ADDRESS DELIVERED AT THE DIALOGUE SESSION OF THE 3RD POLICY FAIR
ON
“MEETING GHANA’S ENERGY NEEDS – CURRENT STATUS AND PREPARATIONS
FOR THE FUTURE”
BY
HON.DR. JOE OTENG-ADJEI
MINISTER FOR ENERGY
APRIL 2012
Mr. Chairman,
Honourable Ministers present,
Metropolitan, Municipal and District Chief Executives present,
Chief Executives and representatives of Institutions
Distinguished Members of the Press
Ladies and Gentlemen
I am delighted to be given the opportunity to address this edition of the National Policy Fair and
to talk about Ghana’s Energy Needs – Current Situation and preparations for the Future”
The provision of adequate and affordable energy is a fundamental pre-requisite for economic
development. Throughout history, nations have developed taking advantage of cheap and reliable
energy supply. European countries benefitted from cheap coal whilst a combination of hydro and
coal provided the required source of energy for the United States. China, India, Brazil and South
Africa are good examples of countries which have very robust energy systems based on hydro
and coal and which are developing very rapidly. One can also talk about the Arab countries such
as the United Arab Emirates and Qatar which depend on energy derived from natural gas and
petroleum because they are in abundance in those countries.
We in Ghana have had a long history of cheap and reliable electricity supply since the 1960s,
thanks to the Akosombo and Kpong hydro-electric dams. Unfortunately the country has
exhausted the capacity of the hydro systems and coupled with the uncertainty of the weather we
have come to add thermal generation as a means of meeting the demand for electricity in the
country.
The Energy Sector development plan of our country is informed by the Ghana Shared Growth
and Development Agenda (GSGDA), the medium term policy framework which seeks to realise
the overall Government development agenda for macroeconomic stability and the attainment and
improvement of our middle income status.
The Energy Sector Vision and Policy Directions
The Government’s vision for the energy sector is to develop an energy economy that will assure
a reliable supply of high quality energy services for all sectors of the Ghanaian economy and also
become a major exporter of oil and power by 2012 and 2015 respectively.
Developments in the Power Subsector
The specific tasks we set for ourselves for the power subsector on assumption of power in 2009
to achieve the sector objectives were to:
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Sustain power generation capacity expansion, as well as rehabilitate and reinforce the
transmission and distribution infrastructure to meet the projected growth in power
demand of 10% per year in the medium term;
Complete on – going power projects;
Open up the electricity subsector to Independent Power Producers (IPPs);
Develop a non-congested transmission system;
Secure long term reliable gas supplies for the operation of thermal power plants;
Increase access to modern forms of energy to the poor and vulnerable especially in the
rural areas through the extension of national electricity grid;
Support sustained energy efficiency and conservation programs including reducing power
system losses and waste in electricity supply and consumption.
The Current Situation
I believe Ghanaians would want an answer to the occasional power outages and load shedding
which have been experienced over the past couple of months. I will therefore begin with the
current energy situation.
The generation capacity of all the power plants in Ghana is currently 2,185.5MW. This is made
up of 1,180MW of hydro generation facilities and 989.5MW of thermal generation facilities.
This is compared with a maximum demand of 1,665MW as was recorded at the end of 2011.
Going by the numbers we should have enough generation to meet the local demand. We have
however encountered a few technical problems.
The first problem had to do with the supply of natural gas from Nigeria. As you all know 32% of
our current generation is from thermal power plants that use gas or Light Crude Oil (LCO). Gas
from Nigeria is however the most affordable fuel available to the country at the moment. Though
supplies from Nigeria had been erratic for some time, the disruptions became more pronounced
in February and this forced us to shed load to sustain the situation. This was especially
imperative as the VRA had converted the Aboadze Thermal Power plant to use gas and
switching back to use Light Crude Oil created technical problems that led to a reduction in
production by about half. The Sunon Asogli Power Plant in Tema can only use gas as fuel and
therefore is not available when there is a shortage of gas.
Three nationwide outages have occurred in the first quarter of 2012. Two of them were due to
equipment failure and the last one due to generation deficiency.
In as much as we would not want to have disruptions in supply, we have to deal with a system
that is more than 50 years old. The VRA and GRIDCo have however embarked on a major
rehabilitation exercise that should avert such occurrences in the future.
