With the production of com­mer­cial oil set to dou­ble in the near fu­ture, op­po­si­tion­ists and think tanks are ask­ing ques­tions about the gov­ern­ment’s management of the sec­tor and just how much the lo­cal econ­omy is set to ben­e­fit from it

With Ghana’s production of com­mer­cial oil on course to dou­ble in the near fu­ture, op­po­si­tion­ists and think tanks are ask­ing ques­tions about the gov­ern­ment’s management of the oil and gas sec­tor and just how much the lo­cal econ­omy is set to ben­e­fit from it

Ghana’s oil production is set to more than dou­ble over the next four years thanks to new fields com­ing on stream. Ghana is a rel­a­tively re­cent and small player in Africa’s hy­dro­car­bon sec­tor, and new dis­cov­er­ies by Nor­we­gian start-up Aker on the Deep­wa­ter Tano Cape Three Points block could help production rise from a lit­tle less than 200,000 bar­rels per day (bpd) this year to about 420,000bpd by 2023, ac­cord­ing to fi­nance min­is­ter Ken Ofori-atta. Aker sub­mit­ted its $4.4bn devel­op­ment plans this year for its Pecan field, where it ar­gues be­tween 600,000 and 1m bar­rels of oil can be found. Ghana’s oil and gas are help­ing po­si­tion it among the con­ti­nent’s fastest-grow­ing economies, with growth fore­cast to reach 8.8% this year.

The gov­ern­ment is also hope­ful that US su­per­ma­jor Exxonmo­bil and its con­sor­tium part­ners will find com­mer­cial quan­ti­ties of oil at its Cape Three Points block. AGM Pe­tro­leum, backed by Nor­we­gian businessma­n Kjell Inge Røkke’s TRG Hold­ing, also con­cluded a deal this year for its ex­plo­ration of the South Deep­wa­ter Tano block.

Whether oil is a boon or a curse depends in part on how the gov­ern­ment rides the waves of boom and bust, how it uses the rev­enue it earns, how it sup­ports the di­ver­si­fi­ca­tion of the econ­omy (see page 78) and how it uses pol­icy to en­sure that the oil sec­tor’s growth ben­e­fits the lo­cal pri­vate sec­tor through con­tracts, part­ner­ships and train­ing.

Re­ward­ing in­vestors

En­ergy min­is­ter John Peter Amewu is op­ti­mistic about the coun­try’s tra­jec­tory, telling a con­fer­ence in May: “Ghana’s oil and gas in­dus­try has grown in size and in ac­tiv­ity from a long pe­riod of zero rig to four rigs work­ing at the same time to de­ter­mine the po­ten­tial of our basins. In terms of the fis­cal im­pact, we have also seen growth from 1,400bpd in 2009/2010 to 214,000bpd in 2019. Many of our people have also been im­pacted through em­ploy­ment op­por­tu­ni­ties and service con­tracts [...] The coun­try now largely uses gas for most of the elec­tric­ity gen­er­ated [...] hence the in­dus­try’s value ad­di­tion to the econ­omy has been well noted.” He said that the gov­ern­ment is now con­sid­er­ing re­vis­ing its reg­u­la­tions of the sec­tor, point­ing out weak­nesses such as Ghana’s oil re­cov­ery rate of about 25%, which is much lower than in es­tab­lished oil-pro­duc­ing economies. He added that one goal is to “re­ward in­vestors that be­lieve in our coun­try and are will­ing to in­vest and meet their work obli­ga­tions.”

Ghana be­gan pro­duc­ing oil in De­cem­ber 2010 thanks to the Tul­low-op­er­ated Ju­bilee field. That pe­riod co­in­cided with a vast spend­ing pro­gramme un­der the National Demo­cratic Congress (NDC) gov­ern­ment that more than dou­bled the gov­ern­ment’s debt as a share of gross do­mes­tic prod­uct (GDP) be­tween 2009 and 2017, when the New Pa­tri­otic Party gov­ern­ment of Pres­i­dent Nana Akufo-addo took power. The In­ter­na­tional Mon­e­tary Fund (IMF) pre­dicts that debt lev­els will hit their peak, at 62% of GDP this year. Mean­while, its lat­est es­ti­mates are that oil rev­enue will reach ¢6.1bn ($1.1bn) in 2019, up from ¢2.4bn in 2018. Aku­foAddo’s gov­ern­ment has been deal­ing with costly clean-ups of the bank­ing and en­ergy sec­tors.

