Ghana to export her natural gas


The Ghana government recently approved Sonon-Asogli’s proposal to build a 700 MW coal-fired power plant in Ghana, which will be powered by coal imported from South Africa. In a stark twist of events, Ghana also has signed a contract with Tullow and its partners to start Natural Gas (NG) exportation in 2014.

I previously published an article (see that highlighted the environmental challenges associated with coal-burning electricity generation plants. It also provided some insightful reasons why Ghana should first concentrate on investing its meager resources to build an industry around her indigenous NG in order to provide employment for the youth.

Discerning Ghanaians, after reading the previous article, expressed some valid concerns. Since this article is directly related to the previous one, I will at the outset seize the opportunity to address some of those genuine concerns before proceeding to the central focus of this article. Notable among the issues raised were: (i) China has the most efficient coke plants in the world; (ii) why did I propose NG as a cleaner alternative to coal, instead of solar energy?; (iii) and Ghana may not have enough NG to meet the targeted energy goal of the nation.

First, the argument that China has the most efficient coke plants in the world is somewhat unconvincing. In their bid to seemingly allay the fears of Ghanaians regarding pollution associated with coal-burning, the Chinese promised to deploy desulfurization and electrostatic precipitator devices and technology in an effort to improve efficiency and mitigate the environmental pollution to the barest minimum.

In fact, if China had viable technology for reducing environmental pollution of coal-burning to the barest minimum, as they are preaching to Ghana, I am certain that they would have first operationalized it in China, before proposing it to Ghana. Watch the following documentary by CBSNEWS concerning the state of air pollution in some parts of Beijing, primarily as a result of coal-burning:

Second, while it is almost impossible to argue in favor of solar energy without making it sound like a cliché, it is still a viable option to explore. I am of the opinion that large- scale deployment of solar technology is still an active area of research, in terms of cost, size of the solar panels, efficiency and capacities of the photovoltaic cells and batteries. However, solar energy, in spite of the technological and affordability challenges, can still be considered as an integral component of a national energy mix, which can be utilized by individual homes.

Regarding the total quantity of NG available in Ghana, I must concede that I currently don’t have access to all the numbers in order to make an educated projection, as to whether there is enough NG to exhaustively satisfy the prescribed energy target of the nation, or not. However, I am fully aware that Ghana has made multiple substantial oil discoveries with appreciable payload of NG. Nevertheless, it is intuitively reasonable to speculate that the country has more than enough NG, since it is about to engage in exporting its ‘surplus’ NG.

For all intent and purposes, one is tempted to hypothesize that Ghana has learnt valuable lessons from its history of exporting almost all of its natural resources, such as cocoa, timber, and bauxite, instead of refining them and adding value to them before exporting them. Processing raw materials, for the purpose of creating jobs and for revenue generation, is a critical aspect of the theoretical underpinnings of economics, admittedly based on my limited understanding of economics.

In my estimation, the phenomenon of exporting raw materials instead of processing them has somewhat pushed the chunk of the population into farming. Specifically, about 52 % of Ghana’s population is engaged mostly in subsistence farming. In contrast, the quality of blue-collar jobs that will be created by processing industries, should Ghana choose to refine its raw materials, cannot be overemphasized.

Particularly, the trickle down benefits accrued to a nation for refining its natural resources before exporting them come in multiple folds. Not only does it build the middle class, which in turn improves general living standards, but it also increases government revenue, since the formal sector has proven to be primarily one of the sectors that government is able to efficiently generate corporate and income taxes from.

To put it mildly, while government is invariably complaining about inadequate revenue sources, government, on the contrary, doesn’t seem to be interested in fashioning out the enabling system that will foster its revenue generation efforts. Indeed, these are some of the ingenious schemes that government can implement for improving its future revenue outlook, in contrast to the infamous proposed ‘condom tax’.

It is inconceivable that the Ghana government will even think of exporting NG, against the backdrop that the country is currently importing NG from Nigeria, whose continued supply is very unreliable. In addition, the country also has challenges with the supply of LPG for local consumption.

In fairness, I will like to give government the benefit of the doubt, since it may have access to some information that the general public may not be privy to. However, that does not preclude us from making our own analysis as to what informed government’s decision to export the country’s NG while it imported coal from South Africa to be ‘burnt’ in Ghana.

First and foremost, the environmental impacts of coal-burning for electricity generation were contrasted to those of NG in the previous article (see the above documentary by CBSNEWS). It is, therefore, safe to speculate that government’s decision to export NG while they imported coal was not facilitated by the ‘sterling’ environmental challenges of coal-burning.

What is more, a very well documented argument made by proponents of coal burning is that coal is a cheap source of energy. Perhaps, that is the reason why Ghana is importing coal in lieu of NG. That notwithstanding, we can do some intuitive cost analysis in order to ascertain the validity of this assertion and its applicability to Ghana.

It is reported by US Energy Information Administration (USEIA) that the fuel requirements for producing 1 kilowatt-hour (kWh) of energy from coal and NG are 0.00053 st (short tons) and 0.000798 Mcf (1000 cu. ft), respectively. It must be pointed out that these figures, to an insignificant extent, also depend on the quality of the fuel. However, they are adequate for the purpose of this analysis.

It also must be emphasized that this analysis is on the basis of currently prevailing world prices of coal and NG. Thus, the world prices of coal and NG are 52.93 USD/st and 3.24 USD/Mcf, according to Investment Mine. These numbers infer that the costs of producing 1 kWh of energy using coal and NG as fuel sources are 0.028 USD/kWh and 0.026 USD/kWh, respectively. After all, coal may not be that cheap!

I recognize that these estimates are solely predicated on the cost of fuel for producing 1 kWh of energy and do not include overhead cost associated with the running of the respective production plants. It also does not include any cost penalty that penalizes for the shipping of coal from South Africa to Ghana, especially, since NG is already ‘siting’ in Ghana and there are somewhat existing pipelines for its transportation.

These results of the analysis above indicate that, currently, the cost of producing I kWh of energy from coal is actually slightly higher than that of NG. As a consequence, I am of the opinion that the well touted philosophy that coal is a cheap source of energy is more related to the abundance of recoverable coal reserves, worldwide. However, that benefit is not applicable in the case of Ghana, since the country doesn’t have any indigenous recoverable coal reserves.

In essence, I can’t imagine the basis of Ghana government’s decision to export NG while the country imported coal. I will, therefore, call on the Ministry of Energy to provide the general public with the merits of the analysis and the relevant protocols that facilitated government in arriving at this ‘strange’ decision, in the spirit of service to the nation.