Ghana’s energy sector is in a moment of transition. In 2017 oil was the largest source of energy in the country, at 42.5%, closely followed by biomass at 40.6%. This mainly consists of the firewood that has historically been used to heat homes and small businesses. While some traditional energy sources remain popular, new developments are overturning old consumption patterns elsewhere in the sector. Most notably, the discovery of large offshore oil reserves has had a significant impact on the national balance sheet: shipments of crude oil represented the second-largest export category in 2017, according to the Bank of Ghana, second only to gold. Firming oil prices have helped the country to increase its GDP by 8.5% in 2017, compared to a more modest 3.7% in 2016.
Ghana is a relative newcomer to the global hydrocarbons industry, and with proven oil reserves of around 660m barrels and an output of about 126,000 barrels per day (bpd), it is a small producer by regional standards, but there is considerable potential for growth. The ongoing expansion of commercial operations into new reserves has led some commentators to identify Ghana as the world’s next oil hotspot, raising hopes that the export of oil and its derivatives can sustain a new era of economic prosperity. The associated gas from the Jubilee field, meanwhile, is providing a useful alternative source of feedstock for the nation’s power generation system, which has previously relied on hydropower and expensive thermal plants driven by light crude oil and diesel. Lastly, the government’s determination to implement an ambitious renewable energy agenda means that the country’s energy mix is likely to diversify even more over the coming years.
Ghana has four basins where hydrocarbons extraction activity is either already taking place, or may be engaged in at a later date as discoveries make it viable: the offshore Western Basin, the Central Basin, the Eastern Basin and the onshore Voltaian Basin. By far the most active of these is the Western Basin, which contains the three oil and gas fields that currently account for almost the entirety of the nation’s upstream activity: the Jubilee field, the Tweneboa, Enyenra, Ntomme (TEN) fields, and the Sankofa field. The Central Basin contains the Saltpond field, which was discovered in 1970 and is one of the oldest oilfields in the country. A significant drop in production levels over recent years resulted in a government decision to decommission the field, but in early 2018 the authorities reported that some companies had expressed an interest in utilising new technologies in a bid to further exploit the area, and consequently the Saltpond has been granted a reprieve. The Eastern Basin, for its part, is home to the Accra and Keta blocks, which, despite a number of exploration phases, have yet to produce oil in commercial quantities.
The geology of Ghana’s deepwater basins is largely a stratigraphic system with hard and interbedded formations. This makes the extraction of hydrocarbons both challenging and expensive. However, Ghana’s offshore fields also yield a light and sweet crude that generally fetches a higher price than the benchmark Brent crude, which helps oil companies offset the relatively high production costs. The average crude oil price from Jubilee field achieved in 2017 was $54.43 per barrel, compared to the average dated Brent price of $54.25.
Lastly, the onshore Voltaian Basin covers almost half of Ghana’s landmass, and is regarded as a promising area for onshore hydrocarbons extraction. Past surveys have identified potential deposits in the northern region of the basin, and in February 2018 President Nana Akufo-Addo announced that a pilot survey had found a working petroleum system there.
The commercial exploitation of Ghana’s oil resources dates back to the establishment of Ghana National Petroleum Corporation (GNPC) in 1983. The government-owned body was tasked with providing a reliable supply of petroleum products and reducing the country’s dependence on crude oil imports, an objective it set about realising two years later with the commencement of exploration activities. GNPC is also the national gas sector aggregator in Ghana and is tasked with ensuring there is a sufficient supply of fuel to meet the country’s increasing energy needs.
After a decade without a significant find, GNPC sought the assistance of international partners, and in 2007 the US-based Kosmos discovered the deepwater oil and gas reserves of what later became the Jubilee field. Kosmos, the London-headquartered Tullow and the US company Anadarko partnered with GNPC to develop the resource, and after some changes in the partnership structure the current partners are: Tullow Oil Ghana, which holds the majority share at 35.5%; Kosmos Energy and Anadarko, with 24.1% each; GNPC with 13.6%; and South African PetroSA with 2.7%. As of 2017 total production stood at approximately 100,000 bpd and 80,000 standard cu feet (scf) of gas per day.
