Annex III: Methodology for the Country Scenarios
The country-level models for Tanzania and Ghana in Chapter 3 were used to construct scenarios of future oil and gas production under different climate constraints, to provide insights on export potential, revenues and the use of fossil fuels in the domestic market.
Production and demand scenarios are projected for each year to 2045, starting from a base year of 2015. The models are split into two main parts 1) Production scenarios for oil (Ghana) and gas (Tanzania and Ghana), and 2) Demand scenarios for energy across all sectors, including fossil fuel consumption under different growth assumptions.
For both oil and gas, the scenarios of domestic production and demand are not linked. They are intended to allow for the comparison of very different supply and demand outlooks, and thus the identification of misalignments and risks. The implicit assumption is that if domestic production does not meet demand, imports make up the balance. Two further analyses were then developed to take into account revenues and emissions implications.
The approach to each is set out below:
1. Production scenarios
The production side of the model uses existing outlooks, from which scenario variants are then developed. While the same production ‘cases’ (high, base, low) were developed for each country, the detail is naturally different for each, and reflects the country’s resource base and stage of production.
Tanzania
The three production scenarios for Tanzania focus primarily on the prospects for the development of Tanzania’s offshore gas reserves. The scale of LNG operation in these scenarios is similar to that assumed in other reports from the IMF and NRGI.167 In addition, all three scenarios assume the same level of onshore annual production of 157 million MMBtu, up to 2040, before declining. Each production case reflects the speed and scale of production, namely:
- High – Assumes four train LNG operation, each train at 5 MTPA, with production starting in 2023, in addition to existing onshore gas production.
- Base – Assumes two train LNG operation, each train at 5 MTPA, with production starting in 2023, in addition to existing onshore gas production.
- Low – A ‘no final investment decision’ case, where offshore production does not proceed due to a lack of investment, and only existing onshore gas production continues.
As the exact allocation of Tanzania’s new offshore production to export and domestic markets remains unclear, two further variables were developed for the ‘base’ and ‘high’ production cases;
- ‘Export led’ – Gives priority to exports, with an additional 20 per cent produced on top of the export volume for the domestic market.
- ‘Domestic led’ – Produces additional volumes to the export level to meet domestic demand.
The assumptions, units and data sources used to construct the production scenarios are listed below:
|
Parameter |
Unit |
Value |
Source |
|---|---|---|---|
|
Onshore gas reserves (recoverable) |
Tcf |
4.6 |
TPDC (2015) |
|
Offshore gas reserves (recoverable) |
Tcf |
28.3 |
IMF (2016) |
|
LNG train capacity |
MTPA |
5 |
Songhurst (2014) |
|
LNG capex |
$/TPA |
1,300 |
Songhurst (2014) |
|
Upstream capex |
$/BCF |
27.8 |
Estimate based on IMF (2016) |
|
Upstream opex |
$/BCF |
1.4 |
5% of capex |
|
Export transport cost |
$/MMBtu |
3 |
IMF (2016) |
|
Domestic onshore gas price |
$/MMBtu |
5.3–5.8 |
EWURA (2017) |
|
Domestic offshore gas price |
$/MMBtu |
4 |
Author estimate |
|
Domestic distribution costs |
$/MMBtu |
2 |
Author estimate |
Sources: TPDC (2015), ‘Oil and Gas Exploration – General Overview’, Tanzania Petroleum Development Corporation, http://www.tpdc-tz.com/wp-content/uploads/2015/04/OIL-and-GAS-EXPLORATION.pdf (accessed 5 Dec. 2017); IMF (2016), IMF Country Report No.16/254 United Republic of Tanzania Selected Issues; Songhurst, B. (2014), LNG Plant Cost Escalation, Oxford: The Oxford Institute for Energy Studies, https://www.oxfordenergy.org/wpcms/wp-content/uploads/2014/02/NG-83.pdf (accessed 14 Dec. 2017); EWURA (2017), ‘Subsidiary Legislation Supplement no. 17 to The Petroleum Act: The Petroleum (Natural Gas Indicative Prices) (Special Strategic Investments) Order, 2017’, http://www.ewura.go.tz/wp-content/uploads/2015/03/Petroleum-Natural-Gas-Indicative-price-ORDER-2017.pdf (accessed 5 Dec. 2017).
