GHANA. Petroleum and electricity currently account for only 23% and 12% respectively.

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1 Energy, Oil and Gas: Powering the Nation Introduction The energy sector, consisting of electricity, biomass energy and petroleum products is one of the key sectors of the Ghanaian economy. Energy is useful for domestic, agricultural, mining and industrial processes. Access to modern, reliable and cost effective energy is a key to provision of basic social services and a pre-requisite for growth and dynamism of the economy. Ghana depends on mainly three sources of energy, namely wood fuel, electricity and petroleum. The bulk of the country s energy needs are met by wood fuel which accounts for 65% of the total energy consumed. Petroleum and electricity currently account for only 23% and 12% respectively. Although Ghana is well endowed with a variety of energy resources as hydropower, biomass, hydro-carbons and solar, the country is stretching to meet the growing demand. Furthermore, power supply interruptions that occur as a result of inadequate generation reserve margin, excessive transmission network constraints and poor voltage support have become the order of the day. With regards to the petroleum sector, Ghana is an emerging oil giant with substantial discovery off-shore. Ghana s oil fields, which is expected to pour its first oil in the last quarter of 2010, continue to attract a lot of offshore investors and is receiving a great deal of attention from the international community. The discovery in the area called the Jubilee Field also contains significant quantities of natural gas, which can provide substantial opportunities to address the shortage of power in the country. Undoubtedly, oil discovery can become a catalyst to stimulate national economic growth and transform Ghana from a net oil importer to exporter. It is estimated that Ghana s oil exports will earn about US$ 3.5 billion by

2 This will make oil Ghana s greatest foreign currency earner, outpacing exports of cocoa and gold. The Energy Sector Vision and Goals The vision of the energy sector is to assure universal access and choice of modern energy forms to all Ghanaians without exception by The Government also envisions a sector which will contribute significantly to national revenue and economic growth by becoming a net exporter of oil and power by 2012 and 2013 respectively. The objective of the Government is also to achieve a target of 5,000 MW of installed power generation capacity by This level of capacity will enable Ghana to supply adequate electric power to meet the growth in national electricity demand and also for export to the neighbouring countries. However, this raises a number of challenges: Development of infrastructure for the production and supply of adequate petroleum products and energy services to meet national requirement and for export; Development of the requisite infrastructure to ensure universal access to electricity as well as the efficient and reliable supply of energy services; Ensuring that energy is produced and supplied in a form that has no adverse health and environmental impact; Ensuring efficient use of energy; and Ensuring that oil revenue is managed in a manner that will benefit current and future generations. Electricity Volta River Authority (VRA) dominates the energy sector. VRA is responsible for the generation, transmission and distribution throughout the Northern part of Ghana of electricity and supplies electricity in bulk to Electricity Company of Ghana (ECG), which is responsible for distribution of electricity throughout the southern part of the country. Currently, the total installed power generation capacity of the country is said to be around 1,920 MW. Out of the total, 1,020 MW is generated from the Akosombo Hydroelectric Power Plant, which recently underwent retrofitting involving the replacement of some of its old turbine runners with new ones as well as mechanical works to improve its power output. The Kpong hydroelectric Power Plant has a capacity of 160 MW. The rest comes from the Takoradi Thermal Power Complex, 550 MW; The Mines Reserve Plant, 80 MW; and 110 MW from the Tema Diesel Power Plant. Ghana has also a 125MW power barge called Osagyefo Power Barge (OPB) to generate power from natural gas. The barge has been leased to Balkan Energy under an agreement signed between the Government and Balkan Energy. However, the current average annual increase of 7% in electricity demand without a corresponding addition of power generation has resulted in a tight demand-supply balance with no reserve margin, leading to periodic blackouts throughout the country. Furthermore, the heavy reliance on hydro power, which represents 69% of the generation mix, creates untold hardship to consumers when droughts lead to dangerously low levels in the Volta Lake. The first such pronounced difficulty was experienced in 1983 with the latest in Beyond the existing plants, a total of 1,611.5 MW of capacity is currently under construction by the Government and Independent Power Producers while other plans have been initiated to increase power generation capacity in the country. 211

3 Latest Developments The Asogli Power Plant, a full private sector financed power plant of 200MW capacity, has been completed and awaiting the availability of natural gas from Nigeria under the West Africa Gas Project to commence operation. A Memorandum of Understanding has been concluded with TAQA of Abu Dhabi to carry out the expansion of the Takoradi International Company (TICO) power plant from 220 MW single-cycle plant to a combined-cycle plant of 330 MW. Financing of the Kpone Thermal Power Plant of 220 MW, which is under construction, will be restructured to allow for the participation of strategic private investors in order to secure adequate funding for the speedy completion of the project. VRA has concluded an agreement with Tema Osonor Power Company, an Independent Power Producer (IPP), to expand the Tema Thermal Power Plant by 126 MW and ultimately into a combinedcycle facility with a total capacity of about 330 MW. The construction of the 400 MW Bui Hydropower plant is in progress. The first unit of 133MW is scheduled for commissioning by the end of The total installed capacity of 400MW will be commissioned by There are a number of major hydro-power sites within Ghana that have not yet been developed. The total potential of these sites is in the order of 1,240 MW, with a corresponding average annual energy generation potential exceeding 4,500 GWh/year. Rural Electrification The energy policy focus is to ensure universal access to electricity particularly for the rural communities by Universal access to electricity will enhance growth and prosperity as well as spur development and poverty reduction in the rural areas. Government has secured over US$169 million under the Ghana Energy Development and Access Project (GEDAP) to improve distribution infrastructure and increase access of electricity to selected communities. In addition, the US Exim Bank has granted Government a US$350 million loan facility to extend electricity to rural communities throughout the country. Other electrification projects are targeted at extending electricity to over 1,000 communities throughout the country. Petroleum Management The overall responsibility for the control of Ghana s oil industry is vested in the Ministry of Energy. The Ghana National Petroleum Corporation (GNPC) oversees the upstream petroleum industry (exploration, development, production and disposal of petroleum) while the National Petroleum Authority (NPA) oversees the downstream petroleum industry (refining/ processing, storage and distribution of petroleum products). Upstream Ghana s oil and gas resources stretch across the shoreline from the west (Cape Three Points) to the east (Keta). Similarly, the Voltain Basin inland, which covers over 40% of the country s land mass, is believed to have oil and gas reserves. 212

