SPE-207173-MS

An Assessment of Opportunities and Challenges of Natural Gas Utilization

in Ghana

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Theresa Ahima Morgan, West Coast Gas Ghana Limited; Dr.Riverson Oppong, Ghana Gas Company Limited

Copyright 2021, Society of Petroleum Engineers

This paper was prepared for presentation at the Nigeria Annual International Conference and Exhibition held in Lagos, Nigeria, 2 - 4 August 2021.

This paper was selected for presentation by an SPE program committee following review of information contained in an abstract submitted by the author(s). Contents
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Abstract
This study aims to contribute to industry discussion on gas utilization opportunities available to Ghana.
Specifically, it will analyze Ghana's existing natural gas plans. i.e., the Gas Master Plan analyze possible
opportunities and associated challenges and finally propose sources of finance for gas sector projects.
In order to discover opportunities of natural gas utilization as well as challenges that come in the course
of implementation, data was sourced from secondary sources as well. Benchmarking was also done using
the natural gas journeys of three (3) case study countries: Nigeria, China, and the United Kingdom and a
comparative analysis compared their natural gas journeys in terms of policy direction, natural gas utilization,
infrastructure development and challenges encountered vis a vis the natural gas journey of Ghana.
The analysis showed that various opportunities existed for natural gas utilization in the areas of industrial
power generation, LNG export, CNG, Fertilizer and bauxite production. Various challenges such as lack of
human and technical capacity, sector debt, regulatory issues, pricing issues, security of supply and others
plagued most natural gas economies.
These findings suggest that an ‘armory’ of opportunities exist for natural gas utilization in Ghana.
However, the implementation of these utilization options is contingent on the development of proper policy
instruments and extensive investment in infrastructure. The country should also be conscious of bottlenecks
that may hinder natural gas utilization efforts.

Introduction
For decades, oil and natural gas have become an important source of energy for most countries. They
continue to enjoy an important position in the global energy mix. Oil consumption, natural gas, and coal
accounts for about 34%, 23% and 28% of global primary energy consumption, respectively. (Boakye et.al,
2019).
According to Eni (2019), Africa's young population is one of the fastest growing in the world. Sustaining
the energy needs of the continent is therefore critical for its energy and economic outlook, as well as its
impact on global trends. Rapid growth in urban populations means rapid growth in industrial energy demand
for production, cooling, and transportation. Consequently, a critical task is to address the continued lack of
access to energy and unreliable energy supply.
2 SPE-207173-MS

The 20th century marked the evolution of Ghanaian petroleum activity. The Tano and Keta Basins, which
were discovered in the1900s was on a relatively small scale. The Saltpond field which commenced operation
in the 1970s was also on a similar scale. In 2007, Jubilee field an offshore discovery was estimated to
produce 800 billion cubic feet (Bcf) of gas and 700 million barrels of oil (MMbo). This commercialized
Ghana's oil and gas industry. Since the year 2010 when our first oil was produced from the Jubilee field, The
Twenneboa, Enyenra, and Ntomme (TEN) fields (estimated at 240 MMbo and 396 Bcf of gas) commenced
producing from August 2016. Finally, the Sankofa, Gye, and Nyame fields (with approximately 500 MMbo
and 1.45 trillion cubic feet of gas) began producing in May 2017. Even the country's oil price shocks which

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occurred from 2014 to 2015 and the famous maritime border dispute centered on the Tano blocks could not
impede the steady growth of Ghana's petroleum industry. (Skaten, 2018)
Natural gas arrived in Ghana when the West African Gas Pipeline (WAGP) was introduced in 2008. The
WAGP project should have started in 2006 but the project experienced considerable delay with gas supply
only beginning at the end of 2008. However, actual supply did not commence till November 2011, when
the contractual commitments kicked in. (Mike & Thierry, 2018). Ghana's domestic production commenced
with the Jubilee field's supply of associate gas in 2014 and was followed up by the TEN field in 2016.
Ghana currently two sources of gas: imports and domestic production. Gas from Nigeria through the West
Africa Gas Pipeline (WAGP) and potential LNG sources serve as import sources to the country. Domestic
sources come from producing oil and gas fields both short and medium term as well as long term, from
anticipated investments in the offshore basins of Ghana to produce oil and gas. (Ministry of Petroleum,
2016).
Mike & Thiery (2018) explained that natural gas demand in Ghana is determined primarily by the power
generation sector. The country has depended on hydro power generation since the construction of a dam
on the Volta River and the generation of supplementary power from oil-fired plants. As demand for power
production increased, there was more reliance on costly oil led to proposals to import gas from resource-
rich Nigeria for several years, if gas would be cheaper than oil. The power sector accounts for Ghana's total
gas consumption, with power generation plants in the Takoradi area in the West, where all domestic supply
can be found, and in Tema area in the East, serving the Greater Accra Region.
Formerly, Nigeria's gas was unreliable on account of geopolitics connected with pipeline attacks and debt
from default in payments for gas supplied to VRA. This situation, as well as high demand projections from
the energy commission led to government's policy decision to diversify imports through LNG supply. In
addition, government is embarking with two LNG projects which continue to send mixed signals to the
government and investors’ finances in the local gas market. This brings about the potential of oversupply of
gas which has dire consequences to local suppliers. (Boakye et.al, 2019) Industry experts and think thanks
in the country continue to sound warnings of financial losses to the state resulting from excess natural gas
supply coupled with the non-existence of downstream consumers to offtake the volumes of gas produced.
All gas conferences in the country have therefore been centered on strategies to create the needed demand
for natural gas. Consequently, the fear of excess natural gas in the system is one of enormous concern due
to its impact on government's finances as well as the country's development. There is the need therefore to
explore opportunities to utilize all the potential gas which will be supplied to the local gas market.
Following the above excess gas situation, this study will make explicit the existing demand and supply
situation for Ghana's gas sector. It will then identify opportunities for utilizing excess natural gas in the
country by benchmarking other natural gas economies. It will then study the challenges associated with
exploiting these opportunities. Finally, the study identifies sources of funding for projects in Ghana's gas
sector, a major challenge for the industry.
SPE-207173-MS 3

Natural Gas Utilization

Gas utilization typically involves projects such as distribution and marketing of natural gas for the
commercial sector and typically comprises of power generation plants, liquefied natural gas (LNG), gas to
liquid (GTL) plants, fertilizer plants, gas distribution and transmission pipelines. (Delloit, 2015). According
to the GMP, the use of natural gas begins with processing of raw or wet gas. NGLs, LPG and condensates
are further removed from the gas stream to be sold differently. Lean gas, the remnant is used for power
generation and serves as a source of energy for industrial heating, cement production and also serve as a
feedstock for some petrochemical plants. The GMP also identifies the export of gas through pipelines or

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liquified Natural Gas (LNG) as another option for gas utilization. (Ministry of Energy, 2016)
The U.S. Department of Energy in its collaborative work with the United States Energy Association,
found that there are several domestic uses of natural gas. It suggests that the major use for domestic natural
gas is for power generation. It further describes the use of natural gas as a fuel in transportation, commercial
buildings, and industries. Natural gas can consequently serve as a cost-efficient option for higher cost and
more environmentally damaging fuels. It further explains that natural gas can be used as a feedstock for
industrial plants including fertilizer plants, petrochemical plants, methanol plants and gas-to-liquids plants.
The domestic uses of natural gas are summarized in the diagram below:

Figure i—Natural Gas Utilization Options (US Department of Energy & United States Energy Association, 2017)

Early analysis of gas consumption by Schramm (1984) concluded that domestic consumption of gas
in emerging economies accompanied by exports and conversion into gas-based export products such as
urea, ammonia, or methanol, could grow by about 5 trillion cubic feet. Natural gas would provide the
highest benefits and contribute substantially to relieving balance of payment challenges due to increases in
petroleum prices from 1970's to 1980's. Transportation was therefore the major potential, nonconventional
gas user in his view. He highlighted opportunities for electric power generation, industry, transport,
agriculture, commerce, as constituting major uses of natural gas with residential and others being the least
popular uses at the time.
In his book on natural gas fundamentals, international natural gas industrialist Chandra (2016), concludes
that power generation is the main non-residential use of natural gas accounting for around 25% of all gas
consumption in Europe, more than 65% in Japan and close to 100% of gas consumption in countries with
4 SPE-207173-MS

limited residential and commercial gas distribution resources. He compares usage of natural gas in various
countries to arrive at this assertion. Gas-to-Liquids (GTL) he argues is considered the Holy Grail of gas
technology based on various desires of states. Chandra goes further to analyze products of natural gas
viz-a-viz Crude Oil products and concludes that almost all products that can be produced from oil can
produced from rich natural gas. i.e. a variety of petrochemicals, feed stock and fertilizers. He hypothesizes
that CNG i.e. Methane gas is ideal for transportation based on its relatively low energy density compared
to conventional liquid fuels. Finally, Chandra concluded that residential usage continues to rise outpacing
the energy saving effects of modern efficient appliances and heaters.

