In light of the country’s demographic and economic growth, Ghana’s energy sector is set to expand in capacity and capability over the coming years. Following the discovery of commercial oil reserves in 2007, Ghana’s oil and gas sector has emerged as a significant player in West Africa’s energy landscape. The offshore Jubilee Field, which lies 60 km from the mouth of the Tano River, was the country’s first move into oil production. Subsequent discoveries in the Tweneboa-Eyenra-Ntomme (TEN), and Sankofa and Gye Nyame (SGN) fields have further bolstered its hydrocarbons industry.
With a commitment to responsible resource management, Ghana has become a model for transparent governance in the sector, which can, in turn, serve as a model for other extractive industries, particularly mining. The energy sector has provided a major boost to overall revenue and has also attracted steady foreign direct investment (FDI) inflow, contributing to growth and development.
Structure & Oversight
The government plays a central role in the production, distribution and trading of energy. With financial assistance from the Ministry of Finance (MoF), the Ministry of Energy (MoE) is responsible for the development, oversight and evaluation of policies, programmes and projects for the sector. The Petroleum Commission regulates the upstream sector and is charged with monitoring activity, developing plans and programmes, and issuing permits, whereas the National Petroleum Authority (NPA) is responsible for the mid- and downstream segments, including natural gas operations and pricing. Lastly, the Energy Commission is the technical regulator of the electricity, natural gas and renewable energy segments, and advises the government on energy matters.
The national oil company, Ghana National Petroleum Corporation (GNPC), was established in 1983 to support the government’s goals of securing an adequate and dependable supply of petroleum products, and lowering the nation’s reliance on crude oil imports by developing domestic petroleum resources. Ghana Gas processes and transports natural gas, supplying a significant portion of the country’s liquefied petroleum gas (LPG), a common energy source for homes and businesses. The Ghana Cylinder Manufacturing Company manufactures LPG cylinders and related products.
Performance & Size
The economy continues to exhibit robust expansion, both in and beyond the oil and gas industry, although pressures on the sector have slowed growth marginally in recent years. According to Ghana Statistical Services, in the first quarter of 2023 GDP, including oil and gas, grew by 4.2%, up from 3% in the first quarter of 2022. Comparatively, non-oil GDP growth for the first quarter of 2023 was 5.5%, whereas the first quarter of 2022 saw a growth rate of 3.7%. Hydrocarbons have become a key part of the economy, with the oil and gas sector contributing an average of 4.5% to GDP between 2013 and 2021. The sector was projected to add GHS10.3bn ($935m) to GDP in 2023.
Oil Production
The oil industry expanded rapidly following a series of discoveries in 2007 that launched the modern industry. One such discovery was the exploration and development of the offshore Jubilee Field, the result of a unitisation agreement between two operators, UK oil and gas exploration company Tullow Oil, and US deepwater exploration and production firm Kosmos Energy.
Other international oil and gas corporations active in the country include Swiss-based Dutch firm Vitol, Italian company ENI and Norwegian company Aker Energy, while service companies include Schlumberger, Halliburton, Technip, Rigworld and MODEC. According to a 2016 US Energy Information Administration estimate, Ghana boasts crude oil reserves of 660m barrels. As of April 2023 production stood at 175,000 barrels per day (bpd), making it the continent’s ninth-largest producer.
From 2012 to 2021, crude oil output grew at an average annual rate of 8.5%, according to the most recent figures from the Energy Commission. production decreased by roughly 17.7%, primarily due to mobility constraints imposed in light of the Covid-19 pandemic. This trend has continued, with production decreasing by 6% in 2022 and 13% in the first half of 2023, year-on-year (y-o-y). Despite a slump in production, total revenue for the country’s petroleum industry reached a record $1.4bn in 2022, compared to the previous high of $980m in 2014.
Crude oil is sourced from the country’s three offshore fields: Jubilee, TEN and SGN. In the first half of 2023 the Jubilee field accounted for 58.4% of Ghana’s total output of 22.5m bpd, at around 13.1m bpd, while SGN and TEN contributed 25.4%, or 5.7m bpd, and 16.2%, or 3.6m bpd, respectively.
Gas
Natural gas production has grown significantly since 2011 in line with consumption, with the fuel providing for 28.2% of domestic energy use in 2022. This rise translated to an average annual growth rate of 66.5% in the 2014-22 period, as production has grown from some 635,000 GWh to 34.5m GWh. As of mid-2023 the country was producing 325m standard cu feet (scf) of gas per day.