The success of the Jubilee field caught the attention of international hydrocarbons players and opened the door to a new era of exploration. Numerous oil and gas companies from across the world have explored onshore and offshore potential in Ghana, such as ExxonMobil, Shell, Texaco and Tap Oil.
Other new projects are further enhancing Ghana’s oil and gas capacity. The first oil flowed from the Tullow-operated TEN offshore fields in August 2016. Tullow retains a 47.2% interest in the venture, the other participants being Anadarko and Kosmos Energy, which hold a 17% share each, GNPC with 15% and PetroSA with 3.8%. In February 2018 Tullow commenced a multi-year drilling programme at what has become the nation’s second most important oil resource. The TEN fields have an estimated 240m barrels and 396bn scf of gas, and are connected by subsea infrastructure to the Jubilee field, which aids the transport of gas to Atuabo Gas Processing Plant – the natural gas processing plant of Ghana National Gas Company (Ghana Gas), located in the country’s Western Region.
Cape Three Points
Italy’s Eni, meanwhile, began production at Ghana’s most recent offshore oil and gas project in mid-2017. The Cape Three Points integrated oil and gas development project, made up of the Sankofa Main, Sankofa East and Gye-Nyame fields, is estimated to contain 500m barrels and 40bn cu metres of gas, and continues to be explored by Eni. The first commercial oil flowed from the site in May 2018, starting with an average of 12,000 bpd which increased to 36,000 bpd by the end of the year. The gas produced from the project flows to onshore facilities in Sanzule, which opened in 2018, and is then transported to Ghana Gas, adding around 180m scf of gas to the electricity generation system. Ghana’s Petroleum Commission has allocated rights to develop a further 16 fields, and further projects are expected over the short to medium term. In early 2018 the government also signed a deal with ExxonMobil to explore for oil at Cape Three Points. This has been a welcome development for Ghanaian companies according to Essie Anno Sackey, managing director of aviation company PHI Century. “The entrance of ExxonMobil will be a boon for Ghana. Additionally, the past few years of low oil prices have driven efficiency gains, so the sector is now well placed to scale responsibly,” she told OBG.
All of Ghana’s oil-producing fields are also sources of associated natural gas, although the gas output from Sankofa is currently at non-commercial levels and utilised only for the operator’s own production activities. Gas now plays an increasingly important part in the energy mix. According to Ghana’s Energy Commission, the total flow of gas to the nation’s consuming facilities was 45.5bn scf in 2017, around 65% more than the amount recorded for the previous year. Approximately 26% of this flow reached Ghana through the West African Gas Pipeline (WAGP), which connects Nigeria’s Escravos region to facilities in Benin, Togo and Ghana, and is the first regional natural gas transmission system in sub-Saharan Africa.
The bulk of the imported and indigenous gas is utilised by the electricity generation system, with only around 13% used for non-power activities. Ghana’s gas resource therefore plays a crucial role in the government’s effort to provide an affordable power supply upon which social and economic development can be built. However, the efficiency of gas as a power source is currently compromised by inadequate supply and financial hurdles, arising from domestic and international payment deficits.
Midstream & Downstream
The midstream energy segment is relatively undeveloped. The nation’s single oil refinery, Tema, was built in 1963 and has a design capacity of 45,000 bpd. Operational challenges, however, have reduced its capacity to around 30,000 bpd, and the unit has yet to process any domestically produced crude oil. While the minister of energy has made public his ambition to build a new 150,000-bpd refinery by 2022, the short timeframe and the challenge of securing financing for such an ambitious project has rendered this development questionable.
When looking downstream, the energy sector is a more vibrant arena. Since 2005 the government has overseen a liberalisation of import, distribution and petroleum marketing activities, a process which has resulted in the transformation of the segment. Storage and distribution of Ghana’s oil is managed by bulk oil distribution companies (BDCs). Before the liberalisation process the state-owned Bulk Oil Storage and Transportation Company was the only player in the industry; however, the Ghana Chamber of Bulk Oil Distributors currently holds a membership of 23 BDCs that collectively account for 95% of petroleum supplied to the domestic market.
