There are indications government will renegotiate the headline price of an estimated US$9.8/MMBtu for gas from the Sankofa Field – but it does not look like this will be done before production officially commences on June 26.
Italy’s ENI and its partner Vitol are rumoured to have made some procurement and construction cost savings of around US$400million on the estimated US$7billion project, coupled with the fact that gas prices have gone down along with oil prices in the last couple of years.
“I wouldn’t be able to quote exactly what the contractual arrangement is with ENI, but I believe ENI will pass on savings in the form of a reduction in pricing of the commodity to consumers,” Ben Asante-CEO of Ghana Gas, told reporters on the side-lines of the Ghana International Petroleum Conference, in Accra.
“I wouldn’t be able to tell you exactly how much, but I am encouraged that we will have a reduction in the commodity’s price,” he said.
With global natural gas prices hovering below US$3.00 currently, critics have argued that however variable the dynamics are in Ghana, the negotiated Sankofa gas price is simply too much.
Indeed, while in opposition the ruling NPP criticised the gas price – calling on the Mahama administration to renegotiate.
“I see GNPC and the Energy Ministry sitting with ENI to see how much has reduced in terms of their construction or project cost, and how much can be passed on to the Ghanaian consumer,” Ben Asante said.
Asked whether the review will happen before production commences on June 26, Ben Asante said: “I’m not sure whether it is going to be before or after. But either way, once the savings have been made it could have retroactive effect. So, it doesn’t really matter”.
Sankofa is the country’s first non-associated gas project, with a daily contract quantity of around 170million standard cubic feet.
This could provide over 50 percent more of what the country currently gets from the Jubilee and TEN Fields, Ben Asante said.
Already, light crude oil imports for power generation are said to have dipped by 12 percent in 2017 due to the increasing reliance on local gas, which is cheaper.
“I am happy that we are having to rely a lot less on light crude oil for power generation, because it is offensive to the atmosphere and it is more expensive,” Ben Asante added.
But even beyond power generation, he said, government intends to use gas as ‘feedstock’ to spark an ‘industrial revolution’ in terms of fertiliser and bauxite production.
The Sankofa gas project is expected to help reduce Ghana’s oil imports by 12 million barrels per annum, and rake in US$2.3billion of revenues.
Close to 90 percent of the economic benefits are expected to be captured directly or indirectly by Ghana through additional revenues or through fuel cost savings, according to the World Bank.
The Sankofa project encompasses development of the Sankofa and Gye Name gas fields located 60km offshore in water depths ranging from 520m to 1,014m in the Tano Basin.
The fields are estimated to hold 1.45trillion cubic feet of gas.
The project is being developed by a joint venture of ENI (44.44%), Vitol (35.56%), and the GNPC (20%).