Ghana likely to lose $1.5 billion from botched Tema LNG deal – ACEP, other CSOs warn

A group of African think tanks and Civil Society Organisations (CSOs) convened by the Africa Centre for Energy Policy (ACEP) and the IMANI Center for Policy & Education (IMANI) has warned that Ghana could lose up to $1.5 billion from the botched Tema LNG deal.

The think tanks and CSOs also known as the Alliance of policy think tanks advocating for good governance to drive green growth in Africa held deliberations on the virtual sidelines of COP 27 on 9th November 2022.

At the event, the partners launched a series of case studies intending to show how corruption, mismanagement, and onerous offtake terms, have blunted the strategic flexibility of African governments by saddling them with mounting debts and poor response choices, in a time when rising energy costs are fuelling a cost of living crisis across the continent.

During the discussions, the African Think tanks and CSOs looked at the Tema LNG Terminal (Tema LNG), a project led by Helios Investment Partners to import LNG into Ghana, supported by multiple development finance institutions.

The project was expected to start operations in 2020 but as of November 2022, it is still not online. But Ghana’s national oil company, Ghana National Petroleum Corporation (GNPC), is committed to pursuing the project, despite officials admitting there is no demand for the gas.

There are now serious doubts about the feasibility of the project even in 2023. The reason adduced is that Tema LNG poses a major risk to the already strained finances of GNPC.

Per calculations by ACEP and IMANI, it says GNPC could be paying between $790 million - $1.357 billion a year (based on average 2022 Brent crude prices) for gas the country doesn’t need.

Taking the Tema LNG and other costly investments in oil and gas in the country into consideration, the Alliance of policy think tanks advocating for good governance to drive green growth in Africa has made a proposal for a public release of all contracts, agreements, restated/amended agreements and constructive understandings entered into by GNPC, TLTC and all other actors connected in any commercial sense to the Tema LNG project.

The Alliance also wants an immediate suspension of the Tema LNG project and a standstill arrangement in respect of all obligations of the Ghanaian state concerning the project.

Among other things, the Alliance is proposing that there should be a complete renegotiation of the financial and commercial terms of the project to better reflect the current strategic situation in the global and domestic energy markets.