The last outage which occurred at 7.14pm on Wednesday March 21st, 2012 was reportedly
caused by the unexpected loss of 72MW in generation in La Cote d’Ivoire as a result of
equipment failure, during the peak demand period. As you know the Ghanaian and Ivorian
systems are interconnected and the two countries do supply each other with electricity whenever
there is a shortage in one country. Cote d’Ivoire has been a major supplier of electricity to Ghana
in the past and continues to deliver power to Ghana whenever there is the opportunity. As a
result of the loss in generation, the already constrained Ghana system could not sustain the entire
system which also supplies power to Togo and Benin and so the system collapsed.
Although regrettable these have been the three major incidents of power outage in as many
months in the country. We are making efforts to solve these problems first by ensuring security
of gas supplies through a programme of diversification of gas supply sources. The development
of the gas processing infrastructure that will deliver Jubilee Field gas for power generation is on
course and is expected to be completed in some 18 to 24 months.
In the medium to long term other fields that have been discovered, such as the Dzata and
Sankofa gas fields would be developed to produce gas for power generation, industrial
processing and a petro-chemical industry. Another effort which is being coordinated by the
Energy Commission will compliment both Nigerian and local gas supplies with Liquefied
Natural Gas through the use of a Floating Storage and Regasification Unit that will enable the
importation of natural gas from other sources other than Nigeria.
Growing Energy Needs
Ghana’s economy has been growing steadily since the 1980s at rates between 3 and 14%.
Growth rates have averaged over 5% between 2000 and 2006. Since then the Ghanaian economy
has been growing at over 7% per annum reaching a high of 14.4% in 2011, fuelled partly by the
beginning of production of oil and gas in Ghana.
As expected, energy consumption has also seen significant growth, with electricity consumption
growing from 7,200GWh in 2000 to over 11,200GWh in 2011. Peak demand has grown from
937MW in 2003 to 1665 MW in 2011. Indeed electricity consumption grew by 10% between
2009 and 2010 and went up further by 16.2% between 2010 and 2011. If this growth is to be
sustained, we shall need to add about 200MW of generation capacity every year.
Petroleum product consumption growth has also averaged about 5% per annum. In 2011,
2.8million tonnes of petroleum products were consumed in Ghana compared with 1.4 million
tonnes in 2000. Today even at full capacity the Tema Oil Refinery is inadequate to supply the
petroleum needs of the country hence the introduction of other private sector players in the
supply of petroleum products, who are indeed contributing very significantly to the development
of the country.
Fuel for cooking in Ghana is dominated by wood fuel which is used by about 80 of households in
the country. The continuous reliance on the natural regeneration of woodlands and forests is
unsustainable and all efforts are being made to compliment the supply of cooking fuel. Demand
for LPG is continuously growing and reached 178,000 tonnes in 2011.
Petroleum Sector Developments
Oil and Gas Prospects
Mr Chairman, Ladies and Gentlemen, it has become evident that Ghana’s oil and gas prospects
are real and noteworthy. Our oil and gas potential stretches across the country’s shoreline from
the west (Tano Basin) to the east (Keta) and also covers the Voltaian Basin, which constitutes
40% of Ghana’s landmass.
The Voltaian Basin unfortunately is the least explored and it is in this light that under the mining
support program sponsored by the European Union, airborne geophysical survey has been
conducted on the basin. GNPC has been given access to this data. To compliment this and the
other available data, GNPC has now planned a geoscientific study of the entire basin to enhance
the understanding of the area. The program involves the acquisition of about 1700km of 2D
reconnaissance seismic data.
Hydrocarbon Discoveries
Mr. Chairman, I have to intimate that Ghana’s known oil and gas resources are growing. Apart
from the initial discoveries that have come to be known as the Jubilee Field. Nine (9) other
discoveries have been made to date and are being appraised whilst additional leads have been
identified and are being pursued. Major discoveries made during the period under review
include:
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Vanco and Lukoil discoveries in the Dzata well
Tullow and its partners discoveries in the Owo (Enyera) well
Kosmos discoveries in Teak – 1 and Teak – 2 wells in the West Cape Three Point Block
Hess Corporation discoveries in the Paradise – 1 well in the Cape Three Points.