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Relevant Theories.
The Peak Oil Theory. Peak Oil Theory was brought into the world in 1956. The theory notes that oil
and fossil fuels are limited and will inevitably be consumed. There is a point in time when the maximum
production of oil will be reached and then decline. Another premise of the theory notes that the output of
petroleum from any oil field follows a bell curve. The first 20% of the curve known as pre-peak, which
is influenced by the rate of discovery, the rate of output and the output itself. As the exploration and
understanding of the sector increases and the infrastructure grows, production begins to plateau. If the peak
is reached, output will inevitably fall due to the depletion of the source. Its technique was later extended
to global oil production and other scarce resources such as coal, natural gas, uranium, and other minerals.
There are a variety of schools of thought on this theory. Others assume that the peak has already occurred
in 2007 and that we are at the bottom of the range. (Koscinski, 2020)
It is argued that by the beginning of the 21st century, conventional oil supplies have reached or are likely
to have reached their highest production potential globally and would dramatically decrease in capacity by
middle of this century. However, this theory does not apply to unconventional oil sources like oil sands, oil
shales, oil extracted after tight rock formations have been broken, and oil has been found all the way offshore
in deep water wells, i.e. all oil reserves that need significant investment and manpower to be exploited.
(O'Leary, 2020)
The question about if Hubbert was right about the global peak in crude oil production is a much more
contentious issue. Several studies contend that the plateau was eventually reached in the early 2000's. Some
even argue that the world has not hit peak production yet, that Hubbert greatly underrated unexplored oil
reserves in regions like the Arctic, South American and sub-Saharan Africa regions as well as breakthroughs
in extraction techniques which have significantly increased productivity. In 2010, the International Energy
Agency's (IEA) annual World Energy Outlook estimated that the global peak to produce conventional crude
oil may have occurred in 2006, when 70 million barrels of oil was produced daily. In contrast, the Cambridge
Energy Research Associates (CERA) projected in 2005 that the current global production capacity would
plateau prior to 2020. (Koscinski, 2020). The IEA's World Energy Outlook 2010 projected that by the year
2035, output of conventional crude oil will fall to 20 million barrels daily, by some 68 to 69 million barrels
each day in the future and the variance made up by rising demand from unconventional sources. If the
hypothesis is right, the world's oil-dependent economy will have to face up to the mid-21st century. As a
result, peak oil stays a controversial theory, particularly for emerging oil and gas economies such as Ghana,
which still do not produce oil or gas anywhere near its peak.
The Pickens Plan. Pickens (2008)theorized that America could use its natural gas in place of imported
oil as a primary transportation fuel for heavy-duty trucks and fleets. He argued that the dependence of the
US on ‘OPEC oil’ was a dependence that could affect their economy, environment, and national security.
He suggested that it limits and restricts the nation. In his view, this addiction became truly clear in 1974
when the OPEC Oil Embargo occurred. At the time oil imports had increased from 20% of consumption
in 1970 to 50% of consumption in 2013. He was concerned with the dependence of America on OPEC
for at least half of its total demand. Pickens suggested that the money spent on imports be used to repair
SPE-207173-MS 5

the country's crumbling infrastructure and injected into their economy. The Pickens Plan pointed out that
increased production of oil and natural gas from North American shale deposits could reduce America's
dependence on OPEC. He therefore proposed the Pickens plan with the 3 pillars: replacing oil with natural
gas as a transportation fuel for vehicle fleets and heavy-duty trucks, the construction of a 21stcentury
electrical transmission grid, developing renewable energy sources coupled with an increase in energy
efficiency in residential and commercial buildings. Pickens believed strongly that independence from OPEC
imports could be achieved within 10 years through energy conservation, by increasing the use of natural gas
resources and continuing to shift towards renewables through a leadership focused approach. He concluded

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on the premise that ‘Natural Gas is not a permanent solution but a critical bridge fuel to immediately slash
[Ghana's] oil dependence on imports from OPEC’.

Natural Gas Utilization in Ghana

Preliminary review of literature reveals that Ghana’ s last documented plan for the gas sector was done in
2015.ie. the Gas Master plan. Since then, various stakeholders have made various contributions to the subject
of gas utilization. What is however remaining is a realistic update to Ghana's Gas master plan following
new developments in recent years, especially new developments related to demand and supply scenarios.
The Gas Master Plan (GMP). Ghana completed its Gas Master Plan in 2016 with the primary goal of
establishing a plan for infrastructure growth goals that would help develop Ghana 's natural gas supplies
and protect the country's energy supply. The program focused primarily on short to long-term criteria for
Ghana's gas sector. (Ministry of Finance, 2019).
According to the Ministry of Petroleum (2016), The Gas Master Plan is a culmination of activities
including consultancy and stakeholder discussions. It was originally compiled by the Economic Consulting
Associates (ECA) in the United Kingdom in September 2014. Following its completion, consultations were
held with industry stakeholders to make necessary amendments and adopt it for Ghana. Ghana's gas industry
had only been recently established and was characterized by several different institutions, agencies, and
organizations. This was an unusual approach and hence the developers of the GMP believed Ghana could
benefit from following a more integrated approach benchmarking Turkey. According to the then Ministry of
Petroleum, the policy had several objectives which aimed at offering direction for the Government of Ghana
(GoG) and the energy sector ; to propose gas allocation plans for both domestic power and industrial sectors
and exports considering the economic benefits and the available natural gas supply, the development of an
infrastructure plan for the medium to long term to ensure supply security and align proposed natural gas
distribution plans., recommending a suitable gas pricing policy which will sustain production and secure
the natural gas sector, the development of an institutional framework in line with world best practice, a
review of Ghana's regulatory framework for natural gas and an analysis of the major deficiencies for gas
sector development.
Domestic Reserves and Resources. The GMP posits that with major discoveries in non-associated gas
reserves as well as current associated gas reserves, the country had adequate gas resources to satisfy its
expected demand over the medium term. Ghana's natural gas reserves at the time with the Jubilee field's
associated gas reserves of 490 billion cubic feet (Bcf), the TEN field's associated gas reserves of 363 Bcf,
and the Sankofa field's nonassociated gas reserves of 1,107 Bcf. The policy further mentions the Mahogany
and Teak discoveries which have a total of 120 Bcf gas reserves which would be developed as part of
Ghana's Greater Jubilee Full Field.
Ghana's Gas Infrastructure. According to the GMP, the country's infrastructure consists of the Western
Corridor Gas Infrastructure Development Project (WCGIDP), which was designed to deliver gas from the
Jubilee offshore gas field to the domestic market. It was commercialized in 2015 and consisted of: the 12-
inch offshore gas pipeline Jubilee-Atuabo, 59 km offshore pipeline from the FPSO Jubilee oil & gas field to
the Atuabo Gas Processing Plant, as well as the Atuabo Gas Processing Plant, which processes 150 mmscfd
6 SPE-207173-MS

of raw gas into lean gas, and the Natural Gas Liquids (LPG and Condensate). In addition, the Atuabo
- Aboadze onshore transmission pipeline with a 20-inch diameter and 110km onshore gas transmission
pipeline carries the lean gas from Atuabo to the Aboadze Power Plant with a capacity of 400 mmscfd, as
well as the corresponding gas metering and storage facilities which comprises of the Essiama Distribution
Station and the Takoradi regulation and Metering Station. Finally, the Essiama-Prestea lateral pipeline, a
20-inch diameter 75 km long pipeline linking Essiama to Prestea completes the WCGIDP.
The country's infrastructure also includes the West African Gas Pipeline (WAGP) a 691 km long offshore
pipeline starting from Nigeria and ending in Ghana, with landing points in Cotonou (Benin), Lomé (Togo),

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Tema and Takoradi. The pipeline was completed in 2009 and supplies gas from Nigerian sources. The
first section of the pipeline is onshore in Nigeria with a diameter of 30 inches and the second section
is offshore with a diameter of 20 inches. The pipeline will produce 170 mmscfd at maximum capacity
and without compression. The estimated delivery capacity is 430 mmscfd, requiring extra compression.
Contracted capacity for Ghana is 123 mmscfd. The flow of Nigerian gas has practically been restricted to
Tema, with the Tema-Takoradi section of the WAGP remaining largely unutilized. Lastly an ongoing LNG
regasification terminal in Tema and a Floating Storage and Regasification Unit (FSRU) which will provide
lower costs, smaller size and added flexibility as compared with a fixed onshore facility with a capacity of
the regasification terminal 250 and 400 mmscfd will add up to the country's infrastructure. There are also
two planned distribution networks from Takoradi to Tema and one between Tema and Accra will cover main
population centers as well as serve major industrial and commercial off takers in those regions. (Ministry
of Energy, 2016)
Institutional Framework. The GMP recommended that the country implement a simpler regulatory
structure more suitable to Ghana's emerging gas market. It recommended the appointment of GNPC as the
national gas aggregator and GNGC a subsidiary of GNPC to help coordination and facilitate infrastructure
investment and. This eliminated the role of BOST as the transmission pipeline investor. It also recommended
the roles of regulatory bodies in the downstream sector be unified and handled by one institution.
However, the regulatory issues persist with confusion of jurisdiction between some bodies. Currently, the
following regulatory bodies exist: Petroleum Commission who regulates the upstream sector, Ministry of
Energy who is in charge of energy sector policies, the Public Utility Regulation Commission which regulates
for gas to power as well as electricity tariffs, National Petroleum Authority for downstream sector, Ghana
Standard Authority for standardization and finally the Environmental Protection Agency for the provision
of permits for siting of all oil and gas facilities.
Gas Pricing Policy. The GMP, based on the National Gas Pricing Policy (NGPP) and modeling, proposed
that a new pricing policy statement be placed in place for the pricing of natural gas. This will be focused on
the financial feasibility of supply companies, via cost-reflective gas price components and adequate return
rates. It permitted upstream product prices to be negotiated, while the price of gas to consumers should be
based on the weighted average gas cost (WACOG) plus the supplier's margin. It was the responsibility of
the price regulator to create a comprehensive methodology for all fees, tariffs, and charges. The regulator
would also define price review procedures. However, this was unfavorable and further contributed to the
debt of the industry, as power producers were served by high weighted average natural gas prices.
The Ghana Gas Master Plan Model. The GMP focused on comprehensive analysis of the economic,
structural, legislative, and strategic facets of Ghana, complemented by lessons learnt from foreign
experience in the growth of the gas sector in selected countries. Qualitative research was coupled with
quantitative approaches which underpin the guidelines for the upstream, midstream, and downstream
gas industries. The comprehensive Ghana Gas Master Plan Model (GMPM) was developed covering the
following main aspects: Demand estimations up to 2040 using a power dispatch model and netback pricing,
annual regional and national gas supply and demand balance calculations, the weighted average cost of gas
SPE-207173-MS 7

