Shell has signed a deferral amendment of the LNG delivery commercial agreement with GNPC and Tema LNG Terminal Company which effectively frees it from its earlier commitment to be paying for re-gasified liquefied natural gas now.
The latest development which will see the deferral of delivery of LNG Cargoes affords Ghana sufficient time to build the required infrastructure that unlocks the high local demand for LNG, whilst developing the wider regional downstream market in West Africa.
Tema LNG is currently the only multi-commercial LNG terminal in Sub-Saharan Africa, with the potential to serve particular industries in West Africa. However, GNPC negotiated the original agreement in a way that the US$450 million facility will eventually pass on to the GNPC at the end of the GSA.
The parties to this ground-breaking agreement are the Ghana National Petroleum Corporation (GNPC) as the “Buyer”; Shell Energy Ghana Ltd (Shell) as the “Seller”; and Tema LNG Terminal Company (TLTC) as the “Operator”.
The amendment to the agreements is said to have been necessitated by a proposal by Shell to defer the shipment of LNG. Experts believed the proposal is to manage the global supply and demand dynamics of LNG precipitated by the Russian–Ukraine war.
No Fiscal Burden Placed on the Government
By working collaboratively with Shell, GNPC has executed an amendment that ensures that there is no fiscal burden placed on the Government of Ghana by the Project in the near term while maintaining the option to receive liquefied natural gas (LNG) in the medium to long term, to bring significant advantage to the country and the region’s growing energy needs.
In a recent brief on the Tema LNG Terminal case study, a team of CSOs including IMANI, ACEP, and Tax Justice Network Africa, among others, alleged that despite multiple postponements and much PR, the Tema LNG terminal has failed to supply gas for use in Ghana.
The brief said the consortium continues to insist however that the terminal is “operational” and that the take-or-pay arrangement remains valid. The CSOs said that unless the project is terminated, liabilities of up to US$1.5 billion, could still manifest to the detriment of Ghana. However, this has been denied by GNPC.
According to the CSOs, the Tema LNG project poses a major risk to the already strained finances of the GNPC. Some calculations by ACEP and IMANI suggested that the GNPC could be paying between US$790 million and US$1.357 billion a year (based on average 2022 Brent crude prices) for gas the country doesn’t need. These fears are, however, not reflected in the structure of the amended contract.
GNPC indicated that even though it is free of any such obligation, for now, GNPC stands to benefit from a portion of the fees in the regional business from Tema LNG. It, therefore, expressed its willingness to continue working with the operator, in the intervening period, to deliver solutions for the supply of LNG to customers in the region, and to generate additional revenues for the corporation.
Meanwhile, it continues to see the introduction of LNG into the gas supply mix as an important step to shoring up energy security and meeting Ghana’s growing demand for energy and to lead West Africa in the drive towards a transition to cleaner fuels.