Ghana
Only two of the three production pathways undertaken for Tanzania were developed for Ghana, given its more advanced stage of production, with existing oil and associated gas production, new natural gas production expected online in 2018, and further reserves under consideration. The production cases for Ghana focus primarily on the prospects for exports of crude oil, and the production of natural gas (both associated with the crude oil production, and non-associated) for the domestic market. The scenarios draw on previous projections from the Ghanaian government,168 the World Bank,169 and market analysts.170
Three main fields – Jubilee, TEN and Sankofa – are modelled. All produce crude oil, with Jubilee and TEN primarily producing associated gas, and Sankofa producing non-associated gas. The development of additional acreage – the Pecan and MTAB fields – is also considered in the ‘high’ case. The details of each production pathway are:
- High – As per the ‘base’ case below, this scenario includes additional development of the greater Jubilee area e.g. the MTAB projects and the Pecan field by the early-mid 2020s, which increases oil production (and associated gas) levels. Gas production levels for Sankofa are also estimated to be maintained for longer due to a more optimistic view concerning reserves.
- Base – Oil production is broadly aligned with World Bank projections, based on a profile that looks to maximize production in the next five years (towards 80 billion barrels). There is a similar expectation for gas, with Sankofa production in play by 2018, and is set to rise fast. As for all gas trajectories, blow down maintains production levels towards the end of the trajectory.
- Low – N/A for Ghana
It is assumed that all oil production is exported, and all gas production is used domestically. The assumptions, units and data sources used to construct the production scenarios are listed below:
|
Parameter |
Units |
Value |
Source |
|---|---|---|---|
|
Oil |
|||
|
Field reserve levels |
Mn bbl |
1,490 |
Ghana Ministry of Petroleum, 2016 (2016); Ghana Ministry of Finance (2015); Eni (2013) |
|
Field-level breakeven prices |
$/bbl |
20–45 |
Ecobank (2016) |
|
Government revenue share (approx.) |
% |
60 |
World Bank (2013) |
|
Gas |
|||
|
Reserve levels |
TCF |
2.2 |
Ghana Ministry of Petroleum, 2016 |
|
Gas-to-oil ratio (GOR), for associated gas* |
cf/bbl |
1,000 |
Ghana Ministry of Petroleum, 2016 |
|
Re-injection rate (gas recouped at end of production – ‘blow down’)* |
% |
20 |
Ghana Ministry of Petroleum, 2016 |
|
Production capacity (Sankofa) |
MMcfd |
160 |
World Bank, 2013 |
|
Cost (Sankofa) |
$/MMBtu |
8–10 |
Ghana Ministry of Petroleum, 2016; World Bank, 2013 |
|
Cost (assoc. gas) |
$/MMBtu |
2–3 |
Ghana Ministry of Petroleum, 2016; World Bank, 2013 |
* Estimates for Jubilee, also used for other associated gas production in the absence of field specific information
Sources: Ghana Ministry of Petroleum (2016), ‘Gas Master Plan, June 2016’; Ghana Ministry of Petroleum (2016), ‘Ghana Celebrates First Oil from the TEN Field’; Ghana Ministry of Finance (2015), ‘2015 Reconciliation Report on the Petroleum Holding Fund’, http://www.mofep.gov.gh/sites/default/files/reports/petroleum/2015%20Reconciliation%20Report%20on%20the%20Petroleum%20Holding%20Fund.pdf (accessed 10 Dec. 2017); Eni (2013), ‘Eni successfully drilled first oil delineation well of the Sankofa East oil discovery in offshore Ghana’, https://www.eni.com/docs/en_IT/enicom/media/press-release/2013/01/PR_Sankofa_ENG.pdf (accessed 6 Dec. 2017); Ecobank (2016), ‘Ghana Oil & Gas Upstream Outlook. September 2016’; World Bank (2013), ‘Energizing Economic Growth in Ghana: Making the Power and Petroleum Sectors Rise to the Challenge’.