from the supply mix and the determination of location, capacity, costs, and timing of new infrastructure
(transmission pipelines and proposed LNG terminals).
Demand and Supply profiles considered in developing the Gas Master Plan. Three major supply profiles
were regarded dependent on domestic gas and mineral stocks, import volumes of WAGP and potential
imports of LNG. The Enyenra and Ntomme oil fields and one gas condensate field (Twenneboa) form
the TEN group of domestic reserves focused on extraction of associated gas from the Jubilee gas field.
Kosmos’ Mahogany and Teak were both supposed to come on board the non-associated gas discovery, the
Sankofa field, discovered by ENI and associated gas discoveries. According to Ministry of Energy (2016),

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demand for gas in Ghana was primarily from three main sectors: industrial usage, transportation, and power
generation. The power sector had the largest demand percentage with over 80% of aggregate demand from
2015 to 2040. Gas to power demand was estimated with a power dispatch model considering electricity
demand and GoG's plans for the power sector. The Ministry further envisaged that besides the power sector,
several industries would use gas to generate heat for industrial processes, plus piloting the use of gas for
transportation to possibly replace diesel petrol, and Liquefied Petroleum gas (LPG). The GMP suggested
that domestic supplies that will be available from 2017 and beyond were enough to cover all demand for
gas up to 2021 in all scenarios. The LNG terminal in Tema was projected to increase the available supply
in the gas sector by 2021.
Lessons Learnt from Benchmarking.. A comprehensive review of the development of the gas journeys
of nine countries provided several important lessons for Ghana's natural gas strategy. The case study
countries were Indonesia, Columbia, Israel, Netherlands, Tanzania, Trinidad and Tobago, Nigeria, Turkey
and Thailand. The Lessons to be followed in the GMP's recommendations included:

• The power generation industry was the main off-taker in the early stages of the growth of the gas
sector in all case studies.
• A regulatory framework which focuses on cost reflective pricing and consequently financial
viability of organizations in the value chain is critical.
• Most often, gas transmission networks were developed by integrated state-owned gas companies
using funding from the government and donors.
• Industrial use had been most successful in instances where it grew in an incremental fashion.

• Finally, gas export though of high economic value in many countries was not relevant to Ghana at
the time due to the size of reserves and potential domestic market.
GMP Conclusions and Recommendations. Ministry of Petroleum (2016), from benchmarking nine
countries, proposed the following strategy: Power generation, industrial utilization needed to be carried out
in a step-by-step manner instead of selecting focus industries through industrial policy., Cement/Clinker
production, supply of gas for heat generation to low risk industrial clusters in the domestic market, use
of CNG dedicated vehicle fleets including urban buses and taxis, and also the non-viability of natural gas
export. The assertion of exports not being viable however may be due to the timing of the document and
the demand supply scenarios at the time.
The GMP recommended the construction of a reverse flow capability on WAGP to meet short term
demand in Tema, an onshore 20-inch pipeline linking Takoradi to Tema, an LNG Terminal in Tema. With an
associated floating regasification. It further recommended the strengthening of the institutional framework
for the transmission of power., A variety of government papers address plans for the creation of the gas
industry.
Finally, the GMP addressed the financing of natural gas projects through the use of royalties and tax
revenues from gas sales and production to help secure the gas value chain. It also called for more private
8 SPE-207173-MS

public partnerships (PPP) structures as well as BOOT arrangements. The Policy proposed the development
of a National Gas Pricing Policy (NGPP).

Natural Gas Demand and Supply Projections.

Ghana produced gas from three fields - TEN, Jubilee, and Sankofa in 2019. The country had plans for more
domestic production in upcoming years. The country imports gas through the West Africa Gas Pipeline
(WAGP) from Nigeria and has signed contracts for LNG supplies scheduled for arrival in 2020 through the
Tema LNG and Takoradi LNG projects in 2022. (Ministry of Energy, 2019)

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The diagram below represents the gas demand and supply projections from 2019 up until 2030. The bars
above the indicated red lines show potential for excess supply of natural gas. This the Ministry of Energy
(2019)estimated it can cost the country an equivalent of USD 1,361 million for unutilized gas supply and
regasification capacity yearly in 2023. It also clearly depicts that present pipeline gas and domestic supplies
are more than enough for the electricity generation by 2023. In 2022 and 2023, the demand for power and
non-powered natural gas will exceed the available supply in 2019. Nevertheless, the deficit in 2023 is quite
low and would be covered through a transition in dispatching available supply.

Figure ii—Natural Gas Demand and Supply Projections (Ministry of Energy, 2019)

Key Considerations Underlying Demand and Supply Projections. The Government advocated for greater
use of natural gas non-power purposes such as manufacturing, transportation, fertilizer processing, and a
petroleum hub with the aim of creating employment and growth of the local markets. The Government plans
to use more natural gas for coal in 2023, the ESRP report forecasted a more than tenfold rise in non-power
consumption. Natural gas will be used as a feedstock in petrochemical production as well as fertilizers
(ammonia, urea). To make domestic fertilizer production competitive as opposed to alternatives, the price of
gas will be kept extremely low at about USD 2.50 per MMBtu. Consequently, GoG is proposing the supply
of associated gas which is relatively cheaper for these purposes. This presents several macroeconomic
advantages and will facilitate the expansion of these industries. Nevertheless, the distribution of volumes
of low-cost gas to chosen sectors has implications that require further thought. Selling low-cost natural gas
for the manufacture of fertilizers and petrochemicals implies a reduction in the government's capacity to
sell low-cost gas for power generation.
SPE-207173-MS 9

In 2019, natural gas will still be the main source of fuel in the power generation sector (approximately
96 per cent) with limited amounts of gas used by the industrial sector. In 2019, Ghana has excess supply of
gas. The future cuts in gas supply from the Jubilee and TEN industries would be minimal due to the adverse
effect on output of LPG and oil demand on the domestic market. Supply balancing will be achieved in 2019
cutting down Sankofa's Offtake. This can be accomplished by deferring Ghana 's share of field growth.
According to the ERSP report, the onset of the country's first LNG supplies will increase the excess gas
supply situation significantly in 2020. To balance demand and supply, aggressive steps will need to be taken
to meet the anticipated demand and stop paying for unused gas.

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The ESRP report forecasts a more than tenfold rise in non-power production as well as a steady rise gas
consumption in the power sector in 2023, in line with the government's efforts to expand non-power use of
natural gas. Demand for non-powered gas could rise more quickly beyond 2023, particularly if the proposed
fertilizer manufacturing plans are successfully introduced in upcoming years. Recent forecasts indicate that
the introduction of fertilizer will commence until 2024 after the analysis period of the timelines utilized
in the ESRP report.
The Ministry of Energy further posits the following assumptions used in the BAU (Business as usual)
projections:
The ERSP suggests that government had in mind the construction of the Takoradi-Tema Interconnection
Project (TTIP), which was important for gas movement through the WAGP from west to east. In the absence
of this system of reverse flow, gas plants in the east i.e. the Tema enclave would deal with the problem of
fuel insecurity. The plants in the west on the other hand would have tremendous burden to retain a high
level of operational activity for gas utilization. This project was to be completed by end of 2019. There was
a proposal to move the Karpowership ship from Tema to the Naval base at Sekondi, for conversion to use
domestic gas by the third quarter of 2019, to further resolve the gas supply gap between west and east.
The Jubilee fields were estimated supply between 90-100 mmcfd and TEN between 30-50 mmcfd.
Initially, Sankofa is below the 140 mmcfd take-or - pay level producing about 260 mmcfd.
Imports: Supply via the WAGP is estimated to be 70 mmcfd, while the take or pay component of 90
mmcfd is still suspended because of force majeure. Tema LNG is projected to begin from the last half of 2020
and set to produce 250 mmcfd. Takoradi LNG imports would begin in 2022 producing about 180 mmcfd.
Power generation gas demand is projected as 230 mmcfd in 2019 increasing to about 350 mmcfd by 2023.
The Non-power demand i.e. Fertilizer and industry are projected to rise to 110 mmscfd from 80 mmcfd
in 2019.
Please find tabular representation below:

Table i—Gas supply/Gas Demand assumptions

Gas Demand (MMscfd)

Year 2019 2020 2021 2022 2023

Power Sector
(Updated IPSMP Ref
Case)

Total Demand 229 257 266 322 350

(Power)

Western Region

Total Non-Power 26 39 53 63 72
Western Region

Eastern Region

Total Non-Power 0 6 19 25 26
Eastern Region
10 SPE-207173-MS

Gas Demand (MMscfd)

Year 2019 2020 2021 2022 2023

Total Non-Power 26 45 72 88 98
Demand

Total Demand (Power 255 302 338 409 443

& Non-Power)

Contracted Gas Supplies (MMscfd)

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Year 2019 2020 2021 2022 2023

Total Supply 337 498 627 737 823

Opportunities According to Stakeholders.

