Ghana domestic gas production casts more doubt on FSRU

Progress on developing Ghana’s Sankofa gas field is putting more pressure on planned LNG imports via floating storage and regasification units (FSRUs), analysts speaking to ICIS said.

Ghana had planned to install two FSRUs from early 2016, but the country’s anchor market of gas-fired power plants could be largely supplied instead by Sanofa output targeted for 2018.

“Sanofa’s production would be equivalent to 75% of the existing gas and dual-fired power plants currently installed in Ghana,” said Claudio Steuer, an energy consultant involved in the early phases of gas commercialisation studies for Ghana in 2010-11.

Although there are plans for more power plants in Ghana, FSRUs may find themselves operating with excess capacity while they search for additional markets. The 170,000 cubic metre (cbm) Golar Tundra arrived in Tema, Ghana, on 30 May but has yet to receive any LNG.

The long wait for LNG

The charter of FSRUs has been one response to the global oversupply of LNG, pointed out Energy Aspects analyst Trevor Sikorski. However, reasonable onshore infrastructure is necessary to bring the gas to market.

In 2015, Ghana’s West Africa Gas Limited (WAGL) chartered the Golar Tundra on a five-year contract with a five-year extension. The FSRU was expected to be in service by the second quarter of 2016 but LNG imports have not yet begun.

According to trading sources, there is no onshore port infrastructure in Tema to accommodate the vessel.

“The infrastructure onshore is not getting worked on. It is unclear whether the charter is getting paid,” said Steuer.

The Golar Tundra was intended to supply 250 million cubic feet (mcf)/day of regasified LNG to the 230MW Kpone thermal power plant operated by state-run utility the VRA.

However, in Golar LNG’s second-quarter 2016 results, the ship operator said, “There are near-term concerns with the status of the FSRU Tundra contract in Ghana that need to be addressed. The commercial rational remains sound and the rhetoric from government and charterers is supportive, however the pace of progress on the ground is not yet reflective of this.”

Domestic production

In contrast, work on the Sankofa field is galloping forward.

In September and October, the World Bank and international banks HSBC and Standard Chartered signed letters of credit totalling $1bn which will underpin Ghana’s offtake from the Sankofa field.

With the Ghana National Petroleum Company’s (GNPC) gas purchases guaranteed, project partners Eni and Vitol are moving closer to gas production by 2018.

“Eni and Vitol’s development of the Sankofa fields has scope to provide an additional 30,000bbl/day of crude and 180mcf/day of gas which will significantly improve supply to Ghana,” said Steuer.

Based on the field’s output, it is possible in theory to supply approximately 1.3GW of CCGTs assuming an 80% load factor and 53% energy efficiency, said Steuer.

This is roughly equivalent to 75% of all gas and dual fired power plants currently installed in Ghana, said Steuer.

“Alternatively, this project could supply 1.1-1.3 GW of new power plants, effectively increasing the country’s electricity supply by 50%, Steuer added.

A timing issue

With near-term gas-fired power plant demand almost satisfied by upcoming domestic production, it is unclear what the role of LNG will be.

“Sankofa production effectively reduces the window of LNG supply to 14 months assuming Golar Tundra is able to receive its first LNG cargo by the end of this year,” pointed out Steuer.

However, the long-term demand outlook for gas in Ghana is more bullish. Authorities have been looking to reduce dependency imports from Nigeria through the West African Gas Pipeline (WAGP), while Ghana’s state-run utility Volta River Authority (VRA) anticipates its gas demand alone to grow to 700mcf/day by 2020. josie.shillito@icis.com