2. Demand scenarios
The demand projections were based on 2015 energy demand figures and used two sets of drivers of demand. The first includes economic growth, population change, and the energy balance and intensity of different economic sectors.171 The models used national projection estimates (detailed below), which can be adjusted to explore higher or lower assumptions. The second set of drivers mainly consist of the rate of energy efficiency improvement across different sectors (with annual improvements in energy intensity in end-use sectors ranging from 0.25 per cent under BAU to 0.5 per cent in the ‘green’ trajectory). These scenarios consider energy demand across all sectors and fuels, not only fossil fuels. Two demand trajectories were developed for each country – a ‘business as usual’ case, and a ‘green’ case.
Tanzania
For Tanzania the default expectation for economic growth is 7 per cent GDP in the near term and 5 per cent in the long-term.172 The country’s population is expected to grow at an average 2 per cent annually over the model period based on Tanzanian government projections.173 The impact of GDP growth on the energy consumption of commercial sectors is based on the assumed energy intensity per production factor, calibrated based on the 2014 energy balance.174 Two energy demand cases are developed, as follows:
- Business-as-usual – Gas shares across different sectors, not absolute levels, are based on national gas plan assumptions contained within national plans.175
- Green – This scenario assumes a greener system, with a strong focus on non-biomass RE and lower levels of fossil fuel use.
The shares of energy consumption across all sectors, including power generation, provide an insight into how different energy sources aggregate across the sector.
|
Share of total energy consumption by type |
2015 (%) |
2045 (%) |
|
|---|---|---|---|
|
BAU |
Green |
||
|
Gas |
4 |
35 |
18 |
|
Coal |
0 |
13 |
0 |
|
Hydro |
1 |
3 |
9 |
|
Renewable (excl. hydro and bioenergy) |
0 |
3 |
45 |
|
Oil |
10 |
8 |
4 |
|
Bioenergy |
84 |
39 |
23 |
The contribution to electricity generation by type across the scenarios is provided below.
|
Shares of electricity generation by source |
2015 (%) |
2045 (%) |
|
|---|---|---|---|
|
BAU |
Green |
||
|
Gas |
44.7 |
38.0 |
10.0 |
|
Coal |
0.0 |
30.0 |
0.0 |
|
Hydro |
41.8 |
25.0 |
35.0 |
|
Renewables – Solar Off Grid |
0.8 |
5.0 |
25.0 |
|
Renewables – Solar On Grid |
0.0 |
1.5 |
15.0 |
|
Renewables – Wind |
0.0 |
0.5 |
15.0 |
|
Oil |
12.7 |
0.0 |
0.0 |
Ghana
For Ghana, the GDP rates were based on a near term rate of 7 per cent, declining to 5 per cent by 2045. Ghana’s annual average GDP growth rate from 2000 to 2011 was 6.4 per cent. A central 2 per cent estimate was used for population growth, as per World Bank data, and is assumed to stay constant.176 Two energy demand scenarios were developed, as follows:
- Business-as-usual – Reflects a continued use of fossil fuels, in particular gas use based on national outlook.177
- Green – This scenario assumes a greener system, with a strong focus on non-biomass RE and lower levels of fossil fuel use.
The energy consumption shares across all sectors including power generation provide an insight into how the different shares assumed across sectors aggregate.
|
Share of total energy consumption by type |
2015 (%) |
2045 (%) |
|
|---|---|---|---|
|
BAU |
Green |
||
|
Gas |
16 |
30 |
13 |
|
Coal |
0 |
0 |
0 |
|
Hydro |
8 |
5 |
17 |
|
Renewable (excl. hydro and bioenergy) |
0 |
4 |
43 |
|
Oil |
42 |
49 |
21 |
|
Bioenergy |
34 |
12 |
5 |
The contribution to electricity generation by type across the scenarios is provided below.