Boakye et.al. (2019)posits that, one of government's first efforts should be wiping the excess domestic gas
by encouraging existing power plants to use gas to generate electricity to relief the company of take or pay
commitments of government. A critical task is to address the persistent lack of access to electricity and
the unreliability of electricity supply, which have affected the continent's development. (Roberto 2019) He
estimated that the average electrification rate in Africa in 2018 was about 45%. He further rationalized that
Ghana is in an advantageous position with about 86% of its people having access to energy. This implies
that Ghana can work on reaching total electrification of the country and also export power to neighboring
countries such as Togo and Benin and below 25% in Burkina Faso.
According to Ghana Gas National Company (Ghana Gas, 2019), there are the following prospects for
gas utilization; GPP Train 1, GPP Train 2 and CNG i.e. The Second Gas Processing Plant with a planned
capacity of 150 mmscfd / d, Compressed Natural Gas (CNG) for industrial and transport use, Pipeline
Extension from 20"x 25 km from Atuabo GPP Plant to Petroleum Hub, 20 "x 252 km Takoradi - Tema
bi-directional gas flow Pipeline, 20 "x 225 km Prestea, Nyinahin-Kumasi Pipeline, 20" x 50 km Atuabo-
cote d'ivoire pipeline Construction of the Jomoro Fertilizer Project, bauxite production and Government
initiatives (1D1F) will also provide additional opportunities for gas utilization in the country.

Natural Gas Utilization in Nigeria.

Nigeria discovered commercial oil in 1956. Prior to the advent of Nigeria LNG in 1999, more than 90
per cent of Nigeria 's gas output had flared, resulting in environmental degradation. Many policies and
mechanisms have also been put in place to help achieve the country 's ambition to produce coal. (Udezi,
2017). The country has the 9th largest gas reserves worldwide according to CIA World Facebook with an
existing 2P (AG+NAG) reserve of 192 trillion cubic feet (TCF) and an expansion in gas resource capacity
to approximately 600 TCF.
The Nigerian Petroleum Act was first passed in 1969 to create a legal and regulatory structure for the
conduct of oil and gas industry in Nigeria. Increased hydrocarbon exploration and production activities have
occurred in the region since the inception of this act. The Act gave the gas utilization association mandate
to operate and led to the development of a gas utilization plan. Another act, The Petroleum Change Gas
Act, 1973, allowed the government to take flare gas free of charge or at an agreed cost without the payment
of a royalty license. The associated gas re-injection act followed the establishment of a gas flare act at the
end of 1 January 1984 in 1979. The implementation of the act has contributed to a decline in gas flaring
Under the Strategic Gas Strategy of Nigeria (2004), Nigeria 's choices for the use of natural gas included:
gas for power, gas for LNG facilities, gas for GTL, gas for export pipelines, gas for chemicals, commercial
users, industrial users, domestic users, and refineries (Biose, 2019). Nigeria can boast of the following in
terms of current utilization programs: The Escravos gas plant, a liquefied petroleum gas (LPG) project,
the Oso NGL Scheme, a NNPC / Mobil Joint Venture (JV) and an NGL facility, for export, the Ekpe
gas compression project targeted at gas lifting and gas re-injection, the Belema Gas Injection Plant, The
SPE-207173-MS 11

West African Gas Pipeline Project comprising the Governments of Nigeria, Ghana, Benin and Togo, a
CNG program initiated by NIPCO (now 11plc) to convert vehicles and construct several CNG stations for
refueling, and three CNG plants owned by Power Gas which have a combined capacity of 25 mmscf daily
supplying gas predominantly to power factories targeted at the agri-food industry. (Biose, 2019)
The Nigerian Gas Master Plan (NGMP) was developed in February 2008, by the Federal Executive Board
(FEC). The plan was soon drawn up after opening up the domestic gas market and consisted of the national
gas supply and pricing strategy, the national gas supply and pricing scheme and the blueprint for the national
gas system.

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According to the NGMP, the corporation also has among its plans, the development of eight (8) thermal
power across different parts of the country in the short and medium term. There were also plans for
developing 5 sets of pipelines; " the Escravos-Lagos -Pipeline-System Elps Phase II, Odidi -Warri Gas
Pipeline Expansion, a 40"*30km gas pipeline is expected to enable the supply of additional 44mmscf/d gas
through the ELPS line, the Obaifu/Obrikom-Oben Ob3 Pipeline meant to transport gas from the eastern
part of the country to the western and northern parts, the Ajaoluta-Abuja-Lano AKK Gas Pipeline system
which is the first phase of the trans-Nigeria gas pipeline TNGP and finally the QIT - Ob/ Ob Gas Pipeline
a 36"*261km gas pipeline is meant to transport gas from qua Iboe to OB3 pipeline". Efforts were made to
achieve an attractive domestic gas price. The price of gas transport rose from $0.30 / mmscfd in 2014 to
$0.80 / mmscfd in 2016. (Biose, 2019).
While much progress has been made towards curbing gas flaring, which has fallen to an average of 10
per cent of the current gas generated, the act still takes place due to factors such as the failure to comply
with the 2010 Gas Flare Prohibition Act, making the penalty n 10 / mmscfd($0.02 / mscf @ N360 to
$1 very affordable for oil and gas producers, the lack of adequate midstream infrastructure, Economic
dependency on oil, making it impossible for the federal government to implement the shutdown of oil
output due to gas flaring, dysfunctional gas market environment, vandalism, ageing facilities, thereby adding
infrastructure integrity issues. Construction of such strategic infrastructure has not progressed as desired due
to funding constraints based on competing national priorities, security and community challenges, security
and community challenges, enforcement of Nigerian content law, project management issues, problems
arising between consortiums implementing contacts, lack of legal support for the Nigerian gas master plan.
Although the price of gas to the power sector is currently more attractive than gas to the long term, upstream
companies are reluctant to supply gas to that sector as a result of irregular payments by the power sector
for gas resulting in huge debts, insufficient capacity to receive gas due to insufficient power transmission
infrastructure, vandalism of gas transmission pipelines. (Biose, 2019)

Natural Gas Utilization in China

According to APERC (2017), natural gas, although a minor part of China's primary energy supply, is
gradually rising. When the economy grows and the population rises, energy demand continues to increase.
China became the largest oil consuming country in the world in 2010, accounting for approximately 21
percent of global energy demand. In the 1990s, with the abolition of import restrictions, the use of LPG
accelerated quickly. Demand developed rapidly with the recommendation of natural gas in the 9th Five
Year Plan (1996 to 2000), resulting in increased domestic gas production and progress in building the first
major pipeline. Natural gas has historically been used mainly for industrial purposes in China, but the use
of natural gas for power production and domestic applications has been growing in recent years.
The National Growth and Reform Commission developed a natural gas usage strategy to promote the
efficient use of natural gas in 2007. The plan separates the use of natural gas into four categories: residential
use, industrial use, production of electricity and the usage of natural gas by the chemical industry.
China revamped the pricing system, reformed the domestic gas industry, and strengthened the transport
sector 's infrastructure. A limit on the wholesale price (city-gate price) of natural gas was imposed by
the Chinese central government. A market management scheme stimulated the implementation of a new
12 SPE-207173-MS

natural gas pricing mechanism and reduced the impact on existing downstream consumers. In its strategy
of expanding its natural gas market, China has also made progress. Competition is required to take control
and to boost the efficiency of the services provided. The three central policies of a mixed ownership market,
resource distribution, liberalization and resource price liberalization have been declared. Infrastructure-
building strategies in sectors such as power generation, rail, telecommunications, oil, and natural gas have
also been established. In addition, to allowing access to LNG terminals for third parties, the National
Development and Reform Commission approved a Natural Gas Infrastructure and Operations Management
Act. (APERC, 2017)

