A joint KPMG–UNDP analysis of Ghana’s 2026 Budget Statement has praised government’s decision to shift from light crude oil to locally produced natural gas for power generation but cautions that the transition will only deliver its promised benefits if backed by major investments in the national grid and stronger regulatory reforms.
The report titled 2026 Budget Highlight on the Budget Statement and Economic Policy of the Government of Ghana presents one of the most detailed external assessments of the country’s gas-to-power strategy, which government says will reduce generation costs, strengthen energy security and support climate commitments.
“Government’s transition from light crude oil to locally produced natural gas for electricity generation represents a strategic shift toward cost efficiency, energy security, and environmental sustainability.”
KPMG–UNDP analysis of Ghana’s 2026 Budget
According to the firms, natural gas offers Ghana a cleaner and significantly cheaper fuel source, with the Budget estimating that gas-based generation could cut costs by nearly 75%.
The transition also aligns with global decarbonization trends and Ghana’s commitment to reduce emissions under its climate obligations.
However, the report emphasized that success is not guaranteed. “While the outlined initiatives are pivotal, some critical considerations must be addressed to ensure their success and maximization of their benefits,” the analysis noted.
Grid Reliability Could Determine Success
A central concern raised by KPMG–UNDP is the capacity of Ghana’s transmission and distribution network to handle increased gas-fired generation.
The report cautions that without investments in the grid, the benefits of cheaper gas could be lost to bottlenecks, outages and inefficiencies.
“To fully realize the benefits of this transition, government must make simultaneous investment in transmission and distribution networks.”
KPMG–UNDP analysis of Ghana’s 2026 Budget
The institutions highlighted the urgent need to “upgrade the grid, reduce technical losses and adopt smart technologies,” especially in areas with unreliable supply.
Ghana’s technical and commercial losses remain among the highest in Africa, undermining revenue mobilization and affecting the financial sustainability of utilities such as the Electricity Company of Ghana (ECG).
While natural gas is expected to lower the cost of power generation, the real effect on consumers will depend on efficiency across the entire value chain.
“The impact on end-user tariffs will depend on the efficiency of transmission, distribution and regulatory frameworks.”
KPMG–UNDP analysis of Ghana’s 2026 Budget
KPMG and UNDP caution that Ghana must build transparent and predictable tariff-setting systems that reflect actual costs while ensuring the sector remains viable.
They warn that without cost-reflective pricing, the financial position of power sector agencies could continue to deteriorate, undermining the benefits of the gas transition.
Even as natural gas is positioned as a cleaner alternative to oil, the report notes that it is still a fossil fuel. The shift therefore requires strict environmental oversight.
It stated, “Environmental assessments and mitigation measures will be necessary to address potential impacts,” adding that community engagement must be central to project planning.
Government has repeatedly faced pushback from communities affected by energy infrastructure projects, and analysts argue that social license is essential for sustained development.
Major Gas Expansions Already Underway
The 2026 Budget highlights multiple gas-related achievements in 2025 that set the stage for accelerated gas-to-power integration.
These include upgrades to the Offshore Cape Three Points (OCTP) processing facility, which expanded capacity from 240 million to 270 million cubic feet per day, and increased production from the Jubilee and TEN fields.
Two new supply agreements, one with OCTP partners for an additional 80 million cubic feet per day and another with Jubilee partners for 70 million cubic feet per day—are expected to significantly boost domestic gas availability.
To manage the upcoming surge in supply, government has established a committee to fast-track development of a second gas processing plant (GPP2).
Looking ahead, Ghana plans to develop an additional 150 million cubic feet of gas per day by 2026, enough to power a new 1,200-megawatt state-owned thermal plant scheduled to begin construction next year.
Government says this plant will be central to ensuring stable baseload supply and shielding the country from global fuel price volatility.
The Budget also revealed a renewed focus on hydropower, with feasibility studies to be conducted on the Red Volta River and other southern rivers.
KPMG–UNDP described this initiative as evidence of “a strong commitment to diversifying Ghana’s energy mix with renewable sources,” essential for achieving the country’s 10% renewable-energy target by 2030.
The KPMG–UNDP report concludes that Ghana’s gas-to-power transformation is well conceived but will require meticulous implementation.
Strong grid investments, tariff transparency, environmental safeguards and timely completion of gas infrastructure will determine whether the transition delivers the promised long-term stability.
For a power sector burdened by debt, dependence on fuel imports and recurring supply challenges, the coming years will reveal whether Ghana can fully leverage its natural gas resources to build a more reliable and sustainable energy future.
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