Total proven domestic natural gas reserves were estimated to be 1.8trn scf at the end of 2022, according to the Energy Commission. Ghana’s biggest gas-producing fields are Jubilee, Offshore Cape Three Points (OCTP) and TEN. In 2021 the three fields generated more than 204bn scf of natural gas. Of that total, 70.5bn scf, or 34.5%, came from Jubilee field, while TEN accounted for 64.1bn (31.4%) and OCTP represented 51.7bn (25.3%). Several upgrades to the Sankofa field, located in OCTP and on-line since 2015, saw its output increase from 210m scf per day to 235m scf per day as of October 2023.
Robust production growth is helping to meet domestic natural gas consumption, which amounted to 127trn British thermal units (Btu) in 2021. The bulk of this – some 107.8trn Btu, or 85.2% – came from domestic sources. The remaining 18.7trn Btu, or 14.8%, was imported from Nigeria via the West African Gas Pipeline (WAGP), a 23.5% decrease from the level imported in 2020. Gas trade through the WAGP represents an important element in West Africa’s regional energy sector. Commissioned in April 2008, the 678-km pipeline connects Nigeria with Benin, Togo and Ghana, and received its first natural gas shipment in December of that year.
According to the WAGP Treaty ratified in October 2004, the WAGP is required to supply Ghana with 123m scf per day of gas. However, gas flows have never achieved the full contractual volume, instead fluctuating between 11m and 84m scf per day since operation began. Growing demand in Nigeria, payment issues and pipeline vandalism have all contributed to an unstable supply through the pipeline. While future gas deliveries from the pipeline could reach 60m scf per day, increasing pressure for Nigeria to sell its gas supply domestically could further disrupt future imports. In December 2022 Ghana signed a memorandum of understanding related to a 700-km gas pipeline project running from Morocco to Nigeria, facilitating gas flows between a total of 13 participating countries in the region.
Electricity
According to the Energy Commission, the production of primary fuels increased at an average annual growth rate of 13.1% – from 46.6m GWh in 2010 to 181.3m GWh in 2021, an all time high. This expansion occurred primarily as the result of an increase in crude oil production, which grew from 2.3m GWh to 93.3m GWh over the same period. Ghana’s total energy supply experienced a 3.3% annual growth rate between 2000 and 2021 to reach 143.5m GWh in 2022.
Before 2012 the largest portion of the total energy supply was provided by biomass. Oil has since taken over as the primary energy source, supplying an estimated 33.6% of total energy in 2022. Biomass was the next-largest energy source, supplying some 32.4%, whereas natural gas and hydropower supplied 28.2% and 5.7%, respectively. Ghana generated around 0.1% of its power from solar in 2022, although renewable capacity development is ongoing, with the government aiming to generate 10% of the national power supply from renewables by 2030.
The transport sector was the largest consumer of energy in 2022, at 38,634 GWh, recording a 6% drop from the previous year. It was followed closely by the residential sector, at 38,611 GWh. Industry accounted for 19,300 GWh of consumption, a 3.8% increase from the previous year, whereas services and agriculture accounted for 4370 GWh and 1070 GWh of energy use, respectively.
The government rolled out the Energy Sector Recovery Programme (ESRP) in May 2019 to combat the challenges of overcapacity in the generation segment. The ESRP aims to strengthen and develop the grid network and metering systems for transmission and distribution while targeting greater competition at the distribution level. An amended version of the programme was released in June 2023, aiming to reduce revenue shortfall and enhance governance of the Energy Commission. It is overseen by the Energy Sector Task Force, which is headed by the vice-president and consists of the ministers of energy, finance and public enterprises.
Sector shortfall was reduced from a projected $12.6bn to $4bn for the cumulative 2019-23 period through the implementation of the programme, primarily due to $5.7bn in disbursements from the Energy Sector Levy Act and MoF Sector Stabilisation payments, as well as delays in the start of gas supply contracts. The sector’s liquidity has allowed energy sector agencies to obtain loans to increase their efficiency. For example, Ghana Grid Company has begun upgrading transmission lines to limit the occurrence of blackouts during inclement weather.
New Discoveries
While onshore oil and gas seepage saw exploration and production (E&P) activity begin in Ghana back in the late 19th century, it was not until the end of the 1970s that commercial production commenced. This was then largely halted in the 1980s, with the exception of the Saltpond field. Exploration continued, however, with focus shifting from onshore towards deepwater offshore blocks.
