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Botched Tema Gas deal can cause $1.5 billion loss to Ghana

By Franklin Cudjoe - IMANI
Business Features Botched Tema Gas deal can cause 1.5 billion loss to Ghana
WED, 16 NOV 2022 LISTEN

During this year's United Nations (UNFCCC) 27th Conference of the Parties (COP 27) in Egypt, Ghana’s President, Akufo-Addo, has been teaming up with colleague African presidents to push rich countries who pollute the most to release the $100 billion in climate finance promised to poor countries to help them green their economies and adapt better to climate change.

The emphasis on an expedited release of billions of dollars to African economies both as reparations for loss and damage and as support to help Africa adapt to the inevitable effects of climate change however raises questions of accountability, transparency and the quality of governance. Africa has seen large flows of money for development purposes in the past that have been lost to corruption, poor policy design and mismanagement. How to prevent the new domain of “climate finance” from succumbing to old stereotypes?

Furthermore, African leaders are also busily using the climate talks to convince rich nations to continue investing in the continent’s fossil fuels, which they see as necessary to expand economies and boost electricity access. However, decades of investment in oil and gas have generally failed to deliver cheap and reliable electricity supply to Africa’s poorest consumers due to poor strategic choices, policy incoherence and outright corruption.

To probe these challenges, confusions and contradictions, 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) 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.

The first case study is presented in this short brief . It looks at 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 at November 2022, it is still not online. 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, or ever.

Tema LNG poses a major risk to the already strained finances of GNPC. Calculations by ACEP and IMANI suggest 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.

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