Understanding Global LNG Markets and What It Means for Ghana's Energy Future

Engineering practices have been evolving for some time, based on technological advancements, especially in the 20th century, across various industries, including manufacturing, food, health, and energy. Energy plays a vital role in our world today, leading many countries to adopt different methods of energy production.

The global liquefied natural gas (LNG) market is gaining popularity due to its green nature and has undergone significant changes recently. And it is fascinating to see how much it has transformed over the past few years. Once considered a niche market, LNG has become crucial for global energy security. Impressively, LNG trade grew from approximately 268 million tonnes in 2016 to around 413 million tonnes in 2024 (BP, 2024; International Gas Union, 2024), and although growth slowed to about 2% in 2023 before new supplies began to come online, this trend demonstrates that countries are finding ways to generate sufficient energy for power generation.

In Ghana’s case, the natural gas from the Ghana National Gas Company (GNGC) and ENI is not enough to meet the country's energy needs. This is significant because Ghana is increasing its gas usage for both power generation and industrial purposes. The first-ever LNG project in Ghana, which will operate under a Build, Own, Operate, and Transfer (BOOT) system at the Tema LNG terminal supported by Shell, represents a crucial step toward enhancing energy control in Ghana's overall energy strategy.

Current Developments in Major LNG Markets

China positions itself as a technology leader with advanced engineering capabilities and substantial energy production, which has allowed it to reclaim its status as the largest importer of LNG. For 2024, imports were expected to reach approximately 77 million tons, equivalent to about 106 billion cubic meters, reflecting an 8% increase from the previous year (China Customs, 2024). Notably, this figure is still consistent with levels seen before 2022. Although overall gas intake set records early in 2024, stronger pipeline flows and certain macroeconomic challenges slowed imports in the latter part of the year.

For Ghana, this clearly indicates that an increase in demand from Asia effectively sets a price floor and impacts the availability of cargoes for the Atlantic Basin buyers, including us.

Japan is surprisingly taking a different approach by reducing its heavy reliance on LNG. Annual imports have decreased by about 20% since 2018 due to the return of nuclear plants and improved efficiency (Japan Customs, 2024). This rebalancing in East Asia is beneficial for the Atlantic Basin, as it releases more cargoes, which helps price-sensitive buyers.

Europe's shift has been particularly significant. Since 2021, they have heavily increased their LNG usage, rising from about 22% of their gas supply in 2021 to around 38% in 2024, peaking at 41% in 2023 due to the decrease in Russian pipeline flows, with some factors centered on the ongoing war in Ukraine (European Commission, 2024). However, it's noteworthy that EU LNG imports fell by approximately 19% in 2024 due to weather patterns, demand destruction, and the increasing share of renewables. This demonstrates that European demand for spot LNG is cyclical, allowing for cargoes to be available for other regions when their demand declines.

On the supply side, following a tight period in 2022-2023, new projects are finally beginning to increase availability. Initiatives like Plaquemines LNG in the U.S. and Tortue FLNG off the coast of West Africa began boosting supply toward the end of 2024, with a more significant global increase anticipated by the middle of the decade (International Energy Agency, 2024).

For Ghana, this could mean improved liquidity and potentially softer pricing during surplus periods. Ghana's power system is still very much gas-dependent on the thermal side. The latest stats show thermal generation at about 62% of total generation in 2023, which is down from the 65% peak we hit in 2021, with hydro providing most of the rest and utility-scale renewables still pretty modest (Ministry of Energy, Ghana, 2024; Ghana Grid Company Limited, 2024).

The mid-year planning projections estimated that Ghana would need around 63.5 terabritish thermal units (TBtu) of natural gas just for power in the second half of 2024 alone, which really drives home how much we depend on gas for baseload and mid-merit needs (Energy Commission of Ghana, 2023). As of late 2024, we had about 5,260 MW of installed capacity (though only about 4,856 MW is dependable), with thermal plants mostly set up for natural gas but sometimes having to switch to liquids when we have supply constraints (Volta River Authority, 2023).

The situation at the Tema LNG terminal

The Tema LNG Terminal is quite interesting from a technical perspective. It utilizes both a Floating Storage Unit (FSU) and a Floating Regasification Unit (FRU), designed for a nominal send-out capacity of approximately 1.7 million tonnes per annum (Mtpa). Essentially, the project combines a purpose-built regasification barge with an LNG carrier-based FSU (Tema LNG Terminal Company, 2021). According to the documentation, development began around 2018, with initial operations starting in 2021.

At this scale, the Tema LNG Terminal should be able to meet a significant portion of Ghana's thermal gas needs and serve as a backup supply during domestic shortfalls or issues with the West African Gas Pipeline (WAGP), depending on the commercial arrangements (Ghana National Gas Company, 2024). Commissioning the LNG project automatically sets Ghana ahead by providing an avenue for the supply of gas to other African countries that do not have sufficient gas for power generation, and it is worth mentioning that GNGC is currently building a pipeline to some of these countries for the supply of gas.