The gov­ern­ment wrapped up its IMF bailout in April, but it has been hav­ing dif­fi­cul­ties rais­ing do­mes­tic tax rev­enue. The IMF and the Ac­cra gov­ern­ment agree that Ghana does not need to change its laws to get a fairer deal from its nat­u­ral re­sources. In an April 2019 report, the IMF ex­plained: “There is also sig­nif­i­cant scope to make potentiall­y large rev­enue gains from en­forc­ing cur­rent leg­is­la­tion, for ex­am­ple by ex­e­cut­ing cost au­dits to de­tect pos­si­ble profit shift­ing by com­pa­nies in these sec­tors.”

The op­po­si­tion and some of Ghana’s think tanks ar­gue that the gov­ern­ment is not strik­ing good deals in the oil and gas sec­tor. This year, op­po­si­tion NDC mem­bers of par­lia­ment have been crit­i­cal of the gov­ern­ment’s ne­go­ti­a­tions in the Aker and AGM deals, say­ing Ghana is not getting its fair share and is fore­go­ing the right to take on big­ger eq­uity stakes once dis­cov­er­ies are made. Ac­tivists point to a lack of trans­parency, ask­ing for ex­pla­na­tions about why AGM – a com­pany re­lated to Aker, where Kjell Inge Røkke is also a di­rec­tor – has cho­sen Aker di­rec­tor David Ado­makoh as its lo­cal eq­uity part­ner through his firm Quad En­ergy. Ado­makoh set up Quad in April of this year.

A lo­cal think tank, the Imani Centre for Pol­icy and Ed­u­ca­tion, says the gov­ern­ment stands to lose bil­lions of dol­lars in oil rev­enue with deals that are too favourable to oil com­pa­nies – claims which the gov­ern­ment de­nies, say­ing the crit­ics do not un­der­stand the in­tri­ca­cies of the deals.

Ghana’s pre­vi­ous oil deals have all been con­ducted through di­rect ne­go­ti­a­tions with com­pa­nies rather than through a com­pet­i­tive bid­ding round. The gov­ern­ment launched a li­cens­ing round for six blocks in Oc­to­ber 2018, with the re­sults of ne­go­ti­a­tions due to be an­nounced in Au­gust of this year.

Fail­ure to de­liver

Big names like France’s To­tal, Italy’s Eni, Ire­land’s Tul­low and Us-based Kos­mos are in the run­ning for blocks, with BP and Exxonmo­bil hav­ing since dropped out of the bid­ding. The Africa Centre for En­ergy Pol­icy is calling for the gov­ern­ment to im­prove its over­sight of the sec­tor, point­ing out that many com­pa­nies that have been awarded ex­plo­ration li­cences lack the tech­ni­cal ca­pac­ity and fi­nan­cial means to carry out their work pro­grammes. In late May, the en­ergy min­istry said that more than a dozen com­pa­nies could lose their li­cences over fail­ures to pay fees re­quired by the gov­ern­ment and fail­ing to de­liver on drilling and map­ping pro­grammes. This could lead to a ma­jor shake-up in the sec­tor, but may not bring about

a flood of new in­vest­ment be­cause many ex­plo­ration ar­eas are yet to be de-risked.

The gov­ern­ment’s attempts to un­lock more value from the sec­tor to sup­port the growth of the econ­omy has also shifted to the Volta­ian basin to the east of the coun­try’s coast. Pri­mar­ily an on­shore re­serve, it spans 104,000km sq, with an es­ti­mated 52% of the re­sources sit­ting in the North­ern Re­gion of the coun­try. The Ghana National Pe­tro­leum Cor­po­ra­tion (GNPC) has com­pleted its stake­holder en­gage­ments with com­mu­ni­ties likely to be af­fected by ex­plo­ration ac­tiv­i­ties, and ear­marked six oil blocks, two of which are the East Keta block and the On­shore/ Off­shore Keta Delta block. Two blocks have been re­served for the GNPC, which will likely seek part­ner­ship with some in­de­pen­dent oil com­pa­nies to sup­port ex­plo­ration and production.

