Ghana in talks to head off Nigeria threat to cut gas supply

* President has vowed to end blackouts by New Year

* Loss of Nigeria supply could raise gas costs

* Threat shows strain of reforming Ghana energy sector
Ghana held emergency talks in Nigeria on Thursday to avert a threat to cut gas supply drastically, which could worsen the country's electricity blackouts and present an extra headache for the government.
The Nigerian National Petroleum Corporation (NNPC) said it will cut gas supply by 70 percent to Ghana's main power generation company by Friday due to unpaid debts of $181 million. Ghana already suffers power shortages and Nigerian gas meets about 25 percent of its needs.
"A high-powered government delegation led by the Minister for Power Kwabena Donkor is currently in Nigeria having discussions on this very important matter," Petroleum Minister Emmanuel Buah told a news conference. There was no immediate comment from NNPC.
Power cuts have raised the cost of doing business and angered voters at a sensitive time for President John Mahama's government ahead of what is expected to be a tough re-election battle next year.
Mahama has vowed to end the power cuts by the start of next year and Donkor has said he would resign if the problem has not been fixed by then.
The government's room for manoeuvre is limited, however, under the terms of an aid programme with the International Monetary Fund it is following to restore balance to its economy.
Ghana was for years one of Africa's economic stars but falling global commodity prices have blunted the value of its gold, cocoa and oil exports.
Its fiscal problems include inflation of up to 17.4 percent in September, a currency that has fallen sharply in the last two years and a debt-to-GDP ratio of around 70 percent with what economists say are high debt service costs.

The Nigerian threat is a sign of budgetary stress and the strain of energy sector reform in Ghana, experts said.

"It is extremely embarrassing for the government. It touches on credibility ... Every investor will be looking at that and saying, 'Is this a country to do business in?'" Ben Boakye of the Africa Centre for Energy Policy think tank told Reuters.

In the long term, Ghana aims to increase domestic gas production with new gas fields to meet rising demand and reduce its dependence on imports.

"In the next decade, 80 percent of our source of power will come from thermal generation with gas as the critical feed stock," Buah said, adding that government will also modify a pipeline so offshore gas can feed power stations east of Accra.

Nigerian gas flows to Ghana through the West African Gas Pipeline Company's pipe that runs via Benin and Togo. VRA buys the gas to fire power plants mainly in the east of the country.

Hydro supplies around 50 percent of Ghana's power with the rest from its own gas and other sources.

The power crisis stems from a fall in supply from Ghana's dams, government underpayment to the Electricity Company of Ghana, residents' illegal consumption and tariffs too low for VRA to recoup its costs. (Additional reporting by Ulf Laessing in Lagos; Editing by William Hardy)