Development in the Jubilee Field
In 2009 a decision was taken to develop the Jubilee field oil and gas resources in phases. Our
specific targets were to:
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Develop and produce oil and gas in commercial quantities.
Achieve at least an output of 60,000 barrels of crude oil per day by year end 2010.
Since then
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Jubilee has been successfully developed including drilling and completion of 17 wells
and subsea installations.
Financing and construction of the FPSO was completed, it’s lease arrangement
successfully concluded and the vessel successfully moored.
The target of producing First Oil from the jubilee field was met in December 2010.
Ghana achieved an industry record of 3.5 years from discovery of oil to first oil
production.
The current average daily oil production from the Jubilee field is about 77,000 barrels per
day. The plateau production of 120,000 barrels per day is expected to be achieved in
2013
Total crude oil production by the Jubilee partners from inception on 28 Nov 2010 to 31
Dec, 2011 was 25,376,983barrels.
Petroleum Agreements
Mr. Chairman, interest in Ghana’s oil and gas is growing and becoming competitive and
therefore places the country in a better position to negotiate for better fiscal terms and greater
participation. Currently there are thirteen (13) Petroleum Agreements operating in the country at
different stages of exploration and development. Transparent procedures have been developed by
the Ministry as a demonstration of Government commitment to accelerating the process of
acquisition of blocks in the sedimentary basins in order to fully and speedily increase the
county’s known oil and gas resources..
The Petroleum Commission
The passage of the Petroleum Commission (PC) Bill by Parliament on June 1, 2011 and its
assent by the President on June 14, 2011 seeks to establish a PC which will regulate, monitor and
manage petroleum activities, utilisation of petroleum resources and co-ordination of policies
relating to petroleum resources. Recognizing that Ghana’s petroleum sector upstream activities
has undergone a paradigm shift, from exploration to production, the Government of Ghana has
undertaken legal and institutional changes to meet the trends of time. The PC is part of the
activities being pursued to address the institutional changes that are necessary. The establishment
of the PC would streamline regulatory functions in the upstream sector and this would bring the
practices in the sector to industry standards
Implementation of the Petroleum Revenue Management Act
The Petroleum Revenue Management Act, 2011 (Act 815) became effective on April 15th 2011.
Revenue management has undergone a legislative improvement programme to emphasize on
transparency and concerns of all stakeholders. These are manifested in Act 815 (Revenue
Management law) and the country’s attainment of Extractive Industries Transparency Initiative
((EITI) status. The Petroleum Revenue Management Act (PRMA) provides a framework for the
collection, allocation and management of petroleum revenue in a responsible, transparent,
accountable and sustainable manner for the benefit of all citizens of Ghana. The implementation
of the revenue management is far advance. Allocation of resources and Petroleum receipt is
currently being done in accordance with the Revenue management Act (Act 815).
Midstream Initiatives
Commercialisation of domestic Gas Prospects
To maximise the exploitation of the gas from the Jubilee Field and other future gas discoveries
the Government of Ghana has moved to actualise this intention by initiating the processes of
ensuring the development and utilisation of natural gas that would be produced.
We have set targets to:
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Commence the Gas commercialisation project.
Commission the first 60km of the gas pipeline system, and
Build an environmentally and structurally safe site for locating the gas processing plant
and ancillary equipment.
A limited liability company, the Ghana National Gas Company (GNGC), incorporated under
the companies’ code has been established. The GNGC, a whole state owned entity is an agency
under the Ministry of Energy mandated among things to:
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Own, manage and develop a national network of gas pipelines and gas treatment and
storage facilities.
Acquire, by purchase or otherwise, construct, establish, manage, and maintain and
otherwise deal with all gas transmission and processing facilities, works, buildings,
conveniences and other systems necessary to gather, transport, treat or store gas.
Market and sell gas
Carry out any general commercial activities related to the safe and reliable operation of
the gas infrastructure.
Gas Master Plan
To ensure that Ghana has plan for integrated downstream gas utilisation industry that benefits the
country, the Government is developing a gas master plan, building on earlier plans developed by
the Ghana Energy Commission that will enable the development of an appropriate infrastructure
for cost effective commercialisation and utilisation of Ghana’s natural gas across the entire value
chain. It will identify drivers and strategies that will promote sustainable development of gas
industry and implement them and develop a gas-based industrial enclave. The Gas master plan
will also support the development of local businesses to build expertise and capacity to
participate in the development of petrochemical industry. This plan would be in place by early
next year.
