Ghana, once considered a model economy in West Africa, is currently facing its worst economic crisis in decades. The country is grappling with high inflation and a depreciating currency, leading to difficulties for its citizens. In the midst of this crisis, plans to import liquefied natural gas (LNG) under a 17-year agreement with Shell have raised concerns among opposition politicians, energy analysts, and NGOs.
Critics argue that importing LNG could potentially drive up electricity prices, hinder the transition to renewable energy, and perpetuate a cycle of fossil-fuel related debt. Currently, Ghana heavily relies on gas to meet its electricity needs, with gas accounting for 50% of its electricity generation and less than 1% coming from solar power.
Proponents of the LNG importation argue that it will enhance Ghana’s energy security, promote industrial development, and replace the use of heavier and more expensive fuel oil. The country’s demand for electricity is expected to double in the coming years, and the project consortium asserts that gas will be necessary to fulfill this demand. To accommodate this growing demand, a $400 million LNG terminal is being constructed in Ghana. Private equity investors and development finance institutions are financing the project, with the hope of turning Ghana into a hub for supplying LNG to the West African market.
However, critics argue that mismanaged gas and power investments in Ghana have resulted in financial difficulties and an inability to provide reliable and affordable energy. They urge the government to reconsider the project and prioritize renewable energy sources instead. One major concern is that LNG production is more carbon-intensive than ordinary gas due to the energy-intensive process of liquefying, shipping, and regasifying. This process also increases the risk of methane leakage, a potent greenhouse gas contributing to climate change.
Transparency is another issue, as the details of the contract and potential liabilities for Ghana have not been made public. Critics fear that the agreement could burden Ghana with more debt, particularly at a time when the country is receiving its 17th bailout from the International Monetary Fund. Additionally, Ghana faces challenges in the energy sector, with a history of unfavorable take-or-pay contracts that have led to excessive payments for unused gas and power. The country also struggles to pay for all the power it consumes, with independent power producers threatening to shut down if the government doesn’t settle its outstanding debt.
In the midst of these challenges, Ghana allows Tullow, an oil company, to flare gas from its offshore oilfields due to the lack of processing capabilities. Flaring is an environmentally harmful practice that releases carbon dioxide and methane into the atmosphere. The LNG terminal project in Ghana has received support from various international actors, including development finance institutions. However, concerns persist regarding the economic and environmental implications of importing LNG. Critics argue that prioritizing renewable energy sources and addressing the mismanagement of gas and power investments are essential for sustainable and affordable energy access in Ghana.
SOURCE:https://www.energyportal.eu/