After Nigeria, Ghana is the second-largest consumer market for petroleum products in West Africa. The country is also emerging as a petroleum products hub, with Ghana-domiciled companies shipping products across borders to markets in Burkina Faso, Togo and Côte d’Ivoire. The National Petroleum Authority, created in 2005 to regulate and drive the liberalisation effort, has accelerated this development with a range of incentives, including a credit scheme aimed at encouraging the sale of petroleum products, and favourable terms for imports and transportation.
As Ghana’s economy continues to expand, the demand for hydrocarbons and their derivatives is also climbing: according to the Energy Commission, domestic energy demand is rising by 10-15% every year. As consumption exceeds domestic production, Ghana relies on imports for oil and gas products. Crude oil imports are used for both refinery operations and electricity generation, although the proportions of this split vary considerably from year to year. In 2008, for example, nearly 1.4m tonnes of crude imports were refined into derivative products in the domestic refinery system, compared to the 580,000 tonnes that were used for electricity generation. By 2014, however, operational challenges at Tema refinery meant that only 70,000 tonnes were directed to refinery operations, compared to the 623,000 tonnes sent to the nation’s power plants. The most notable development of recent years, however, is the significant drop in the total import of crude oil, which fell from almost 1.45m tonnes in 2016 to around 233,000 tonnes in 2017. The sudden decline was largely as a result of a slowdown in refinery operations and the emergence of natural gas as a fuel for power stations.
The country currently imports natural gas from Nigeria via the WAGP, which is used to fuel the country’s thermal plants. The need to import gas, however, is declining as the domestic supply increases: in 2017 the total gas supply from Ghana Gas improved significantly due to additional supply from the TEN field during the year, which was almost three times more than the supply of gas imported via the WAGP.
Overall demand for refined petroleum products, including liquefied petroleum gas, petrol, premix, kerosene, diesel and residual fuel oil, continues to grow in Ghana. In 2014, 3.3m tonnes of petroleum products were supplied to the economy, according to the National Petroleum Authority, and by 2017 this figure had grown to 3.5m tonnes. The most notable counter-trend to this overall expansion in recent years has been the significant drop in diesel and kerosene consumption in 2017, which can be attributed to decreasing use of generators and kerosene lamps due to an improvement in the grid electricity supply. Between 2016 and 2017 diesel and kerosene consumption fell by 5.9% and 30.9%, respectively.
A number of bodies are responsible for developing and regulating the energy sector. The Ministry of Petroleum formulates the sector’s overall policies, while the Petroleum Commission regulates and manages upstream projects. At the operational level, GNPC explores oil and gas fields independently, and partners with other companies in exploration and production works. Ghana Gas builds, owns and operates the government’s infrastructure for gathering, processing, transporting and marketing natural gas. The generation, transmission and distribution systems are overseen by three bodies: the Energy Commission is the technical regulator; the Ministry of Power and the State Enterprises Commission monitor the segment’s performance; and the economic regulator is the Public Utilities Regulatory Commission.
The exploitation of hydrocarbons resources has been carried out according to the provisions of the Petroleum (Exploration and Production) Law of 1984, which establishes the contractual relationship between the state, GNPC and prospective investors in upstream petroleum operations. This law also grants GNPC the right of entry into any open area to undertake exploration activities. The 1992 constitution also has a bearing on the sector, in that, according to its provisions, all petroleum resources are the property of the president of Ghana. While in some cases individuals and groups can retain rights that entitle them to compensation, the clear establishment of ownership has allowed the country to swiftly exploit its resources: the Jubilee field, for example, was brought from discovery to production in less than 3.5 years, and the TEN fields and Sankofa field have been developed in a similarly timely fashion.
In recent years the government has begun to overhaul the regulatory framework that governs the sector. One of the most significant new laws is the Petroleum Commission Act of 2011, which established the Petroleum Commission as the regulator for all upstream activities. Although intended to be an autonomous body, the Ministry of Energy retains an influential role in the sector, particularly in the area of petroleum agreements. In 2016 the government introduced the Petroleum Exploration and Production Act, which aims to make the sector more investor-friendly by increasing transparency and promoting good governance. One of the most significant results of the new legislation is an open and competitive tendering process for the acquisition of petroleum licences. Once again, the Ministry of Energy has been granted considerable influence over this process, retaining the right to circumvent the bidding framework altogether and enter into direct negotiations with international oil companies – the method by which all petroleum agreements in Ghana were agreed prior to 2018. In late 2018 the government launched the first bidding round, to be carried out according to the provisions of the new act. The Licensing Round Bid Evaluation and Negotiation Committee opened up six blocks for bidding and allocation – the first in a planned series of licensing rounds aimed ramping up crude oil production to 100m bpd. A total of 16 companies submitted their applications for the blocks, including Tullow Oil Ghana, Kosmos Energy, Eni Ghana and Total. The results are due to be announced in January 2019, with the blocks expected to be awarded in August.
