Ghana is blessed with many natural resources and in 2007 the country hit a milestone with the discovery of oil in commercial quantities west of Cape Three Point in the Western Region by Kosmos Energy Ghana HC (Kosmos) and Tullow Ghana Limited (Tullow). But it was not until mid-December 2010 that oil production began at the offshore Jubilee field. Additionally, more oil fields are being developed, with estimated oil reserves up to 700 million barrels. It is expected this will boost economic growth as the county is currently facing huge challenges in fiscal and monetary policies, high budget and current account deficits, and a depreciating local currency-cedi. Expectations of citizens need to be addressed as to how managers of the economy will put in place the appropriate economic policies to improve the living standards of the citizens currently with Gross Domestic Product (GDP) per capita of $3,500 (2013est).
The Jubilee Oil field started daily production of 80,000 barrels per day (bpd) and has currently reached 110,000 barrels per day. It is expected to produce 120,000bpd in the coming years. The Offshore Cape Three Points (OCTP) agreement was signed earlier this year. The $7billion project, being undertaken by Italian Oil and Gas Multinational ENI Spa in collaboration with Vitol Energy another global energy and commodity trading company, would see the development of the Sankofa and Gye Nyame fields to provide adequate gas to operate the thermal power plants for 20 years. This will go a long way to mitigate in some way the perennial power cuts to industries and households. All these developments in the Oil and Gas sector is spearheaded by multinationals and concerns outside Ghana.
What is the government and local players in the oil and gas sector doing to gain substantial benefits from this natural resource, is it going to be the same old script like we read for gold and the other resources- timber, bauxite, cocoa? Many believe it’s the call of government to put in place the necessary policies and legislations which strategically should be titled in favor of local participation in this sector.
The upstream sector is used to refer to the search for, followed by the recovery and production of, crude oil and natural gas. This sector is also widely known as the exploration and production (E&P) sector. Stages within the upstream petroleum-product industry include the search for underground or underwater oil and gas fields, the drilling of exploratory wells and, if the wells are deemed economically viable and recoverable, the operation of wells that bring crude oil and raw natural gas to the well’s surface. Kosmos, Anadarko, ENI. Vitol, Tullow are all players in the upstream sector of the oil and gas industry here in Ghana.
The midstream sector can include some elements of both the upstream and downstream sectors. However, the main component of midstream is the gathering system. Gathering systems are oil and natural gas storage areas where raw produced products are held until they can be transported, via pipeline, railcar or tanker truck to the refinery, where they are turned into marketable petroleum products. Most BDCs in Ghana can be classified as players in the midstream.
The downstream sector refers to the refining of crude oil, and the selling and distribution of natural gas and products that are derived from crude oil. Such products can include LPG, gasoline, jet fuel, diesel fuel, fuel oils, asphalt and petroleum coke. The downstream segment includes oil refineries, petrochemical plants, petroleum distribution outlets, retail outlets and natural gas distribution companies. The downstream sector touches consumers through thousands of products from motor fuels to lubricants and fertilizers to pharmaceuticals. Here is the starting point really for Ghanaian participants in this sector.
International Finance Corporation (IFC, a member of the World Bank Group, in June this year signed an estimated $8 million loan agreement with Quantum Oil Terminal Limited, an indigenous oil and gas company. Quantum Oil Terminal Limited is developing 55, 000 metric ton petroleum products storage facility near the Tema Port. This will go a long way to mitigate the storage constraints in the petroleum products distribution value chain and reduce shortages in the country. Whilst it is commendable for such laudable initiatives and moves to get more local participation, much also need to be done.
The proposed Petroleum Exploration and Production (E&P) Amendment Bill seeks to introduce new measures to maximize revenue. It has proposed a capital gain tax, rules on transfer pricing and bonus payments which could either be signature bonus or production that would be dependent on new agreements. Basically, Ghana’s share in the barrels produced per day is 16,000bpd. And the country is consuming well over 60,000bpd of the product.
Analysts and industry watchers have critiqued government’s resolve to engage locals in the sector by making the operation more transparent. Speaking at the maiden Ghana International Petroleum Conference (GhIPCON) to create a platform for industry education, policy construction, review, modification and momentum for growth and development in the petroleum industry, the Chief Executive Officer of Chamber of Bulk Oil Distributors, Senyo Hosi, lauded the support by government over the years. He also assured government of the resolve of the BDCs (downstream sector) to help push this agenda to get more local participants in the mid and downstream sectors. And also this will be a Launchpad to be a leader in the African market. The Energy and Petroleum Minster, Emmanuel Armah Kofi Buah at the same forum opined the gains made in the downstream sector should be a catalyst to climb to the upstream sector in the ever evolving oil and gas sector. Currently, according to Hon. Buah, the downstream policy on local participation is being developed. He said Ghana, in its quest to be the hub for oil and gas activities, has put in place the necessary legislative framework and institutional structure to simplify oil and gas business transactions in the country.
After eight years of oil find, one will shudder as to the reasons why policy makers and government have failed to lay this all important policy in place to support local participation in this sector. Many countries in the world that have in way or another benefited from the oil find have put in place the necessary framework which guarantees participation of their locals which is the only sure way to be a blessing to them and not a curse.
When it comes to trumpeting of a success story in the oil and gas sector, the Caribbean island state of Trinidad and Tobago is a good example of a developing country that has made the most gains from this resource-oil and gas. And the country has put in place a structured policy to engage locals across all sectors from upstream to midstream down to the downstream. Ghana, also a developing country can learn from Trinidad and Tobago and walk the talk with the appropriate legislations in place. We have mined gold and other minerals for 100 years and got it wrong (and we’re still getting it wrong) we cannot repeat the mistakes again. Policy makers and governments now and successive ones should get to work and bring to life the dreams of the 24.2 percent of Ghanaians (6.4million) who cannot afford to spend GHS3.60 on food a day. About 8.4 percent of the population lives in extreme poverty. This indicates they cannot afford to spend more than GHS2.17 on food in a day.
The finance Minister, Seth Terkper indicated that the country earned $978.87 million equivalent to GH 03.0billion from the export of oil from the Jubilee field as of the end of 2014. He added that, the volume of crude from the Jubilee field in 2014 was 37,201,691bpd representing an increase of 42.6percent over 2011 production levels.
Clearly, this shows growth in the sector but what about the effects on the average Ghanaian who dreams of a better standard of living? Are we doing much?
Author: Paa Swanzy-Essuman || Ghanatalksbusiness.com