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Finally, in the 13th Five-Year Plan to ban coal-fired boilers in the city by the end of 2020, China developed
a coal consumption restriction policy which sets environmental protection targets. Coal for heating purposes
was removed in the Pinggu district and private service companies were switched to cleaner fuels.
In order to prepare for a continued rise in demand for natural gas in the future and to ensure a secure
supply, China planned to build facilities such as LNG ports, natural gas pipelines and underground gas
storage in conjunction with the increase in natural gas exports. With the arrival of LNG carriers from
Australia's North West Shelf Project at Shenzhen CNOOC Port in Guangdong Province in 2006, the Chinese
LNG industry began.
Considering development demand, major state-owned oil companies such as CNOOC, CNPC and Si-
nopec have been granted exclusive rights to import LNG to China. Nonetheless, by policy reforms, new
terminals operated by non-state - owned oil companies may obtain access to the field.
According to a plan announced in 2012 by the National Energy Administration, a 44,000 kilometers
domestic trunk line pipeline was installed for the pipeline grid between 2011 and 2015. Centered on
the construction of the West East Gas Pipeline, Shaanxi-Beijing Pipeline, and Sichuan-Shanghai Pipeline
natural gas distribution routes, the 13th Five Year Plan was announced in 2016. Natural gas produced in
western China has been exported through the West East Gas Pipeline to the east coast. The third West-
East Gas Pipeline was completed in December 2016, with the fourth West-East Gas Pipeline being
planned. Natural gas pipeline imports started in 2010 but were equal to LNG imports in little over a year.
Finally, considering the gas strategy publicized by the National Growth and Reform Commission in 2012,
the government prioritized the usage of natural gas as a transport fuel, especially in the automotive sector,
public buses, taxis, logistics vehicles, long-distance buses, cleaning of automobiles etc.
In order to facilitate the use of natural gas in China, straightforward and timely pricing was important.
Compared to other fuels such as coal and LPG, enhancing market sustainability has been critical. As per
the Gas Usage in the Transportation segment above, China is also concerned about the expansion of use
in the transportation market. The production of LNG buses and trucks, CNG cars and other vehicles is
a problem, and the number of filling stations for LNG is also growing accordingly. Finally, there is the
problem of maintaining energy stability and reducing emissions by rising domestic shale gas output in order
to satisfy the growing demand in the world. As demand rises in the region, China plans to increase shale
gas production. (APERC, 2017)

Natural Gas Utilization in The United Kingdom.

After arriving in the 1960s, the market for natural gas in the UK has undergone a drastic transition. The
biggest driver for the use of natural gas has been upstream developments in the North Sea. In the 1990s
and 2000s, power generation dramatically increased demand. As a result of a lack of competition and a
government program to encourage clean energy, demand has fallen by 30 percent since 2000. (APERC,
2017)
For over five decades, natural gas has been used, and other fuels have been significantly replaced as well.
Gas consumption was almost zero in 1965 when BP first entered the North Sea, but natural gas accounted
for 45 percent of electricity demand in power generation, 31 percent in manufacturing, and 32 percent by
SPE-207173-MS 13

2014 in the residential and industrial sectors. The country has no intentions of increasing natural gas supply,
because of high gas penetration, and demand is projected to be steady or decrease in the future.
Natural gas has driven the government to speed up the rate of liberalization in the overall energy policy:
the lack of competition. The process started in 1987 when the government revoked the then-state-owned
British Gas monopoly status and permitted third-party access (TPA) to its pipeline with respect to the
gas industry. Starting in 1982, the retail sector was liberalized in phases and opened entirely in 1998. In
1997, British Gas was unbundled, and BG plc (now National Grid) owned and controlled the system. The
price control was finally removed in 2002. The new energy strategy is largely driven by concerns about

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climate change. Other critical policy concerns are competition, energy market stability and energy scarcity.
In accordance with the Paris Agreement adopted by the United Kingdom in 2016, the United Kingdom has
dedicated itself to the reduction 40 percent of greenhouse gas (GHG) pollution in 2030 from the 1990 levels.
The United Kingdom has a well-developed natural gas system with almost 8000 km of high-pressure
pipelines. The import and sale of natural gas is subject to multiple cross-border links. Three major supply
pipelines exist as follows: one from Norway, one for export from Ireland and two for manufacture and export
from / to the Netherlands and Belgium. There are also Four LNG import terminals in operation in the UK.
Beginning in 1982, the retail market was phased out and opened up entirely in 1998. Gas in the UK was
unbundled in 1997 with BG plc (now National Grid) operating and controlling the network. Price regulation
was finally scrapped in 2002 and market industry liberalization was completed in 2003. In 2015, the market
share of the retail division of Centrica, formerly the British Gas retail division, fell to 37 percent. In 1997,
gas had to be exchanged between producers and consumers. A wholesale price had to form the basis of
their dealings and a wholesale market or hub had formed. Today, one of the world's most liquid markets is
the UK wholesale market, referred to as the National Balancing Point (NBP). Any gas that joins the UK
gas grid, whether domestic or imported, is priced in line with the NBP. The business became unpredictable
as NBP became a spot business, requiring a hedge mechanism for producers and customers. In addition,
in 1997, the Intercontinental Exchange (ICE) listed a deal for NBP futures. The depletion of demand in
the United Kingdom was primarily caused by the growing lack of natural gas for power generation. It was
hard to invest in gas-fired power plants due to lower usage factors. It was projected that natural gas would
have versatility in producing electricity as a backup fuel for renewables. There are few prospects in the new
energy policy for the development of gas demand in the nonpower sector in the United Kingdom, at least at
the national level. Also, some prospects are predictably directed towards decarbonization. A feed-in tariff
scheme for electricity was created by the 2008 Power Act. In the United Kingdom, the availability of gas
supply remains a significant policy issue. The Energy Act of 2016 had a legislative structure for energy
management and the establishment of the Oil and Gas Authority (OGA) to finance upstream production
in the North Sea as an independent government corporation. The goal of the development upstream and
output growth of domestic natural gas supplies was to reduce the economy's reliance on imported natural
gas. In 2015, in a small area of the United Kingdom, the government allowed hydraulic fracturing for shale
gas extraction, the result of which is unclear. Despite such initiatives, it is not likely that gas output in the
United Kingdom can recover. (APERC, 2017)

Challenges of Natural Gas Utilization in Ghana.

Lack of skills and technological capacity is a major challenge. According to the Energy Commission (2019),
the availability of skilled human resources, Technical constraints on the part of; Upstream production
(e.g., issues with FPSO affects production). According to Ghana Gas (2020), Downstream customers (e.g.,
unavailability of some thermal units, Transmission issues) are major issues for Ghana's Oil and gas Industry.
Technical constraints on the part of; - Upstream production (e.g. issues with FPSO affects production),
Downstream customers (e.g. unavailability of some thermal units, Transmission issues).
According to Asian Pacific Economic Research Centre (APERC) (2017), lack of infrastructure poses
a major challenge to Ghana's gas sector. APERC explains that natural gas infrastructure, both upstream
14 SPE-207173-MS

and downstream are essential in meeting gas demand. They further state that majority of ‘gas demand
forecasts using econometric models face difficulties in providing accurate projections due to uncertainty
in future physical infrastructure completion’. Boakye et.al. (2019), however suggests that misplaced gas
infrastructure investment priorities and political excuses constitute the fundamental causes of the gas
utilization crises.
Benchmarking analyses on gas prices in many African countries and other developing countries with
domestic gas markets indicate that wholesale gas prices mainly used for power production vary from $3-
$6 / MMBtu Theophilus & Manfred (2018), a $1-$2 / MMBtu surplus. Further studies also show that the

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average cost of gas supplied to power producers in Ghana is around $6.4 / MMBtu relative to a weighted
average purchase price of $8.8 / MMBtu (2017) and $7.3 / MMBtu (2018), which may result in substantial
downstream rentals in excess of $1-$2 / MMBtu. (Theophilus & Manfred, 2018)
Ghana's oil and gas industry has historically been plagued by regulatory issues. The GMP explains the
regulatory structure at the time to include exploration, production and gas aggregation functions performed
by GNPC. GNGC who has ownership of the pipelines and operates the gas processing plant has the role
of supervising the development of the downstream distribution system is another body. BOST was the
sole national transporter of natural gas in Ghana. Other stakeholders include multinational upstream oil
companies, the West African Gas Pipeline Company and power generation companies (VRA and IPPs) who
are responsible for driving gas to power demand. The GMP criticized this structure as complex rendering
effective coordination of tasks and roles as time consuming and subject cost overruns. This was the case
with the gas processing plant where delays and cost over-runs have affected the development of the sector.
More recently the issue of multiple regulation of natural gas operations by Petroleum Commission, Energy
Commission, PURC and NPA leading to unclear regulatory jurisdiction has also been a problem. (Ghana
Gas, 2019).
Sector Debt is one worrying issue in Ghana's gas sector. According to PIAC (2020), at the launch of
its annual report in Accra in 2019, the Chairman of the Committee, Mr. Noble Wadzah, reported in 2019
that the Ghana National Petroleum Company (GNPC) had supplied the GNGC with US$ 334.6 million in
raw gas, but no payment was provided in respect of supplies. "This is primarily due to the failure of the
Volta River Authority (VRA) to pay GNGC for the lean gas supplied. An overall debt in terms of lean
gas supplies of US$ 668.1 million had been accumulated and was quite worrying. This places the GNPC,
the gas aggregator, in bad financial standing and is detrimental to the sector's progress. Ghana currently
owes a total of $160 million to WAGP for gas supplied from Nigeria via the West Africa Gas Pipeline
to its largest power provider, Volta River Authority, N-Gas Limited, a company operated by the Nigerian
National Petroleum Corporation, Chevron and Shell, imports gas from oil companies in Nigeria and sells
it via WAGP to Ghana. (Aidoo, 2019).
In most developing oil and gas environments, the funding of projects faces a major obstacle. For e.g., the
World Bank-funded flagship public-private partnership (PPP) in Ghana, the Sankofa Offshore Gas Project,
with $1.2 billion in total in WBG guarantees and debt finance, represents a growing economic strain. Under
the 'take or pay’ clause of the Sankofa agreement between Ghana and private sector investors, GNPC must
purchase 90 percent of the specified amount of gas generated, whether it can use it. In 2019, the ‘unused
petroleum’ bill of the Government of Ghana was primarily due to the ‘take or pay’ clause of $250 million
in the Sankofa agreement due to a mixture of lack of demand and delays in building the related facilities
required to take off. The World Bank announced that it would stop providing funding for ‘upstream’ oil and
gas projects such as Sankofa from this year. (Brentonwood, 2020). In many developed countries, problems
such as raising start-up and working capital, the nonexistence of appropriate security, strong investment
plans, high interest rates combined with high risks in Ghana may also discourage private investors from
entering the value chain. (Vidda, 2019)
SPE-207173-MS 15

Conceptual Framework for Natural Gas Utilization.

