Ghana’s Oil Exploration Has Improved
-Dr. Amin Adam
At the 11th Oil Trading Logistics (OTL) held recently in Lagos, Dr. Mohammed Amin Adam, Deputy Minister for Petroleum of Ghana, revealed that oil exploration in the West African country has improved with significant progress. The country has been in oil exploration for years but attained commercial discovery in 2006. Owing to the volatility of crude oil prices, the country has diversified its economy. Amin Adam is worried that most oil companies in the former Gold Coast are not meeting up with expected production level due to international litigation issues which has been nipped in the bud with favourable judgement on the side of the country. He urged African countries not to be exporting and shipping out crude oil so that they won’t deplete reserve in the continent while refineries should also be built to aid Africa instead of importing petroleum products.
Since you assume this position, in a new government in Ghana, how has it being with the oil industry in the country, owing to the fact that Ghana is just joining the exploration space of the oil industry?
Ghana has been in exploration for a long time for nearly three decades but commercial discovery was made in 2006 and 2007. To date, the country is producing oil from different fields with about 100 000 barrels per day from the Jubilee fields, and around 15 000 barrels from the Ten field. Sancofa has also brought about 30 000 so the country is getting to close to 200 000 barrels oil of crude oil with 2000 barrels of production per day. This means that Ghana is no longer a small producing country in oil. Ghana is about the 5th in oil production in Africa which means the country is on its way to becoming a major producer that will urgently serve the needs of the country in terms of energy and also the needs of other neighbouring countries.
The oil industry is bogged down by global fluctuations of prices, is Ghana worried about this trend, and is it also making efforts to diversify to other sectors?
Of course, Ghana’s economy is already largely diversified because the contribution of oil to the revenue budget of the government is around 6% which is about 1.2% of GDP. The oil component within Ghana’s economy is not that much. The economy is already largely diversified built on agriculture and the services sector. Therefore, the country is aware of the devastating effect of the volatility of crude oil prices could have on the economy if it becomes a major producer and if dependence on oil for revenue increases in the budget. This is the reason the country set up a stabilization mechanism which is called the Ghana Stabilization Fund and also part of Ghana’s revenue that will be used to fill in the gap in the budget any time there is a shortfall in revenue resulting from fluctuation in prices.
However, Ghana is also building the agriculture centre, the country sees this initiative as an anchor for economic transformation in the country. The new government in Ghana recently launched a programme known as Plan for Food and Jobs which is to position agriculture to be the major contributor to the economy which will create more jobs and increase the level of incomes of people and also to produce the raw materials that the country needs in its industries.
Any challenge so far in Ghana’s oil industry?
Certainly, we have challenges, a number of companies are holding Ghanaian blocs including companies from Nigeria and we are not satisfied about their level of performance. It is because of two reasons, one of the reasons is the fall in crude oil prices, really, it has desensitized the pace of investment. The second reason being that Ghana went to the International Tribunal on the law of the seas to resolve its boundary dispute with Ivory Coast and the uncertainty it introduced also slow down activities. These are reasons why the performance has not been satisfactory. The ruling has been favourable to Ghana. We are calling on all those who are holding our blocs to come back to work, they must increase activities because we are depleting from the reserves that we have proven. If you are depleting from your reserves and you are not replacing, you will not have an oil and gas industry one day. In order to prevent this from happening, we want to be able to increase exploration activity, we want to license more companies to look for oil so that we can increase our reserves, production, revenue and contribution to oil and gas sector to the economic prospect of Ghana.
What are the importance of OTL to the downstream sector?
OTL certainly has provided an important platform for operators to share ideas and to learn new things. It is also to share experiences so that together as African countries, stakeholders will be able to harmonise policies, ideas and institutions to ensure that quality services are delivered to the citizens. In this platform, I have particularly called for operators in the industry to work together integrate economies through sharing of risks and projective development of joint projects so that we can be able to build an economy that will serve the people.
Ghana is planning to have three refineries owing to information from the National Petroleum Authority (NPA) Director. What is the present state of these refineries?
Ghana is developing petroleum infrastructure master plan where the country had an indication that it could have three additional export based refineries. Apart from the three additional export based refineries, Ghana is expanding its existing refineries so that they will be able to meet domestic demand. The country is also aware of the development of the Dangote refinery in Nigeria. Dangote refinery may not be able to meet the demands of Africa. We need about 2.7 million barrels capacity in a day and 650,000 barrels from Dangote together with 300,000 barrels from Ghana, if we develop these refineries, they will still not suffice us. Therefore, we need to be able to expand our capacity so that we can produce all the products we consume in this continent.
What is your advice to African countries with respect to the oil industry and what is the way forward?
Africa should stop exporting and shipping out its crude and shipping in petroleum products as well. The only way this can be done, build viable refineries and improve on efficiency of those refineries. Africa refineries market are small, if the continent will benefit, it has to improve on efficiency and also need to expand so that it could have the benefit of economies of scale. This is what should be done because if these steps are taken, we will stop exporting crude, jobs and incomes. These jobs and opportunities will remain in the continent which will be used to support the transformation of economies.