While the hydrocarbons sector continues to expand and displace biomass in the overall energy mix, Ghana is also pursuing an ambitious renewable energy agenda aimed at reducing the nation’s reliance on fossil fuels. Before 2016 just one non-hydropower renewable facility fed directly into the national grid: the 2.5-MW solar photovoltaic (PV) plant owned by the Volta River Authority in Navrongo was inaugurated in 2013, and at the time was the largest grid PV plant in West Africa outside of Cape Verde. In 2016 a new 20-MW solar plant built by BXC Ghana significantly boosted the nation’s solar capacity, and in the same year a 100-KW biogas electricity generation facility was connected to the national grid. Between its solar and biogas initiatives, Ghana has 22.6 MW of installed capacity in renewables, around 0.6% of the nation’s total installed capacity. Despite the modest input of renewables to the national grid, the segment has considerable potential to grow further.
“Green energy production is rather stagnant; due to licensing issues and a lack of incentives, there is little movement. However, the new government has aimed to make renewable energy 10% of the total domestic supply, and so it appears the political will for higher production has arrived,” Sanmi Longe, managing director of International Energy Services Limited, told OBG.
Solar power, in particular, presents a strategic opportunity. According to the Energy Commission, the nation receives between 4.5 and 5.6 KWh per sq metre per day of solar radiation annually. Annual sunshine duration ranges from 1800 to 3000 hours, a level which would make large-scale, grid-connected projects highly feasible in the future. Additionally, the UN Environment Programme reported in 2015 that the solar generation potential for Ghana stood at 150 MW.
There is also considerable potential to generate power through wind technology. According to the Energy Commission, average wind speeds at various locations across the country range from six to nine metres per second – above the generally accepted minimum required for utility-scale wind power plants. Ghana has yet to build any wind power facilities, but the Energy Commission has identified around 12 suitable coastal sites for their construction, from Asemkow in the west to Tohloku in the east.
The relatively small part that renewables play in the country’s energy mix is widely viewed as a missed opportunity, and therefore over the past decade the government has begun to take steps to establish a regulatory framework that will allow both the public and private sectors to engage more fully with emerging renewable technologies. In 2011 it introduced the Renewable Energy Act, which provides the legal basis for the addition of renewable energy sources to the power system. The act also contains a promotional component, establishing a fund for the promotion and development of renewables, including financial incentives for remote areas and island communities. Since the act was introduced, the Energy Commission has established a number of regulations to facilitate this process, such as the renewable energy grid code and a schedule of feed-in tariffs.
The government’s efforts to boost renewables are beginning to pay off. As of 2018 the Volta River Authority was working with two wind developers, Denmark’s Vestas and Egypt’s El Sewedy, to develop 150 MW of wind power at four locations in the south of the country: Anloga, Anyanui, Lekpogunu and Akplabany. The most significant recent development, however, was the announcement by Eni that it would construct a 20- MW PV power plant in northern Ghana. By securing this large-scale foreign investment, Ghana has taken an important step towards its target of increasing utility-scale PV from 22.5 MW to 250 MW by 2030.
Ghana’s revised regulatory framework for the sector, increased transparency throughout the system, and an ongoing schedule of bidding rounds for exploration and production agreements means that the prospects for continued increases in oil and gas production over the medium term are strong. This, combined with the expansion of the renewables segment, suggests that traditional energy sources will continue to be displaced by petroleum products and sustainable technologies. Over the coming years the government will be tested on whether it can exploit its onshore oil and gas resources as effectively as it has developed its offshore reserves. The Voltaian Basin, covering more than 40% of Ghana’s territory, has been identified as a potential site for development by GNPC, and President Akufo-Addo has stated his intention to develop projects in the basin leading up to 2020.
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