|
Shares of electricity generation by plant type |
2015 (%) |
2045 (%) |
|
|---|---|---|---|
|
BAU |
Green |
||
|
Gas |
38.1 |
60.0 |
10.0 |
|
Coal |
0.0 |
0.0 |
0.0 |
|
Hydro |
49.8 |
25.0 |
50.0 |
|
Renewables – Solar Off Grid |
0.1 |
5.0 |
15.0 |
|
Renewables – Solar On Grid |
0.0 |
1.5 |
15.0 |
|
Renewables – Wind |
0.0 |
0.5 |
10.0 |
|
Oil |
12.0 |
8.0 |
0.0 |
3. Revenues
Commodity price information is estimated using projections from the IEA and IRENA,178 complimented with modelling from TIAM-UCL. For both countries, as outlined in the main report, export revenue calculations are based on the following formula:
([Export level] × [Market price] - [Total production & transport costs]) × [Government share]
The price inputs are based on figures for market demand and prices in the TIAM-UCL model, which were cross-checked against IEA projections. Prices are not discounted. Gross revenues are charted under three climate scenarios presented in Chapter 2 of this paper:
- An NDC scenario – equivalent to the current NDC commitments (resulting in roughly a 3.5°C temperature rise);
- A 2D scenario – equivalent to a 2°C carbon budget; and
- A No CCS scenario – where CCS fails to play their expected role within a 2°C scenario and the available carbon budget is effectively halved.
Table 5: Price assumptions under different climate scenarios
|
2015 |
2020 |
2025 |
2030 |
2035 |
2040 |
2045 |
2050 |
|||
|---|---|---|---|---|---|---|---|---|---|---|
|
Oil |
NDC |
$/brl |
51 |
79 |
95 |
111 |
118 |
124 |
131 |
137 |
|
2D |
$/brl |
51 |
73 |
70 |
66 |
65 |
64 |
63 |
61 |
|
|
2D No CCS |
$/brl |
51 |
73 |
58 |
54 |
53 |
52 |
50 |
49 |
|
|
Gas |
NDC |
USD/Mbtu |
10.5 |
9.6 |
10.75 |
11.9 |
12.15 |
12.4 |
12.6 |
12.8 |
|
2D |
USD/Mbtu |
10.5 |
8.9 |
10.4 |
11.0 |
11.1 |
10.7 |
10.9 |
10.7 |
|
|
2D No CCS |
USD/Mbtu |
10.5 |
8.9 |
9.0 |
9.0 |
8.2 |
7.4 |
6.8 |
6.2 |
Source: TIAM-UCL, IEA (2018).
Tanzania
For Tanzania, government share estimates are based on an analysis of the current revenue sharing agreement,179 following a similar approach to the IMF.180 Actual revenue would depend on a range of factors, including profit sharing with the IOC, tax regime, production level and the international market price.181 A further set of estimates include the revenue take from the domestic market price, and added to the above export revenue calculation. However, at present, the costs of bringing offshore gas to the domestic market are unclear and a point of political discussion in-country.
Gas revenues are presented in four ways (the first is primarily used in this paper); 1) revenues raised from export sales; 2) revenues raised from export sales, net of production costs; 3) total revenues raised from export and domestic sales; and 4) total revenues raised from export and domestic sales, net of production costs.
Ghana
For Ghana, export oil revenues are set out in three ways (the first is primarily used in this paper); 1) total revenue raised from crude exports; 2) revenues raised from export net of (breakeven) costs; and 3) revenues raised from export net of (breakeven) costs and import bill (for oil products).
Gas revenues are presented in two ways; 1) revenues raised from domestic sales, and 2) revenues raised from domestic sales, net of production costs.
167 Both considered illustrative projects with two to four LNG trains; the IMF uses scenarios of two and four LNG trains, NRGI uses three LNG trains; NRGI (2017), ‘Uncertain Potential: Managing Tanzania’s Gas Revenues’, https://resourcegovernance.org/analysis-tools/publications/uncertain-potential-managing-tanzania-gas-revenues (accessed 31 May 2018); IMF (2016), IMF Country Report No.16/254 United Republic of Tanzania Selected Issues. Washington DC: IMF, https://www.imf.org/external/pubs/ft/scr/2016/cr16254.pdf (accessed 31 May 2018).