Downstream Developments
New Refineries
The Ministry of Energy in pursuance of Government’s Deregulation Policy on the petroleum
downstream sector, has created an enabling investment environment to encourage the private
sector, through various incentive packages, for the establishment of export-oriented oil refineries
in Ghana.
Pursuant to this vision, Government has adopted the policy of non-recourse financing in
executing the export oriented refinery vision. However, investors are encouraged to establish
export oriented refineries in the Free Zone Enclaves of Ghana, where the project will enjoy Free
Zone benefits. It is also expected that the suitable site which may be acquired by the investor for
the project may be designated as Free Zone to enable the project benefit from the incentives.
Increasing Strategic Reserves of Petroleum Products
Ladies and Gentlemen, Government is committed to increasing the capacity of the Bulk Oil
Storage and Transportation Company in both storage and the transportation of bulk products
nationwide. In this regard tank expansion projects are underway in most of their depots. In
addition the company is fabricating barges for the purpose of transporting bulk products by the
Volta Lake to the northern sector of the country.
Renewable Energy
Ghana has been blessed with abundant energy resources that can be harnessed for the
development of a sustainable energy sector.
Renewable energy resources, particularly biomass, solar and wind energy abound in
Ghana. Biomass is Ghana’s dominant energy resource in terms of endowment and
consumption. Biomass resources cover about 20.8 million hectares of the 23.8 million hectare
land mass of Ghana and is the source of supply of about 60% of the total energy used in the
country. The vast arable and degraded land mass of Ghana has the potential for the cultivation of
crops and plants that can be converted into a wide range of solid and liquid biofuels.
Biomass waste from agriculture and municipal sources also presents another stream of bioenergy resources. Residues from major agricultural crops are estimated at 13,000,000 tons/year
and biomass energy is likely to continue to dominate as a prime energy source in Ghana for
cooking and heating. Its application in generating electricity could contribute to meeting some of
the power needs of the country in the medium to long term. The policy issues that need to be
resolved relate to the effective management of waste, the availability of efficient and low cost
conversion technologies, pricing and the establishment and scrupulous enforcement of
regulations.
By virtue of its geographic location, Ghana is well endowed with solar energy resources which
could be exploited for electricity generation and low heat requirements in homes and industries.
Average radiation ranges from 4.5 to 6.0 kWh/m2/day with a sunshine duration of 1,800 to 3,000
hours per annum.
Solar energy already plays a significant role in the agricultural sector and is used for drying
produce such as maize, cocoa, pepper and others.
Over 1.0 Megawatt of solar PV systems have been installed in the country to generate electricity
for various applications such as water pumping, lighting for schools and home, street lighting,
vaccine refrigeration, etc. in some rural communities.
Hydro energy another renewable form of energy has been the backbone of Ghana’s electricity
system since the early 1960s. With an installed capacity of over 1,200 MW hydroelectricity
accounts for 65% of electricity production in Ghana and is being expanded with the construction
of the 400MW Bui hydroelectric power plant which is expected to be completed in 2013. Even
though the overall potential of mini-hydro is limited, 21 potential mini hydro sites that could be
developed for power generation have been identified in the country. The generating capacities of
these sites range between 4kW and 325kW per site.
The policy direction on biomass is to support sustained regeneration of woody biomass resources
through legislation, fiscal incentives and attractive pricing and to promote the establishment of
dedicated woodlots for wood fuel production. Furthermore, Government seeks to promote the
production and use of improved and more efficient biomass utilisation
technologies. Government also intends to promote the use of alternative fuels, like liquid
petroleum gas as a substitute for fuel, wood and charcoal by addressing the institutional and
market constraints that hamper increasing access to it in Ghana.
To address the challenges that militate against the increase of renewable energy in the national
energy mix in a sustainable manner the Renewable Energy Act, 2011 (Act 832) was passed by
Parliament last year. The object of the Act is to support the development, utilisation and efficient
management of renewable energy sources. Its goal is to increase the proportion of renewable
energy, particularly solar, wind, mini hydro and waste-to-energy in the national energy supply
mix and to contribute to the mitigation of climate change.