4 Recent discoveries and appraisals in the Jubilee field, which is made up of two blocs, show that the field contains recoverable reserves of about 800 million barrels of light crude oil, with an upside potential of about 3 billion barrels. The extraction of oil is expected to commence late During the first phase which is to be completed by 2010, the daily production would be about 120,000 barrels of oil and about 120 million cubic feet of gas. The second phase will be carried out between 2010 and 2012 and will lead to a daily production of 250,000 barrels and 250 million cubic feet of gas. Oil experts also have confirmed that, recent discoveries and appraisals in the Jubilee field, which is made up of two blocs, show that the field contains recoverable reserves of about 800 million barrels of light crude oil, with an upside potential of about 3 billion barrels. As part of the moves to make the country a major oil player, the government decided to extend its continental shelf. Accordingly, Ghana made its submissions to seek approval to extend the continental shelf under the United Nation s Convention on the Law of the Sea (UNCLOS). Furthermore, the Government intends to accelerate the process of acquisition of blocks in the Ghana sedimentary basins in order to fully and speedily delineate the country s oil and gas potential. There are currently 11 Petroleum Agreements operating in the country at different stages of exploration or development, according to the Ministry of Energy. The major actors in Ghana s oil sector are Tullow Oil, Kosmos Energy, Anardarko Petroleum, Sabre Oil & Gas, EO Group and GNPC. There are several other companies active in the Jubilee Field. These include Vanco Energy (US) and LukOil (Russia) in the Deep Water Cape Three Points Block; Sfren (UK) in the Keta Block in the east, Amerrada Hess (US) in the Deep water West Cape Three Points Block; Vitol/Meliconia in the Cape Three Points Shallow/Deep Block; Gasop, a subsidiary of Nigerian OMEL in the Saltpond basin; and the Saltpond Offshore Producing Company, a partnership between GNPC and the Houstonbased Lushann Eternit in the Saltpond Field. Midstream In order to secure a sustainable and cost-competitive fuel source, Ghana is involved in the West African Gas Pipeline (WAGP) project for power generation. The WAGP project is a natural gas pipeline of 678 km to supply gas from Nigeria to Benin, Togo and Ghana. The U$1 billion WAGP, which was completed in January 2010, is expected to supply gas to the Takoradi Thermal Power Complex by March The Government also plans to reduce the cost of power generation by building two natural gas pipelines from the Jubilee Field to the Osagyefo Power Barge and the Takoradi Thermal Power Complex. The cost of infrastructure to commercialise the natural gas from the Jubilee Filed is estimated at over US$ 1 billion. The speedy development of the infrastructure is critical for the reliable supply of natural gas to operate some of the thermal power plants. Downstream It is Government s intention to ensure increased local refining capacity to meet both domestic demand and exports. Currently, about 60% of domestic demand can be met by the sole oil refinery, the state-owned Tema Oil 213

5 Refinery (TOR). To bring refining capacity to acceptable levels, there is the need to expand the capacity of TOR and also improve its operations. About US$300 million is going to be invested in TOR to increase its capacity by about 100,000 barrels per stream day from its current level of 45,000 barrels per stream day. About US$683.5 million is to be injected into the operations of the Bulk Oil Storage and Transportation Company Limited (BOST), in the medium term period up to 2015, to improve bulk transportation of petroleum products especially to the northern parts of the country. Challenges In a country of almost 23 million people, barely 15 % of the population is connected to the national power grid, and in rural areas only 5% of the population has access to grid electricity. Less than 35 % of the total energy consumption in Ghana is today from commercial energy sources. Raising investment capital to develop the energy sector is a major challenge. It is estimated that, about US$ 9 billion is required in the next five years to finance the numerous initiatives in the energy sector, including oil and gas activities which alone require over US$ 5.5 billion. A major cost of being a player in the crude oil industry is the high safety standards that require vigilance in monitoring operators in order to protect the environment and the people whose lives can be affected directly. The local capacity, specialized knowledge and human resource skills needed to take advantage of the oil boom are lacking. No petrochemical industry exists yet to create valueadded products from crude oil to avoid the practice of exporting raw materials like cocoa, timber and gold. The high cost of the technology to generate renewable energy sources (e.g. wind, solar and waste energy) poses a major challenge. Deforestation rates in Ghana are amongst the highest in Africa, with current levels of wood-fuel consumption far exceeding forest growth. The challenges are therefore to reverse the decline of the wood-fuel resource base of the country by encouraging wood-fuel forestry and promoting the use of alternative fuels such as LPG as substitute for wood-fuel. Conclusion After decades of casting jealous looks at its oil rich neighbours, the taps of Ghana s very own oil boom are about to open. If carefully managed, the prospective oil revenue will bring significant transformation to the national economy in terms of growth, job creation and living standards. While the doubts and worries persist, both inside and outside the country, the Government is determined not to make the oil discovery a curse but a blessing. However, Ghanaians should draw lessons from the experience of other countries that have had bitter experiences from oil production. 214