A series of discoveries in 2007 launched the modern industry with the offshore Jubilee Field. Oil E&P activities inside the country’s boundaries fall under the purview of GNPC. Four sedimentary basins in Ghana are believed to possess undiscovered oil and gas reserves: the Volta Basin, which is onshore; the Tano-Cape Three Points/Western Basin; the Saltpond/Central Basin; and the Accra-Keta/Eastern Basin. These experienced a significant amount of exploration and the country’s oil production remains focused on deepwater fields.
Since 2007 some 25 discoveries have been made in the upstream segment. More recently, in June 2021 ENI announced a new discovery in the Eban exploration prospect, with an estimated delivery of 5000 barrels of oil per day and reserves of between 500m and 800m barrels of oil equivalent.
Meanwhile, ENI and its upstream partner, Vitol, have been engaged in a dispute with Ghanaian E&P firm Springfield over the unitisation of neighbouring discoveries in the SGN field. The government ordered them to reach a solution in 2020, while June 2021 saw the High Court ratchet up pressure, mandating that 30% of ENI and Vitol’s oil revenue from the field – an estimated $40m per month – be held in an escrow account until the dispute is resolved. The case has moved to international arbitration, with the minister of energy declaring the two company’s disputed holdings unitised in January 2023. In June of that year Springfield signed a $750m loan agreement with the African Export–Import Bank intended to fund the development of its oil and gas holdings.
Upstream
Pre-licensing, licensing, land surveys, exploration and appraisal, field development and production, disposal and decommissioning all constitute upstream activities. According to the MoF, upstream oil and gas activities contributed approximately 3.7% to the country’s GDP in 2020, contracting by 4.6% at constant 2013 prices.
In June 2023 the Petroleum Commission reported that 3759 Ghanaians were employed in the upstream petroleum industry. The 2011 Petroleum Local Content and Local Participation Regulations Law No. 2204 set a target of 90% Ghanaian content and participation in the oil and gas industry for 2020. While this target has yet to be met, efforts are under way to boost the country’s workforce. The Accelerated Oil and Gas Capacity Building Programme, launched in November 2017, is one prominent initiative that provides training to students and small and medium-sized enterprises to encourage increased local participation in the hydrocarbons industry.
The government aims to ensure that local expertise, goods, services, businesses and financing are central to the petroleum industry value chain, helping to achieve value addition, job creation, local employment and value retention in-country. Indigenous companies are given first preference to participate in upstream petroleum activities and all petroleum agreements must include local company equity of at least 5%. “Ensuring more Ghanaian companies play significant roles in the upstream oil and gas sector will boost local content through added in-country spending, which creates opportunities and value for the economy more broadly,” Kofi Amoa-Abban, CEO of Ghana-based upstream oil and gas company Rigworld Services, told OBG.
Ultimately, an increase in local participation in the industry could serve to boost the capability and international competitiveness of local firms, creating petroleum and petroleum-related support industries to sustain economic development. The law also requires entities in the sector to submit plans to comply with local content requirements regarding the provision of goods and services.
New discoveries are helping to fuel upstream activity. Discovered in 2012, the Pecan oilfield is undergoing development to become the country’s fourth-producing field, with potential reserves of up to 334m barrels of oil equivalent. As of mid-2023 the $1.5bn Pecan Phase I project was at feed stage and was expected to commence production in 2025 with a capacity of 82,500 bpd.
Aker Energy has a 50% share of the project, with Russian petroleum corporation Lukoil holding a 38% share and GNPC owning 10%. Local transport company Bulk Ship & Trade has the remaining 2%. As of February 2023 Lukoil was in talks with Indian firms to sell its stake in the Pecan oilfield, which could help expedite development plans for the field.
The Jubilee South East field, located in the TanoCape Three Points concession area, is anticipated to produce an average of 37,000 bpd by the end of 2023. It is operated by Tullow Oil, at a share of 39%, Kosmos Energy (38.6%), GNPC (19.7%), and South Africa’s national oil company PetroSA (2.7%). After a second Jubilee South East field production well was brought on-line in July 2023, Tullow Oil reported that gross output from the wider field had topped 100,000 bpd. In line with forecasts, both wells have seen a 50% increase in production compared to the first half of 2023. Two more production wells are expected to be operational by the end of 2023.
In order to generate revenue – and partly to fund the country’s accelerating transition to renewable energy – the government is looking to attract investors by selling new exploration rights. Spanning approximately 46,000 sq km, the offshore oil and gas blocks being marketed as of October 2023 include both new areas and blocks relinquished by Exxonmobil following its exit from the market in 2021.