Ghana is also participating in the UN Secretary Generals Sustainable Energy Initiative with
special attention to Energy for Cooking and Productive Uses of Energy.
Addressing the LPG Supply Constraint
We expect to produce some 300,000 tonnes of LPG from the processing of gas from the Jubilee
field alone. This is enough to meet the current local demand which is less than 200,000 tonnes.
Other efforts are being made to construct additional storage capacity and improve port facilities
that would enhance LPG imports to supplement domestic supplies when necessary.
Local Content
Mr Chairman, our ability to leverage our oil and gas resources for the development of the
Ghanaian economy and for enhanced welfare of the citizenry can be achieved by ensuring
mainstreamed involvement of citizens in activities of the sector. It is to this end that the Ministry
has developed a Local Content and Local Participation in Petroleum Activities Policy. This
policy outlines strategies on how to develop the oil and gas industry with optimal local content
and participation, enhance national development, create jobs; and also effectively manage the
potential revenue from oil and gas production and processing; as well as ensuring security for the
oil and gas installations and the industry as a whole. An Implementation strategy and the
necessary Legislative Instrument to implement this policy have been drafted and will be
presented to the public for scrutiny.
Capacity Building for SME’s
The Ministry of Energy and the Ministry of Trade and Industry have recognized that
organizations and individuals in Ghana have very high expectations of employment in the
emerging oil and gas sector since oil was discovered in commercial quantities. However, they
may not be able to fully participate since they do not have all the necessary skills and capabilities
to enable them take advantage of business opportunities that arise in the oil and gas sector. The
Capacity of SMEs have to be enhanced to enable them meet the stringent requirements including
management, financial controls, health and safety standards and quality control needed to do
business with the international oil and gas companies.
An SME Office will be established in the Western Region as the focal point for co-ordination
between the oil and gas companies and SMEs and also provide support to SMEs so that they can
position themselves to take advantage of business opportunities that are available in the oil and
gas sector. The SME Office will also undertake capacity building of SME’s and will assist
market their capabilities, liaise with international Oil and Gas Companies and Service Providers
by being a focal point for procurement opportunities; Establish a single pre-qualification process
acceptable to all IOCs and Service Providers; among others.
Energy Needs for the Future
If the expected high middle income status is to be achieved and maintained then we expect the
annual GDP growth rate to average about 7.4% over the next 18 years up to 2030. By which time
the total final commercial energy demand is expected to increase almost 7 folds with a total final
energy demand projected to increase to 17,5million tonnes of Oil Equivalent in 2030 with the
transport sector expected to account for the largest share of 43.0%. This will be followed by
manufacturing and household sectors, which will account for 21.0% and 18.0% respectively.
The total electricity generated in 2011 was 11,200 GWh; as against 10,232 GWh in 2010. The
share of power supplied to industries, increased to 49% from 47% in 2010, whilst that to nonresidential sector which is largely, the commercial sector also increased to 16% from around
14% the previous year. The share of supply to the residential sector however, dropped by 5.8
percentage points compared to the previous year. This means that there was more power for
wealth creation than for household activities, which in economic terms is more encouraging.
The significant increment in industrial sector share was largely due to VALCO which was
allowed to operate on average of one and a half potlines. VALCO’s consumption was 597 GWh
in 2011 compared to 7 GWh in 2010.
Ghana recorded a real Gross Domestic Product (GDP) growth of about 14.4% in 2011 as against
an 8% growth in 2010. Economic experts further project high but relatively modest GDP growth
for 2012 largely on account of a boost in commercial oil production.
Within the constraints of limited installed grid power capacity in the country and also lack of
significant potential import, electricity consumption in Ghana is projected at 14,576.3 GWh.
We expect to meet this demand in the short to medium term from the 132 MW Takoradi 3
expansion project which is expected to come on stream in the 3rd quarter of this year. The first
unit of the Bui power plant is expected to be operational towards the end of the first quarter of
2013. The 110MW steam generator at the Takoradi Thermal Power plant which has been out of
service for repairs is also expected to be put into service in the third quarter of this year.
