Natural gas industry restructuring for value optimisation: A Case Study of Ghana

Abstract

The global natural gas industry in emerging oil and gas producing countries faces the challenge of restructuring and regulations, making industry conduct revaluation inevitable. The main concern in restructuring the natural gas industry in these economies is how to break previously vertically integrated companies into separate business entities under an appropriate market structure along the gas value chain. There are two schools of thoughts on how to restructure the natural gas industry. The traditional school of thought favours a vertically integrated structure and the liberal school of thought advocates for competitive-based structures encompassing different regulatory reforms including ownership unbundling. The natural gas industry in Ghana, though nascent, is growing due mainly to rising demand for electricity, at about 5.8% annually. Currently GNPC owns the upstream gas, midstream infrastructures and champions final gas delivery to downstream consumers. Gas price harmonization, easing contractual agreements, maintaining the survival of GNGC, and energy security reasons are among the policy factors that seem to favour a state-owned vertically integrated structure. The aim of this paper is to examine and determine the industry structure that is optimal to sustain Ghana energy supply mix. The paper offers two natural gas industry structure models to describe the effect of unbundling infrastructure ownership of natural gas along its value chain on energy supply mix in Ghana. The paper suggests maintaining the aggregating role of GNPC is appropriate. However, the paper recommends unbundling infrastructure ownership from upstream natural gas owners. Thus, the Gas Processing Plants and Ghana National Gas Corporation (GNPC) transmission pipelines need an independent entity to operate the GNGC transmission pipeline as the National Gas Transmission Utility (NGTU) with open access allow IPPs equal access to natural gas at the market hubs