Midstream
Upcoming projects in Ghana’s midstream segment include the ongoing construction of a floating liquefied natural gas (LNG) plant under the purview of Tema LNG Terminal Company. Located 12 km off the coast of Tema, the $350m project includes a floating storage and regasification unit with a capacity of 83bn scf. Initially slated for completion in 2020, delays in construction saw that date pushed back to 2023, although the facility remained under development as of November of that year.
Situated in close proximity to Tema, the Tema VI liquids storage terminal is expected to be operational by the end of 2024, with a storage capacity of 1.9bn barrels of oil. The facility, located in the Greater Accra Region, will have access to pipelines, roads and port infrastructure, and will be utilised to store crude oil, chemicals and petroleum products. Sentuo Oil Refinery, a producer of petrochemicals, both owns and operates the project, which has an anticipated budget of $380m.
Additionally, a $300m oil tank farm is being built near the village of Dixcove in the Western Region, with storage facilities for 62,000 cu metres of petroleum products. The government-run Bulk Oil Storage and Transportation Company has also announced plans to build an oil storage facility in the town of Wa in the Upper West Region. Both sites are scheduled to begin operations in 2024. Lastly, capacity-boosting work on a 70-km pipeline running from Tema to Akosombo is slated for completion in 2023 and represents an important step in the country’s plans to become a regional leader in oil and gas production.
Downstream
Regulated by the NPA, the downstream segment incorporates all activities involved in the importation and refining of crude oil, as well as the sale, marketing and distribution of refined petroleum products in the country. According to NPA estimates, in 2020 the downstream segment boasted over 5000 service providers and generated more than $2.8bn in revenue, or roughly 6% of GDP.
The segment’s dynamic nature also provides opportunities for potential investors. “The most promising investment prospects for infrastructure expansion in the oil and gas downstream segment include laying underground fuel pipelines from the ports of Tema and Takoradi to storage depots in Kumasi and Buipe, as well investing in fuel barges to utilise Lake Volta for fuel transport,” Philip Tieku, CEO of fuel retail company Star Oil, told OBG. Benefits of the segment’s expansion include improved gas infrastructure, a growing petrochemical sector and a rise in skilled employment.
Refining Activity
The Tema Oil Refinery, located 24 km from Accra, is currently the country’s only such facility. Established in 1963, the refinery purchases and refines crude oil, and has a capacity of 45,000 barrels per stream day and a storage capacity of 2m tonnes. However, Tema Oil Refinery was not operational as of November 2023 due to insufficient stock to meet the refinery’s needs, although the NPA was reportedly in talks with a private company to enable the operations to resume in the near term.
To address the country’s energy requirements while reducing its reliance on imported petroleum products, construction work on the new Sentuo Oil Refinery in Tema is ongoing, with the facility projected to be operating at full capacity by 2025. Phase One of the 40,000-bpd refinery was 80% complete as of August 2023, with a planned second phase to add an additional 20,000 bpd of capacity. Part of the government’s One District, One Factory initiative, the facility is expected to receive investment of $3bn. Upon completion, the refinery will have the capacity to produce 350,000 tonnes of pitch products, 200,000 tonnes of lubricating base oil and solvent naphtha, and 400,000 tonnes of by-products, including polypropylene, ammonium sulphate, sulphuric acid and sulphur.
In terms of gas refining, a $210m gas processing plant with an estimated capacity of 200m scf per day is planned for construction in Prestea, some 105 km from Kumasi, the country’s second-largest city. Additionally, in March 2023 Ghana Gas and its joint venture partners signed a project implementation agreement for a second gas processing plant at Atuabo in the country’s Western Region. The $700m processing plant will possess an initial capacity of 150m scf per day and can be expanded to 300m scf per day after completion in 2025. The plant will have the capacity to convert LNG into butane, pentane and propane condensates, and will host storage facilities. Ghana Gas’ first gas processing plant in the area shut down for 14 days for maintenance in March 2023, but has since resumed operations.
In October 2020 Parliament approved the establishment of the Petroleum Hub Development Corporation (PHDC), which will oversee the development of a $60bn, four-refinery project in Bonyere, Western Region. Each refinery will have a capacity of 150,000 bpd with two oil jetties, storage and two petrochemical plants on site. With the support of the NPA, the project’s goal is to transform Ghana into a downstream leader for sub-Saharan Africa by 2030. According to UAE-based firm ABiQ Business Intelligence, the complex will work to address regional demand, develop a local labour market – with the capacity to create 780,000 jobs in the development phase and beyond – and speed up intra-African trade. As of August 2023 the government was seeking new sources of investment for the planned mega-project.