In 2004, traditional biomass accounted for about 62% of the total final energy consumption. This
was followed by petroleum products 30% (i.e. motor fuels 27% and fossil fuels 3%) and then
electricity 8%. However in 2030, petroleum products are expected to account for the largest
share of 65% (i.e. motor fuels 53% and fossil fuels 12%). This is expected to be followed by
traditional biomass 23% and then electricity 18%. The higher proportion of fossil fuels is due to
increased use of motor fuels in urban transportation and the substitution of traditional biomass
with LPG for cooking.
The per capita electricity consumption in 2004 was 255 kWh, rose to about 400kWh in 2010 and
is projected to increase to 1120 kWh/cap in the year 2030. Although significant the electricity
demand will be significantly lower than the 3108 kWh and 6180 kWh, which are the weighted
average for the world and the European Union in 2004.
Energy Efficiency and Conservation
The high growth rate in the demand for power that has been observed in Ghana over the years is
the result of economic growth, grid extension and increased consumption. Whiles uncontrolled
power consumption is straining the energy infrastructure, causing environmental damage and
hindering economic growth demand for major appliances and equipment ranging from
refrigerators, air conditioners and lighting equipment -is expected to continue its steady growth.
Mr. Chairman I wish to state that, whilst government makes efforts to increase energy supply
infrastructure, it is the responsibility of consumers to use the energy available in an efficient
manner. This can be achieved through a change in attitude and the use of efficient technologies.
In the absence of focused efforts to reduce energy consumption by appliances and equipment,
within an imperfect market where inferior inefficient electrical goods could easily be dumped on
unsuspecting consumers, electricity demand in the residential and commercial sectors will
continue to grow rapidly in the country.
Although growth in demand for energy can be accommodated by some combination of supplying
more energy and improving the efficiency of energy supply, it has been established that energy
efficiency standards and labels for appliances, equipment, and lighting are the most effective
tools for ensuring energy efficiency in the residential and commercial sectors, limiting energy
consumption growth and at the same time stimulating economic growth.
Currently Energy Efficiency Standards and Labels have been developed for Room Air
Conditioners, Energy Saving Lamps and Refrigerating Appliances. The Refrigerating Appliance
Market Transformation Project which is been implemented by the Energy Commission with
financial support from the Global Environment Facility, UNDP and the Government of Ghana is
expected to reduce the energy consumption of refrigerating appliances from the current average
of 1,200kWh per appliance to 600kWh per annum.
To assist consumers acquire energy efficient refrigerating appliances a special rebate scheme will
be launched by June this year. Consumers who turn in their old refrigerating appliances will be
supported financially to pay part of the cost of a new efficient refrigerator. Furthermore
consumers who opt for higher efficiency refrigerating appliances will receive further rebates
depending on the level of efficiency of the appliance. A bank, which will be selected to manage
the rebate funds, will also be providing consumer credits to enable more Ghanaians discard their
old inefficient appliances and purchase new and efficient appliances. The Energy Commission is
putting finishing touches to the mechanisms for the smooth implementation of the rebate scheme.
I would take this opportunity to urge all Ghanaians to conserve energy by switching off lights
and appliances when they are not needed and by patronising ONLY energy efficient appliances.
Electrical Safety
Faulty electrical wiring has been blamed for fire outbreaks in buildings and facilities in the
country. The causes have been attributed to the wiring of buildings and facilities by unqualified
persons who do not use approved procedures, use sub-standard wires and switchgear. To reduce
incidents of wiring hazards, Parliament has passed the Electrical Wiring Regulations, 2011, LI
2008 which provides for the professional qualifications of persons who perform electrical wiring
in Ghana, which materials are to be used for wiring and how wiring is conducted in Ghana.
In the coming months, the Energy Commission will provide modalities for certifying electrical
wiring professionals to ensure that electrical wiring is conducted in a professional manner to
reduce the hazards associated with the use of electricity in the country.
We expect to do more to ensure that the energy resources in Ghana are harnessed for the
development of the economy and enhance the wellbeing of its citizens. We will continue to
count on the support of Ghanaians to achieve the targets we have set together and God willing,
next year by this time we will have even happier stories in the energy sector to tell together. I
thank you for your attention. May God richly bless us all.
Thank you.