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Ghana’s industrialisation to benefit from Tema LNG terminal

By David Whitehouse
Posted on Thursday, 21 January 2021 16:36

Manufacturing in Ghana has been held back by power constraints. REUTERS/Francis Kokoroko

Sub-Saharan Africa’s first liquefied natural gas (LNG) import terminal at Tema can turn Ghana into a petroleum hub, Tema LNG managing director Edmund Agyeman-Duah tells The Africa Report.

The project, built at a cost of $350m, can be a “driver of growth” for Ghana and the region, says Agyeman-Duah. It will provide year-round guaranteed supply and promote investment in industries that have relied on more expensive oils with erratic availability.

Thermal plants located at Tema have until now relied on heavy fuel oils and diesel imports to meet demand. Industries that will benefit from LNG include power infrastructure, mining and ceramics, which uses natural gas as a feedstock, Agyeman-Duah says.

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The African Development Bank (ADB) has said that power is currently the single largest constraint on Ghana sustaining high GDP growth. Current natural gas demand in the country is not being reliably met by local gas production or serviced by the West African Gas Pipeline, the bank says, adding that the Tema project will facilitate electricity grid expansion.

Ghana has one of Africa’s highest rates of electrification, yet industrial development has been hampered by unreliable supply. Over-reliance on hydro-power led to a prolonged crisis in power supply, which included electricity rationing, between 2012 and 2015.

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At the worst of the crisis, electricity users were guaranteed 12 and 13 hours of supply for a 36-hour period, with some receiving even less. The International Growth Centre (IGC) in London has shown that the crisis led to a 10% drop in the monthly productivity of Ghana’s small and medium-sized manufacturing firms.

  • The IGC says that firms are willing to pay more to avoid power outages. So investments in electricity generation, production, and distribution infrastructure will be worthwhile even if they bring higher electricity prices.
  • According to USAID, Ghana has over 4,000 MW of installed generation capacity, though availability is seldom more than 2,400 MW due to inadequate fuel supplies and infrastructure.

Researchers led by Eric Abokyi at the Università Politecnica Delle Marche in Italy have even argued that increases in electricity consumption have been negatively correlated with manufacturing sector output in Ghana. The share of the industrial sector’s electricity consumption between 1971 and 2014 on average declined even as overall usage gained.

Floating regasification

Floating developments such as that being used by Tema LNG are designed to be built faster and cheaper than onshore plants. The terminal has the potential to supply one third of Ghana’s gas, says Babatunde Soyoye, managing partner at Helios Investment Partners, an Africa-focused private-equity investor which is backing the project.

  • Commissioning is set for March or April, says Soyoye.
  • Project construction began in 2018, and the floating regasification unit which will be sited just outside of the entrance to the Port of Tema arrived from China on 7 January.
  • Tema will operate the terminal for 12 years and then transfer operatorship to the Ghana National Petroleum Corporation.

The project approaches commissioning as the Gulf of Guinea has emerged as a hotspot for piracy. A security assessment carried out by experts formerly with Royal Dutch Shell concluded that LNG can be brought onshore with low risk, says Agyeman-Duah.

The next part of the assessment will determine whether LNG can be moved along other parts of the coast, he adds.

Bottom line

Reducing reliance on hydro-power will improve Ghana’s manufacturing productivity.