HomeIndustry SectorsFinance and PolicyWorld Bank report advises Ghana to secure gas for power first

World Bank report advises Ghana to secure gas for power first

19 July 2013 – A recent World Bank report on Ghana’s energy sector recommends that the country’s government should place a clear priority on satisfying the power sector demand for gas before considering gas supply to petrochemical projects. At a minimum, the government should wait two to four years before irrevocably committing gas to petrochemicals, to allow time for resolving major near-term gas supply uncertainties.

According to Ghana Business News the Ghanaian economy has been achieving sustained growth in excess of 6% a year, but the power sector has become a drag on the economy. A major, avoidable power crisis in 2006/7 is estimated to have cost the country nearly 1% GDP growth in those years, according to the World Bank.

Just over half a decade later Ghana is once again experiencing power shortages, which could have been avoided if lessons from the past had been learned, the World Bank says. According to the World Bank report Ghana’s government must improve the Electricity Company of Ghana’s (ECG) technical and commercial performance. ECG is one of Ghana’s most important state-owned enterprises, with over 1.8 million customers, 5,600 staff and sales of about US$800 million annually.

ECG’s planned investment is for US$190 million on average a year for 2012 − 2015 to upgrade and expand its network. However, it cannot raise the necessary funds, because it is currently struggling financially. ECG realised a small loss in 2011 and a significantly higher loss of US$44 million in 2012 prior to an even higher estimated loss of US$60 million in 2013. The report indicates that, without actions to attract additional power generation, Ghana will be short of about 1,600 MW, because by 2022 the country’s need for power generation (including a 20% reserve margin) is expected to increase to about 4,400 MW, which is double its current generation capacity.

Meanwhile, current investment plans from the Volta River Authority (VRA) and independent power producers (IPPs) are projected to add only about 740 MW. On the gas sector, the report notes that, ensuring an adequate and secure supply of natural gas is fundamental to improving the availability and cost of power in Ghana but a delay in the start-up of gas supply costs Ghana US$1 million per day in additional oil purchases.