On­shore ex­plo­ration

The pre­vi­ous gov­ern­ment un­der the lead­er­ship of John Dra­mani Ma­hama awarded an ex­plo­ration and production li­cence to Swiss African Oil Com­pany, a sub­sidiary of Swiss African Pe­tro­leum AG and the con­sor­tium of GNPC and PET Volta In­vest­ments, mak­ing it the first on­shore ex­plo­ration deal in the coun­try. Some an­a­lysts put the ex­pected re­serves from the Keta basin at 100m bar­rels.

The pre­vi­ous NDC gov­ern­ment passed a lo­cal con­tent law in 2013 that re­quires a min­i­mum 5% eq­uity stake in hy­dro­car­bons ex­plo­ration and production ac­tiv­i­ties. A lo­cal-con­tent pol­icy frame­work from 2010 has largely been met in terms of management po­si­tions and gen­eral staff, but tech­ni­cal po­si­tions are where the progress has been slow­est. The up­stream oil sec­tor is not a big em­ployer, with the in­dus­try di­rectly pro­vid­ing an es­ti­mated 7,000 jobs in 2015 for Ghana’s pop­u­la­tion of more than 28 mil­lion people.

Amongst the gov­ern­ment’s other tar­gets are 90% lo­cal par­tic­i­pa­tion in the oil and gas value chain by 2020, a tar­get judged by an­a­lysts from the out­set as be­ing overly am­bi­tious due to the lack of fi­nan­cial ca­pac­ity, abil­ity to meet in­ter­na­tional stan­dards and lack of tech­ni­cal train­ing of many lo­cal

Oil com­pa­nies are look­ing for lo­cal part­ners across the up­stream value chain

firms. The Pe­tro­leum Com­mis­sion has launched a re­view of Ghana’s lo­cal con­tent pro­vi­sions that is cur­rently on­go­ing.

Nonethe­less, the value of con­tracts won by lo­cal firms has been on the rise. In­ter­na­tional oil com­pa­nies are look­ing for lo­cal part­ners across the en­tire up­stream value chain from di­rect par­tic­i­pa­tion, stor­age, transporta­tion and haulage, to ser­vices and main­te­nance. The gov­ern­ment had set up the En­ter­prise Devel­op­ment Centre in 2013 to help small Ghana­ian com­pa­nies to get busi­ness in the oil and gas sec­tor, but its fund­ing ran out. The cur­rent gov­ern­ment has been talk­ing about re­launch­ing it.

New in­dus­trial zone

Lo­cal think tank Africa Centre for En­ergy Pol­icy’s data shows that lo­cal firms made $154m in deals in 2014, $249m in 2015 and $489m in 2016. Seaweld En­gi­neer­ing, founded in 2007 by its chief ex­ec­u­tive Al­fred Fafali Adagbedu, built part of the float­ing production, stor­age and of­fload­ing unit pro­duced for the Off­shore Cape Three Points devel­op­ment. Other lo­cal com­pa­nies in­volved in fab­ri­ca­tion projects in­clude Bel­met 7, a joint ven­ture be­tween the UK’S Subsea 7 and the Ghana­ian sub­sidiary of South Africa’s Bel­met. The Ghana Free Zones Au­thor­ity is now look­ing into set­ting up an in­dus­trial zone tar­get­ing the oil and gas sec­tors at the western port of Tako­radi to at­tract more lo­cal and in­ter­na­tional in­vest­ment into the sec­tor.

There is much more po­ten­tial for em­ploy­ment and eco­nomic ben­e­fits from manufactur­ing and other ser­vices tar­get­ing the in­dus­try. The Ghana­ian gov­ern­ment wants to po­si­tion the econ­omy as a hub for West African oil and gas ac­tiv­ity, seek­ing to suc­ceed where neigh­bour­ing Nigeria has largely failed as ex­plo­ration picks up in new fron­tier ter­ri­to­ries like Sierra Leone.

Ghana be­gan pump­ing its first oil at the Tul­low-op­er­ated Ju­bilee field in late 2010

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