There are several gas utilizations to choose from such as LNG, CNG, Power generation, fertilizer
production, petrochemical usage, and many others. These opportunities are firstly gleaned from the peculiar
demand and supply scenarios in any country. However, there are several factors which may limit the
exploitation of these natural gas utilization opportunities beyond the demand and supply mix. These limiting
factors or potential challenges include infrastructure availability, availability of project finance, policy
direction, the right regulatory framework, political influence, and the market dynamics in the related
geographical area.

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Figure iii—Conceptual Framework

Financing Natural Gas Projects.

Money is continuously invested to offset the reserves produced. The fact that the search for new oil resources
need to be explored and developed in difficult and high-cost sites is an addition to the challenge. Investment
is also required to finance infrastructure and processing plants in the mid-stream and downstream industries,
develop and prolong the life span of existing facilities, as well as implement innovations. Fortunately, ships,
pipelines, refineries, storage tanks, petrochemical plants, are long-lived resources, as opposed to depleting
upstream assets. Consequently, factors such as energy demand, prices, production costs and government
policies may influence the ability of the producer to obtain financing for projects involving natural gas.
(Clews, 2016). All these investments however are associated with large risks and hence the challenge of
obtaining the requisite finance for your project.
Common finance options include Internally Generated Funds i.e., the accumulated resources of an
organization that have been received and preserved from historical operational activities. Public exchanges
for smaller oil and gas producers are also significant sources of financing. (Robert, 2016). Reed (2018)also
posits that Export Credit Agencies (ECA's) are good domestic sources of finance for exporters and other
customers. Multilateral Agencies and Development Finance Institution, entities operated by the government
work primarily in emerging markets and are active. Straight Loans (Commercial loans) are private loans or
facilities issued by banks to finance oil and gas field projects. Currently, commercial banks have provided
loans of more than $45 billion to integrated upstream gas production and supply in America, Russia, and the
Asia-Pacific region.(Ehigiato, 2015). Project financing strategies have been used severally to fund several
major oil and gas projects. The Baku-Tbilisi-Ceyan11 is also a 1768-kilometer pipeline transporting oil
16 SPE-207173-MS

from Azerbaijan's Sangachal terminal via Georgia to Turkey's export terminal. A multi-sourced project
financing mechanism of approximately US$ 2.5 billion has supported the initiative. (Robert, 2016). Islamic
finance, a method of asset-based finance requiring the execution of economic and financial operations in
accordance with Islamic law (Sharia), particularly the sukuk instrument, a Sharia-compliant bond is another
popular form of finance in the Middle East. (Suzanne Szczetnikowicz and John Dewar, 2018). Syndicated
Loans may be used to fund projects through the collaboration of a group of banks to fund a large initiative
for capital outlays. For example, a syndicated loan was used by Dangote Industries Limited to fund part
of the construction of a crude oil refinery with a production capacity of 400,000 barrels of crude oil and

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600,000 metric tons of polypropylene per day and a fertilizer plant with an annual capacity of 2,8 metric
tons Around US$ 2 billion was secured from Nigerian banks. (Ehigiato, 2015). International loans from
other governments may be used to fund the building of infrastructure. In the past, financing has been given
by the Chinese Government to promote oil and gas developments, including pre-payment of the oil to be
exported later. (Ehigiato, 2015) Joint ventures in countries like Nigeria have become a significant source
of financing for oil and gas suppliers to build the infrastructure needed to carry the goods to market. Direct
Government Funding and Public-Private Partnerships are another source of finance for natural gas projects.
In 2011, the World Bank reported that Ghana expenditure on annual infrastructure is approximately US$
1.2 billion (about 7.5 percent of GDP). Around US$ 0.7 billion comes from the public sector in this respect.
In 2011, the government unveiled a National Public-Private Partnership (PPP) plan to unlock support for
private sector development.

Data Analysis
Ghana's Gas Master Plan.
The country's gas master plan had several objectives which aimed to offer some guidance to the Government
and the entire energy sector as follows: to propose gas allocation plans for domestic power, industrial sectors
and exports possibly, taking into consideration economic value and supply availability, developing an
infrastructure plan to ensure security of gas supply as per the proposed gas allocation plans, recommending
the right gas pricing policy which can sustain gas supply upstream and secure the corresponding demand,
developing a suitable regulatory systems in line with world practices and finally systematically analyzing
the major challenges for development of the gas sector.
The GMP estimated that gas demand in Ghana would come from the following sectors: power generation,
industrial sector and the use of gas for transportation. It estimated that the power sector would provide the
largest percentage of demand i.e. More than 80% of demand from 2015 to 2040. It looked at supply from
two potential sources: domestic sources and imports from the WAGP and external LNG sources.
Based on the National Gas Pricing Policy (NGPP) and modeling, a new pricing policy statement be
placed in place for the pricing of natural gas. This will be focused on the financial feasibility of supply
companies, via cost-reflective gas price components and adequate return rates. It permitted upstream product
prices to be negotiated, while the price of gas to consumers should be based on the weighted average
gas cost (WACOG) plus the supplier's margin. It was the responsibility of the price regulator to create a
comprehensive methodology for all fees, tariffs, and charges. The regulator would also define price review
procedures. However, this was unfavorable and further contributed to the debt of the industry, as power
producers were served by high weighted average natural gas prices.
The GMP recommended a comprehensive infrastructure development plan based on the balancing of
demand and supply of gas across regions. The recommended the following: the development of reverse
flow capabilities on WAGP to cater for short-term demand in Tema (2015-2018), the development of an
onshore gas pipeline to connect Takoradi with Tema, the development of short term and long-term demand
GoG should develop an LNG Terminal in Tema with an associated floating regasification unit instead of
SPE-207173-MS 17

an onshore terminal would ensure flexibility of use and finally the strengthening of power transmission to
Kumasi and further north.
Currently, the first phase of the reverse flow project on the WAGP has been completed and the Tema
LNG terminal is still under construction. However, all projects have not met the timelines suggested by
the GMP. The projected demand has therefore not been created in the industrial sector even though power
generation efforts continue to increase in Ghana. The total gas flow to thermal plants in 2019, grew to
almost 65 million MMBtu (61,092 mmscfd) which is about 17.5 per cent more than in 2018. From this
total, about 36.6 per cent came from the WAGP and the remaining 63.4 per cent came from domestic gas

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(the Atuabo gas processing plant as well as the Sankofa fields. (Energy Commision, 2020) The GMP made
several recommendations such as focusing on power generation, industrialization in a step-by-step manner,
use of natural gas for cement/clinker production, use of natural gas for heat generation and then advised
exports were not viable at the time. It pointed to a need for comprehensive pricing guidelines to be issued
by the industry regulator. It also suggested the use of gas alternatives, such as the supply of gas for heat
generation to low-risk industrial clusters on the domestic market, the use of dedicated car fleets, including
urban buses and taxis, to minimize fuel costs and to provide environmental benefits.
The Gas Master Plan further proposed the development of a National Gas Policy which will serve as
the basis for the creation of a comprehensive Act on the Gas Sector which will promote the continuous
development of gas. It also proposed establishing a stable regulatory and fiscal structure, a fiscal policy, and
a mechanism for pricing gas. Finally, it recommended the development of an infrastructure plan to allow
and promote the construction of key strategic gas infrastructure, including the east-west coastal pipeline,
the Tema LNG terminal and the WAGP reverse flow arrangements.
Unfortunately, most of these recommendations were not followed. Most infrastructure recommendations
the GMP suggested are yet to materialize or at various stages of completion and hence the necessary demand
was not created as estimated by the Gas Master Plan Model. The industry is also still plagued with multiple
regulation, sector debt and weakened institutions making financing of natural gas projects exceedingly
difficult.
According to industry stakeholders, two areas were planned to be covered by gas master plans, i.e., design
optimization and operational optimization. However, Ghana's master plan just mentions the former. (Africa
Oil+Gas, 2020)A cause of concern has also been the lack of changes to the gas master plan since it was
established in 2016. Therefore, because of outdated demand and supply situations, infrastructure strategy
and lack of legal backing, the GMP is increasingly becoming outdated. Another indicator of the inefficiency
of the GMP is also the excess supply of natural gas in the country.

Opportunities for Natural Gas Utilization.