Exports
Ghana has a dynamic power generation sector, with both private and public players participating following legal reforms in the 1980s. In 2022 the country possessed 5454 MW of installed power generation capacity, with average generation levels measuring approximately 4843 MW. Thermal generation, fuelled by crude oil, natural gas and diesel, accounted for the bulk of generation, at 3758 MW; followed by hydro (1584 MW) and other renewable sources (112 MW). In line with government efforts to boost production, renewable energy generation has grown consistently since 2016.
Ghana exports electricity to Burkina Faso, Benin and Togo, with La Société Nationale d’Electricité du Burkina Faso, the national electricity company of Burkina Faso, receiving a significant amount of power. Ongoing grid developments, which include the installation of transmission lines and bulk supply points across the country, aim to enable further exports to other neighbours in the subregion.
The country has recorded positive net exports amid rising generation capacity and a general downward trend in imports in recent years. The Energy Commission recorded 2125 GWh of exports in 2022, a significant increase compared to 739 GWh in 2018. “In the coming years public policy should focus on boosting capacity to ensure the solid and reliable export of power to its neighbours,” Murat Çaptuğ, West Africa coordination director of Turkey-based energy company AKSA Energy, told OBG. “This is pertinent since the country now has the capacity to meet and even exceed its own energy needs.”
Mineral fuels and oils made up 30.6% of the country’s exports in 2022 – the second-largest share, behind gold, at 38%. Significant export began in 2011 with the start of commercial production, and has grown from that year’s figure of 24.4m barrels to 52.2m barrels in 2022, representing a compound annual growth rate of 7.1%. Export levels remain below the 2019 peak of almost 71m barrels.
According to the 2022 “Annual Report and Financial Statement” of the Bank of Ghana, despite a decline in export volume, crude oil export receipts increased from almost $4bn in 2021 to $5.4bn in 2022 due to higher realised prices. The average realised price of crude oil increased by 40.6% over that period, from $71.24 per barrel to $100.19 per barrel. However, exported volume fell by 2.2%.
Imports
Ghana’s power imports have fallen significantly from 1146 GWh in 2002 to 37 GWh in 2022. Crude oil imports have also fallen, from 10.7m barrels in 2011 to 226,000 in 2022, at an average annual decline of 29.6%. The country has seen a parallel decline in the use of crude oil for power generation, with all crude imports in 2021 and 2022 put towards refinery use. Comparatively, Ghana imported over 19.9trn Btu of natural gas in 2022, much of it through the WAGP from Nigeria.
As a result of the Tema Oil Refinery’s continued pause of refining activities, Ghana imports a sizeable volume of refined petroleum products each year, including gas oil, gasoline, liquid petroleum gas and kerosene. In 2022 petroleum product imports reached 4.1m tonnes, the majority of which was gas oil and gasoline, at 50.4% and 38.4%, respectively.
While rising global fuel prices have helped boost export revenue, they have also put upwards pressure on inflation and cost of living. In November 2022 the government announced it was working on a policy to pay for fuel imports using gold instead of US dollar reserves, which have decreased in recent years. The move is intended to prevent the exchange rate from directly affecting fuel or utilities prices.
Oil & Gas Investment
Investor interest in the petroleum industry surged in 2001 when the government revised profit-sharing terms to 10-15%. “The oil and gas industry offers a plethora of investment prospects in the mid- and downstream segments, including oil refineries, petrochemical processing facilities, natural gas distribution and storage infrastructure, retail outlets and petroleum product distribution,” Kwame Osei-Prempeh, managing director and group CEO of Ghanaian downstream service provider GOIL, told OBG. FDI inflows to Ghana rose from $1.9bn in 2020 to $2.6bn in 2021, mainly as a result of investment in the extractive industries, according to UN Conference on Trade and Development’s “2022 World Investment Report”.
While FDI inflows fell 39% in 2022 to $1.5bn, the number of greenfield investments grew, from 29 in 2021 to 39 in 2022. China, the US, the Netherlands and Australia were the top sources of FDI during the first half of 2023, with investment targeting the oil and gas, agriculture, manufacturing, trade and construction sectors. Additionally, taxation of companies in the oil and gas sector adds a significant amount to tax revenue, with the 2023 government budget estimating GHS8.5bn ($772m) in company taxes on oil and GHS4.1bn ($372m) in royalties on oil.
Outlook
On a domestic and regional level, oil and gas consumption is projected to grow in tandem with economic expansion and population growth. Infrastructure development is expected to support continued demand for oil- and natural gas-based products, even as Ghana’s transition to renewable energy sources such as solar and hydropower accelerates. In order to meet this rising demand, key market players are committed to sustained investment to bolster the country’s growing oil and gas capacity.
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