. We cannot cut down our trees to create solar farms. Instead, we plan for our big hydro assets to become multi-purpose. We want to develop large-scale solar farms on the dam lake surfaces, as we’ve done at the Bui Dam. Another large hydro asset in progress is the Pwalugu Multi-Purpose Dam, where we have irrigation for food security, as well as clean energy in the form of solar and hydro.
In order to evacuate the power, we need power transmission assets. However, these are not easily available across the country. So, we are implementing 20-MW solar power plants in remote communities where it doesn’t make economic sense to string wires across 400 kilometres. There, we’re providing off-grid solutions, like solar farms with battery backups.
During 2021, PURC [Public Utilities Regulatory Commission] has been developing a reverse metering tariff as part of our tariff rationalisation agenda. We will implement the regulation to ensure that if you put a distributing solar panel on a public building and there’s excess solar, you can sell it to the grid. We want to put solar on public buildings, schools and other assets.

What vision drove the creation of the Petroleum Hub Development Corporation?
We have 22,000 acres [89 square kilometres] in the western fringes of the country dedicated for petroleum and allied industries to help develop the economy and the private sector. We are encouraging the private sector to come into this USD 60-billion industrial complex.
Our plan is to incentivise the private sector by providing access to investment, along with tax breaks and other incentives that the government can provide for it to feel encouraged to come, invest and export. This can be handled altogether by the Petroleum Hub Development Corporation as a one-stop-shop to assess the individual. Everything can be provided for companies as per the specifications of that company including visas and permits.

How can the nation tackle issues with power purchase agreements (PPAs)?
There’s a bottleneck problem. We’ve gone through cycles of energy catastrophes in this country where our supply was not able to meet demand.
The last time this happened, we signed a lot of power purchase agreements. Those PPAs cost us a great deal and we had a lot of problems with access and availability. We have paid between USD 500 million and USD 1 billion in excess capacity charges for energy we never used but have to pay for. That doesn’t happen in a normal market. Because of that, we are finding it difficult to pay for our next generation of power generators coming on stream. We need to renegotiate the new contracts where we pay for the energy we use, like they would be anywhere else.
I can say we have been able to achieve success with one or two big generators in the country.
We have an energy demand growing at between 7 and 10% per year, so we have to be able to bring in new generation to meet the demand we anticipate in 2024.

What are the priorities of the tariff rationalisation programme?
We want to get into a situation where we buy the energy at cost and develop the business model behind that. Hypothetically we could say we will pay GHS 0.06-0.09 [USD 0.01-0.015] for a kilowatt generated at a power plant – no more than GHS 0.05 [USD 0.008] per kilowatt generated by solar energy. In this way IPPs would build their business case to supply power to the state within a stable landscape.
We now have power purchase agreements that are far lower than the PURC-determined price. We have a solar PPA that is GHS 0.36 [USD 0.06] per kilowatt. That’s why we want to move away from these PPAs, as a transparent policy initiative from the government. The ministry is now starting to receive offers from companies who want to do that.
We have to understand that there is energy demand in the country, but we have a tariff structure that discourages consumption. We have a step-up tariff, so the more you consume, the more you pay. This has led to unaffordable power bills for big companies. There are some hotels that rely on diesel generators because it’s cheaper for them to deploy diesel than to use grid power.
To address these issues, we’re restructuring the tariff system. We will have a simple, transparent tariff for everybody that doesn’t penalise anyone. The step-up tariff is for energy scarcity when you want to conserve, not when you have a sufficient installed generation capacity of 5,200 MW. By comparison, the highest national peak demand now is 3,200 MW. So, we have a huge installed capacity, making the step-up tariff unnecessary.

Is Ghana planning to revamp its local content policy?
We have a committee formed from all the industry stakeholders that is coming up with a new local content law. This will support Ghanaians taking an interest in participating in our petroleum sector from upstream to downstream.

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