Policy Direction. In all countries sampled, natural gas policy formulation has been guided by factors
such as security of supply concerns, market dynamics and environmental or pollution concerns. Policies
have evolved in a step-by-step manner in countries like China who moved from one 5-year plan to
another, changing their objectives gradually as they went along. The focus of policy in both China and UK
moved from ensuring security of natural gas supply for consumers both residential and industrial to trade
liberalization. After these had been dealt with through various strategies for developing infrastructure, the
focus of energy policy is now shifting to reducing pollution through exploiting renewable energy. UK is
well known for its creation of the NPB wholesale market which is important in the growing global natural
gas market.
However, the only dedicated natural gas policy is the Gas master plan and has never been updated since
it was developed in 2016. There are however policy instruments such as the Energy Sector Strategy and
Development Plan, 2010, The Energy Commission Act 1997, Act 541 and Gas Regulations, Gas Pricing
Policy (2012). Pricing of natural gas is determined by the Public Utility Regulatory Commission. However,
18 SPE-207173-MS

the pricing system which is based on the pricing policy developed in 2012 has failed to achieve the aim
of cost reflective pricing. According to Hafner (2018), the average delivered cost of gas in Ghana is $6.4/
MMBtu as per the industry regulator. However, the weighted sales price to power producers averages $8.8/
MMBtu as of 2017 and $7.3/MMBtu in 2018.
Also, market liberalization does not seem likely in Ghana presently as it would mean lifting of price
regulation and total transparency of the gas market, something that is hindered by the country's not very
transparent petroleum contract processes. It may, however, be considered in a more long-term natural gas
policy. Finally, Ghana is currently in early stages of natural gas development and hence renewables are more

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likely to complement oil and natural gas rather than compete with it.
Infrastructure Development. Infrastructure development in Ghana has been slow. However, looking at
countries like UK and China, infrastructure developing has been at the forefront. China and UK allow private
investment into natural gas infrastructure. According to the GMP, Ghana's existing natural gas infrastructure
includes the Jubilee-Atuabo offshore gas gathering pipeline, the Atuabo Gas Processing Plant, the Atuabo
- Aboadze onshore transmission pipeline and its associated gas infrastructure for metering and distribution
as well as the Essiama-Prestea lateral pipeline.
Also, Ghana completed (The Takoradi scope) to reverse flow gas from the Western region of Ghana to
the Tema power enclave. The country's first LNG regasification unit, The Tema LNG Terminal comprising
of a floating storage and regasification unit (FSRU) is also underway. However, there are still opportunities
for expansion in infrastructure to connect to all industrial enclaves and petrochemicals.
Natural gas Utilization Options. Common gas utilization options in all countries include CNG for
transportation, import and export of LNG, power generation (industrial and residential), GTL's in countries
like Nigeria and petrochemical use of natural gas as feedstock. China is a major importer of natural gas,
whilst countries like Nigeria tend do more of natural gas export.
Currently, Ghana's natural gas utilization mix is primarily power generation (mainly residential).
Industry experts and benchmarking indicate the possibility for expansion into Compressed natural gas for
transportation, power generation focused on the industrial sector. Countries like China can serve as a guide
for the above options. Other options include the export of the contracted liquified natural gas to neighboring
countries, fertilizer production, LPG production as well as for heating in the bauxite industry.

Challenges of Gas Utilization.

A careful review of literature on the subject revealed the following challenges. The industry is plagued
by lack of skills and technological capacity and this is sited by various stakeholders. However, the local
content policy. The local content law (LI 2204) has been strategic in contributing to the development of
capacity in the natural gas sector. However, there is still a huge gap especially since the upstream sector is
dominated by International oil companies. Various secondment programs are needed especially upstream
to bridge the gap.
Also, the lack of infrastructure poses a major challenge to Ghana's gas sector according to (APEC, 2017).
Even with the presence of existing pipelines, processing plant and ongoing LNG project. There is still
a lot of potential to develop more pipleines to tie in with the Western Enclave. The Ghana National Gas
Company is looking at the option of constructing a separate gas pipeline from Atuabo (western enclave)
to feed gas to the eastern enclave reducing the over-reliance on the WAGP. In addition, the restriction of
gas pipeline development along the southern sector all possesses a challenge to natural gas development
in the middle and northern belt. As of today, the government, as well as private developers, have no gas
infrastructure in the middle and northern belt despite the growing industrialization within these regions.
Furthermore, there is not a single compressed natural gas (CNG) facility in the country for the automobile
industry.
SPE-207173-MS 19

Ghana's last pricing policy was developed in 2012. However, in 2016, The GMP proposed the use of
the weighted average gas cost (WACOG) plus a supplier's margin which is currently in use. The issue
of producers being served high weighted average natural gas prices still persists. The regulator has failed
to provide detailed information to stakeholders to provide a consistent economic justification for certain
aspects of the price of goods leading to tarrif conflicts among stakeholders. Presently, wholesale prices for
gas are between $3-$6/MMbtu in most developing countries with gas economies. In Ghana, however, the
average cost of gas supplied to power producers in Ghana is around $6.4 / MMBtu relative to a weighted
average purchase price of $8.8 / MMBtu (2017) and $7.3 / MMBtu (2018), a situation which is quite

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worrying.
The regulatory structure for the country has over the years undergone several changes and evolved
significantly. According to the Ministry of Energy (2016), The institutional framework before the Gas
Master plan was developed was as follows: Upstream licensing regulation is done by the Petroleum
Commission, Energy Commission takes care of midstream and downstream licensing and technical
regulation and economic regulation undertaken by the Public Utility Regulatory Commission (PURC).
GNPC regulates exploration, production, and gas aggregation while GNGC owns the pipeline as well as
owning and operating the gas processing plant. Finally, in Ghana, BOST was the only national natural gas
transporter. Foreign energy firms, the West African Gas Pipeline Company and power generation firms such
as VRA and IPPs were among other players in the industry, who drive demand for gas-to-power. However,
the GMP simplified the structure to position GNPC as gas aggregator, with GNGC which it proposed as a
subsidiary responsible for the processing of natural gas in the country. GNGC also owns all pipelines and
hence is responsible for natural gas transportation eliminating the role of BOST as gas transporter. However,
there are still several grey areas especially downstream with multiple regulation taking place across the
Petroleum Commission, Energy Commission and National Petroleum Agency.
Lastly, sector debt is one problem which needs to be paid serious attention. The failure of the VRA to
pay GNPC for lean gas supplied contributes to the sector debt with an overall debt of USD 668.1 million
owed by end of 2019. (Aidoo, 2019). Ghana's Natural gas sector debt of about US$ 668.1 million in terms
of supply of lean gas as at the year 2019 presents significant barriers in the growth and development of
the sector. This was partially due to a substantial financial exposure to take-or-pay arrangements. These
arrangements mean that the GNPC pays for supplies that it cannot sell. These payments amounted to 168
million dollars in 2019. The Ministry of Energy (2019)estimated that, it will cause government USD 1,361
million (about 1,270 mmcfd of natural gas) by 2030 if not dealt with This situation is quite alarming and
hence forms the fundamental basis of this study to create the necessary demand for the gas we are forced
to pay for by these contracts.

Financing Natural Gas Projects in Ghana.

One big problem facing the IOCs and governments is financing. Most financial institutions, foreign
institutions, take considerable account of factors such as the risks and the price of oil, which determine
the feasibility and the rate of return on investment, when financing an upstream oil and gas project. The
borrower's ability to repay is often considered. Though there are numerous funding sources for projects,
most of the funds collected in Ghana for projects come from international lending institutions.
The most important structures in Ghana's gas industry are concessions, the Build-Own Operate-Transfer
(BOOT) model and the total JV collaboration model between the public and private sectors. Investments
in pipelines and other mid-stream installations (e.g., refining plants or LNG terminals) are typically made
by well-capitalized international oil and gas companies because of their capital-intensive nature. These
organizations have the capacity to collect the substantial amount of funding needed for such initiatives,
often in alliances or consortia. They are also more likely to engage in the upstream export business model,
which is a commercial push to establish export routes and new markets for manufacturing sectors. The type
20 SPE-207173-MS

of BOOT structure with appropriate incentives is likely to be the most feasible option if a single, easily
recognizable project, such as an LNG processing plant or pipeline, is considered. (Ministry of Energy, 2016).
Ghana can source funds from sources of finance including equity, export credit agencies and
Development Finance Institutions and Multilateral agencies, Commercial Loans, international loans, and
many others. Although the government is an essential source of funding for the natural gas industry, it
is often unable to provide the required assistance due to high demand for its revenues. Therefore, the
Government also needs the participation of the private sector, which is typically a challenge. Royalties and
other rentals can also be used as protection for the gas chain.

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Ghana's Sankofa project, which was approved in 2015, aimed to make available more natural gas for
power generation through private capital investment. The World Bank's support to this project will inject
about $8 billion private investment into the economy and represents the largest foreign direct investment
opportunity in Sub-Saharan Africa in recent times. (The World Bank, 2020). The recent Tema
LNG project which is scheduled to produce about 1.7 million tons of natural gas yearly, was financed
by Helios Investment Partners, a private equity firm and Africa Infrastructure Investment Managers.
(Shiryaevskaya, 2021)
While commercial loans for large projects are generally unpopular in African countries, it is possible to
use some individual loans or facilities provided by banks to finance oil and gas projects. Considering that
risks around the oil value chain are high and thus difficult for lenders to consider, raising corporate funds
can be overwhelming. local banks' relatively low risk tolerance, syndicated loans may be a more appropriate
choice for Ghana. To finance gas ventures, banks may form a syndicate. (Udezi, 2017)
International loans from one government to another may be used to raise funds for the building of
infrastructure. This, however, depends heavily on geopolitics. Bilateral relations with the government would
also be of severe importance. For example, the Chinese government funded the Atuabo processing project
to the tune of $850 million dollars. (The Economist, 2015)

Summary of Findings
The following findings were made from analyzing all data collected and are summarized below:

Table ii—Summary of findings based on benchmarking.