What Ghana Can Learn from Other Markets

1.      Balancing Price Risk with Security 

It is crucial to understand that when demand in Asia accelerates (especially in China, Japan, and Korea), spot LNG can become tight, leading to sharp price increases. Conversely, when demand softens, as observed in the EU in 2024, buyers in the Atlantic Basin benefit. Therefore, Ghana’s LNG procurement strategy should blend long-term contracts for security with spot market flexibility for cost optimization (International Energy Agency, 2024).

2.      System Balancing Lessons

The EU has demonstrated that robust renewable energy sources combined with efficiency measures can significantly reduce gas consumption and LNG intake, helping to stabilize costs (European Commission, 2024). While gas-for-power remains essential for Ghana, complementing it with grid-friendly renewables and demand-side management can decrease our overall LNG dependence while ensuring a stable power supply.

3.      Getting the Infrastructure Size Right

With a regasification capacity of 1.7 Mtpa, the design of the Tema LNG Terminal appears to align well with Ghana's current power sector and industrial needs. This alignment helps us avoid the stranded-asset risks that have plagued some overbuilt terminals worldwide. Key priorities include ensuring reliable marine access, proper metering and regulation at Pressure Reduction and Metering Stations (PRMS), and maintaining the integrity of downstream pipelines to effectively convert LNG availability into delivered MMBtu at our plants (Ghana National Petroleum Corporation, 2023).

4.      Regional Opportunities 

As gas supply in West Africa increases, such as with the Tortue FLNG project, regional gas trade options should improve. Ghana's strategic position with its ports and grid could facilitate swap structures or balancing trades with neighboring countries, using the Tema LNG Terminal as a backup during any domestic supply challenges (West African Gas Pipeline Company, 2024).

What this means in technical terms

For fuel logistics and contracting, we should combine medium-term Supply Purchase Agreements (SPAs) with indexed pricing and spot cargo windows to hedge against volatility. It is crucial to align take-or-pay volumes, or even take-and-pay, with seasonal hydrology and maintenance schedules at thermal plants to minimize liquid backup burning. Data indicates that thermal energy was projected to be around 62% in 2023, with gas requirements estimated at approximately 63.5 TBtu for 2H-2024 (Ministry of Energy, Ghana, 2024).

Regarding system efficiency, the experience in the EU demonstrates that demand can decrease rapidly when renewables and efficiency measures are scaled up. Ghana should focus on fast-start gas units, reducing losses, and improving industrial gas-to-heat/process efficiency to maximize the utilization of each LNG molecule.

When it comes to safety and operations, Floating Regasification Units (FRUs) and Floating Storage Units (FSUs) must adhere to strict cryogenic safety protocols, boil-off management, and custody transfer metrology to maintain margins amidst current LNG price spreads (Tema LNG Terminal Company, 2021).

Conclusion

Global LNG markets are positioning for the supply-expansion phase after a tight cycle, while demand in key markets like China, Japan, and the EU continues to rebalance (International Gas Union, 2024). For Ghana, the message is pretty straightforward, which is to keep gas at the core of thermal generation, use Tema LNG as insurance against domestic and pipeline variability, and gradually reduce costs and risks by pairing gas with targeted renewables and efficiency measures.

With the national data confirming how central gas is to our power sector, having a fit-for-purpose regasification design at Tema, Ghana, is actually well positioned to capture LNG's flexibility without getting overexposed as long as we keep contracting, operations, and system planning tightly coordinated (Ghana Grid Company Limited, 2024; Energy Commission of Ghana, 2023).

References

1.  BP. (2024). Statistical Review of World Energy 2024. BP plc. Available at: https://www.bp.com/en/global/corporate/energy-economics/statistical-review-of-world-energy.html

2.   China Customs. (2024). Monthly LNG Import Statistics. General Administration of Customs of the People's Republic of China.

3.    Energy Commission of Ghana. (2023). 2023 Energy (Supply and Demand) Outlook for Ghana. Ministry of Energy, Accra.

4. European Commission. (2024). EU Energy Statistics: Natural Gas Supply, Transformation, and Consumption. Eurostat Energy Database.

5.  Ghana Grid Company Limited (GRIDCo). (2024). System Operating Report 2023. Tema, Ghana.

6.   Ghana National Gas Company (GNGC). (2024). Annual Gas Infrastructure Report. Accra, Ghana.

7. Ghana National Petroleum Corporation (GNPC). (2023). Petroleum Sector Performance Report. Accra, Ghana.

8.  International Energy Agency (IEA). (2024). Gas Market Report Q4-2024. OECD/IEA, Paris.

9.   International Gas Union (IGU). (2024). World LNG Report 2024. IGU Publications.

10. Japan Customs. (2024). Trade Statistics: LNG Import Data. Ministry of Finance, Japan.

11.  Ministry of Energy, Ghana. (2024). Ghana Power Generation Statistics 2023-2024. Accra, Ghana.

12. Tema LNG Terminal Company (TLTC). (2021). Project Implementation and Operations Manual. Tema, Ghana.

13.  Volta River Authority (VRA). (2023). Annual Report and Financial Statements 2023. Akosombo, Ghana.

14.  West African Gas Pipeline Company (WAPCo). (2024). Annual Pipeline Operations Report. Lagos, Nigeria.