168 Ghana Ministry of Petroleum (2016), ‘Gas Master Plan, June 2016’, http://www.petromin.gov.gh/sites/default/files/06-14%20GMP%20Updated.pdf (accessed 31 May 2018), Ghana Ministry of Petroleum (2016), ‘Ghana Celebrates First Oil from the TEN Field’, http://www.petromin.gov.gh/ghana-celebrates-first-oil-ten-field (accessed 31 May 2018).
169 World Bank (2013), ‘Energizing Economic Growth in Ghana: Making the Power and Petroleum Sectors Rise to the Challenge’, http://documents.worldbank.org/curated/en/485911468029951116/Energizing-economic-growth-in-Ghana-making-the-power-and-petroleum-sectors-rise-to-the-challenge (accessed 31 May 2018).
170 Ecobank (2016), ‘Ghana Oil & Gas Upstream Outlook. September 2016’, http://www.ecobank.com/upload/publication/20160921012446995A5RG4TAQ11/20160921012423860A.pdf (accessed 31 May 2018).
171 IEA (2016), World Energy Balances: World Extended Energy Balances, 1960–2015, International Energy Agency, (Data downloaded from UK Data Service), https://www.oecd-ilibrary.org/energy/data/iea-world-energy-statistics-and-balances/extended-world-energy-balances-edition-2016_5138d8dd-en (accessed 31 May 2018).
172 Government of Tanzania (2016), Power System Master Plan 2016 update, Ministry of Energy and Minerals, http://www.ewura.go.tz/wp-content/uploads/2017/01/Power-System-Master-Plan-Dec.-2016.pdf (accessed 31 May 2018).
173 Population and Housing Census (2014) shows an annual average growth of 2.7 per cent between 2002 and 2012, ‘Tanzania National Bureau of Statistics (2014) Basic Demographic and Socio-Economic Profile’, http://www.nbs.go.tz/nbstz/index.php/english/statistics-by-subject/popu… (accessed 31 May 2018).
174 IEA (2014), ‘Energy Balances of Non-OECD Countries: Summary Energy Balances, 1971–2013’, UK Data Service, DOI: http://dx.doi.org/10.5257/iea/ebnon/2014 (accessed 31 May 2018).
175 Government of Tanzania (2016), Natural Gas Utilization Master Plan, https://www.jamiiforums.com/attachments/oil-and-gas-masterplan-pdf.495398/.
176 World Bank data shows that the population growth rate for Ghana sits at just over 2 per cent. World Bank Group (2016), ‘Population growth (annual %)’, https://data.worldbank.org/indicator/SP.POP.GROW (accessed 31 May 2018).
177 Ghana Ministry of Petroleum (2016), Gas Master Plan, June 2016, http://www.petromin.gov.gh/sites/default/files/06-14%20GMP%20Updated.pdf.
178 IEA and IRENA (2017), Perspectives for the energy transition: Investment needs for a low-carbon energy system, March 2017, http://www.irena.org/publications/2017/Mar/Perspectives-for-the-energy-transition-Investment-needs-for-a-low-carbon-energy-system (accessed 31 May 2018).
179 TPDC (2013), Model Production Sharing Agreement Between The Government of the United Republic of Tanzania and Tanzania Petroleum Development Corporation and ABC Ltd for Any Area 2013, Dar es Salaam: Tanzanian Petroleum Development Corporation, http://www.eisourcebook.org/cms/Nov%202013/Tanzania%20Production%20Shar… (accessed 31 May 2018).
180 IMF (2016), IMF Country Report No.16/254 United Republic of Tanzania Selected Issues. (accessed 31 May 2018).
181 Kyle, I. (2017), ‘Assessing the Value of Natural Gas Reserves for the Equitable Sharing of Fossil Fuel Extractive Rights in a Climate Constrained World’, MSc thesis under UCL EPEE programme.