Country Opportunities Challenges

Ghana Policy Direction: The Gas Master Plan i.e., the Lack of human and technical capacity,
primary existing policy document for the natural political rivalries, multiple regulation, lack of
gas sector, National Gas Pricing Policy infrastructure, pricing issues, sector debt.
Utilization options identified: Power and
heat generation for the Industrial sector, CNG
in transportation sector, gas/power export to
neighboring countries, fertilizer production,
bauxite production.
Infrastructure Development: Fertilizer plants,
pipeline extensions, LNG infrastructure.

Nigeria Policy Direction: Nigerian Act (1969) Gas flaring, Heavy dependence on oil,
established legal and regulatory structure, The Dysfunctional gas sector environment,
Petroleum Gas Act, 1973 which allowed the vandalism, infrastructure constraints, domestic
government to use flare gas for free or at a supply security issues.
negotiated price, Nigeria's strategic Gas Plan
(2004) focused on more gas utilization options
and the Nigerian Gas Master Plan (the most
recent gas policy document)
Utilization options identified: Electricity for
domestic and commercial purposes, LNG, Gas to
liquids, gas export, petrochemicals, heat/power
generation in industries, refineries.
Infrastructure development: Pipeline
extensions
SPE-207173-MS 21

Country Opportunities Challenges

China Policy Direction: 13 5-year plans (1996 to 2016) Gas pricing concerns, converting vehicles for
which focused on areas such as the promotion of CNG use, security of supply concerns.
natural gas use in the energy mix (shifting from
coal), infrastructure development, expansion of
exploration and production, Lng Infrastructure
development.
Utilization options identified: Power generation
(Commercial & Domestic), LNG, CNG in
transportation, Petrochemical industry.
Infrastructure Development: LNG ports,

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natural gas pipelines and underground gas
storage

United Kingdom Policy Direction: Early direction was initially Demand for natural gas falling due to cuts in
focused on market liberalization and the creation gas production, popularity of renewables due to
of the NPB market Price regulation was lifted in decar-bonation efforts.
2002
Oil and Gas Authority was created to support
upstream development and reduce dependence on
imports.
Recent policies focused on reducing greenhouse
gas emissions and focusing on cleaner energy.
Utilization options identified: Power
generation, gas export, LNG, Industrial and
residential gas use.
Infrastructure Development: The country is not
likely to add new infrastructure as the existing
infrastructure is 8000 km of high-pressure
pipelines and 4 LNG terminals.

Lessons Learnt from Benchmarking and Analysis.

• It has been seen from benchmarking that any opportunities that need to be captured cannot be
done without the requisite infrastructure in place. Infrastructure development will solve most of
the problems identified.
• Power generation (residential & industrial) is the most economic, accessible and the main offtaker
in the beginning of the gas journeys of all countries.
• We cannot downplay the importance of a proper regulatory framework with competitive pricing.

• The financial viability of organizations in the gas to power value chain is critical especially learning
from Nigeria.
• Political influence and meddling in the natural gas chain are more common to developing countries
if we compare the cases of Ghana and Nigeria.
• Private sector investment is essential for liberalization of any natural gas market.

• Industrial utilization of gas is particularly important to the growth of all-natural gas markets.

• Finally, export of natural gas as well as export of power are lucrative ventures.

Conclusions
The study revealed that Ghana's excess gas supply situation exists as a result of either over ambitious
projections or wrong policy direction. It revealed from industry discussions as well as benchmarking several
opportunities for gas utilization in tandem with the benchmarked countries that, Ghana was on the right
track but failed to direct resources into the necessary pipeline and other infrastructure which would facilitate
the ambitious plans set forth by the Gas master plan. Industry experts are therefore right in advising the
country considers export to neighboring countries as well as focusing power generation particularly on the
industrial, petrochemical and fertilizer utilization options.
22 SPE-207173-MS

However, the study pointed out several challenges which plague the country's natural gas sector including
the natural gas sector debt situation, infrastructure constraints, political influence, multiple regulatory issues,
and deficits in human and technological capacity which need to be paid serious attention. It is obvious
however that most of our problems will be solved if the requisite infrastructure is put in place. The Gas
Master plan will also need an update highlighting changes especially in the demand versus supply situation.

Recommendations
Ghana's first line of action for the government should be clearing the excess gas situation which the Ministry

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of Energy (2019)estimated will cause government USD 1,361 million (about 1,270 mmcfd of natural gas)
by 2030 if not dealt with. However, the following specific areas should be focused on:

Policy Direction
The Gas master plan should be updated to reflect the current demand and supply situation i.e. the excess
gas supply situation. The newly updated policy should eventually be put into a comprehensive Gas Sector
Act to strengthen it and prevent political manipulation. The key pillars of this legal document should
be infrastructure development, natural gas trade liberalization and competitive gas pricing. However, an
infrastructure expansion plan (pipeline extensions, conversion of industries to use gas, building of plants
etc.) should dominate the strategy as it is the only way to create demand for natural gas downstream

Regulatory and Institutional structure

Government should establish a more stable fiscal and regulatory framework which allows for quite
predictable fiscal regime and gas pricing throughout the natural gas value chain. State institutions should also
be put together strategically to ensure financial viability and reduce the sector debt. Regulatory framework
should also be simplified and roles of institutions in the value chain well delineated to avoid overlap of
regulation.

Natural Gas Pricing.

The government needs to provide detailed rules on natural gas price determination. These rules need to be
published by the designated industry regulator. This will provide a clear economic and commercial basis
for aspects of the price make up for areas such as gathering, processing, transportation, as well as regulatory
levies. Also, cost reflective pricing should be introduced in the gas sector to ensure that average prices of
natural gas sold to power producers are at power with prices set by the industry regulator. This will help to
reduce downstream rents caused by the imbalance.

Capacity-building.
More resources should be committed to building capacities in skill sets necessary for the gas sector. Reduce
human and technological capacity deficits through including secondments in all contractual agreements in
order to build the capacity of indigenous industry stakeholders.

Infrastructure Development.
The government should support the development of strategic gas infrastructure such as GPP Train 2 and
CNG-Second Gas Processing Plant with a proposed capacity of 150mscf/d and Compressed Natural Gas
(CNG) for Industrial and Transportation Use as well as Pipeline Extension - 20"x 25 km from the Atuabo
GPP Plant to Petroleum Hub, 20" x 252 km Takoradi - Tema bi-directional gas flow Pipeline, 20" x 225 km
Prestea, Nyinahin-Kumasi Pipeline and 20" x 50 km Atuabo - Cote D'ivoire pipeline.
SPE-207173-MS 23

Financing projects
The financial sector should be strengthened and supported to facilitate the raising of funds for natural gas
projects. Public-Private Partnerships and BOOT structures may also be used to finance midstream natural
gas infrastructure. Given the huge demands for infrastructure funds across the gas and power sectors and
the challenging borrowing situation for the government, this would seem a more prudent use of funds than
completely funding individual projects.

Promoting Investor interest

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Government and indigenous private investors looking to invest in related infrastructure should be supported
with various incentives to increase infrastructure in the oil and gas industry. Government should also
continue to strengthen cross border relationships to ensure we obtain funding with relatively fair conditions.

Government support.
In terms of financing natural gas projects, the role of government as a financier cannot be eliminated.
The government may issue guarantees and subsidies sparingly in the gas sector in order to boost investor
confidence. Public-private partnerships may also be used to ensure we obtain the requisite financing for
gas infrastructure projects.

Importation of natural gas.

Ghana should avoid importation of natural gas and focus on domestic gas sources. The focus should be on
utilizing associated gas from the Jubilee and TEN fields.

Off-taker viability.
The government should ensure the financial viability and creditworthiness of power and gas sector entities.
Private individuals should consider joint ventures and other partnerships to strengthen their financial
positions and reduce the risk of taking on natural gas projects. State owned institutions especially those in
the downstream natural gas sector like ECG and VRA should be strengthened through private participation
in order reduce the sector debt and boost investor confidence.

CNG use in the Transport sector.

The government should conduct a feasibility study importation of CNG vehicles for public transportation
and establish a policy framework for the needed infrastructure and renovating of CNG vehicles.

Industrialization
More effort should be made towards promoting industrialization as it is one of the surest ways to increase
gas consumption. Projects such as the 1D1F should be continued and expanded in scope to promote
industrialization. Existing power plants should be motivated to switch to the use of gas solely for power
generation.

Natural gas utilization options

• Power generation focused primarily on the industrial sector of the country to be carried out in a
step-by-step manner.
• Supply of gas for heat generation to low-risk industrial clusters in the domestic market.

• Export of the contracted LNG to neighboring countries.

• Supply of gas for fertilizer production i.e., nitrogen fertilizer produced from natural gas.

• Use of natural gas for bauxite refining.ie for heating in Ghana's upcoming bauxite industry.
24 SPE-207173-MS

• Production of compressed natural gas part of the country's petroleum product mix for industrial
and transport purposes.

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