Ghana Oil Palm Development Corporation Climate Risk Analyses
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CLIMATE RISK AND BUSINESS AGRIBUSINESS Ghana Oil Palm Development Company Executive Summary Acknowledgments © 2011, International Finance Corporation Authored by Vladimir Stenek, International Finance Corporation Richenda Connell, Acclimatise The authors wish to thank the following institutions for their valuable contributions to the study: Ghana Oil Palm Development Company (GOPDC); Agriculture- engineering Department, Faculty of Engineering Science, University of Ghana, Legon; CSIR Water Research Institute, Ghana; Department of Crop Science, University of Ghana, Legon; Department of Geology, University of Ghana, Legon; Food and Agriculture Organization, Ghana; Ghana Environmental Protection Agency, Ghana Meteorological Services, GOPDC Outgrowers’ Association; Kade Agricultural Research Center, University of Ghana, Kwaebibirem District, Ghana; Oil Palm Research Institute, Ghana; Presidential Special Initiative, Ghana; St. Dominic’s Hospital, Akwatia; University of Ghana, Legon; World Health Organization, Ghana; Centre de cooperation international en recherché agronomique pour le developpement (CIRAD); and SIAT. CLIMATE RISK AND BUSINESS AGRIBUSINESS Ghana Oil PalmDevelopment Company Executive Summary Contents Overview ..................................................................................................................................... 2 Ghana Oil Palm Development Company..................................................................................... 3 Summary of GOPDC climate risk analyses ................................................................................. 5 GOPDC adaptation action plan ................................................................................................. 11 Contribution to sectoral climate resilience: roles of different groups .......................................... 14 Observed climate and climate change at GOPDC .................................................................... 15 Climate risk analysis for oil palm yield at GOPDC Kwae Estate ................................................ 17 Climate risk analysis for oil palm pests and diseases at GOPDC .............................................. 19 Climate risk analysis for ecosystem services at GOPDC .......................................................... 21 Climate risk analysis for GOPDC industrial operations .............................................................. 23 Climate risk analysis for water and wastewater at GOPDC ....................................................... 25 Climate risk analysis for community and social issues .............................................................. 27 Climate risk analysis for malaria at GOPDC .............................................................................. 29 CLIMATE Seed germination Ecosystem services Plantation management Palm growth & development Malaria Pests & diseases FFB yield Soils Social issues Mill Wastewater Power plant Crude Palm palm oil kernel oil Groundwater Refinery Main components of GOPDC’s operations for which climate risks were analyzed End products MARKETS Overview This report presents the outcomes of a study which analyzed the potential climate-related risks for Ghana Oil Palm Development Company (GOPDC). GOPDC owns two oil palm plantations at Kwae and Okumaning in Ghana’s Eastern Region. It also owns a mill and refinery at Kwae, where oil palm fresh fruit bunches (FFB) are processed into crude palm oil (CPO) and palm kernel oil (PKO), as well as refined products (primarily olein and stearin). The tables below presents a high level summary of the GOPDC climate risk analysis, where the outlined results describe the confidence levels that we attach to them. As described in the climate chapter of this report, there is high confidence that temperatures at GOPDC are rising and will continue to rise due to climate change. The picture is much less clear with respect to changes in seasonal rainfall: looking across a broad range of climate models, about half the models project future increases in rainfall and half show decreases over this part of Ghana. There is, however, higher confidence that rainfall intensity will increase, i.e. that a greater proportion of total rainfall will fall in heavy events. As well as investigating the potential effects of climate change, the risk analysis has assessed how variability in current climate conditions affects GOPDC’s operations, and has identified where the greatest climatic sensitivities lie. In some cases, while we have been able to identify links between climatic factors and their effects on GOPDC, knowledge is lacking about the impacts of climate change – for instance in the case of the important oil palm pollinator, E. kamerunicus. This points to the need for additional research. In other cases there is good knowledge of the relationships between climatic factors and their impacts on GOPDC, such as rising temperatures affecting refinery throughput. Where possible, we have presented estimates of annual future financial impacts of climate change for GOPDC, using a 12% discount rate. For some climate-driven events, such as the loss of the oil palm pollinator or an outbreak of damaging pests, while we have been able to estimate the financial consequence of the event, we have no knowledge of its likelihood. In these cases, we present undiscounted financial impacts per event. The analysis has also revealed some critical uncertainties that GOPDC faces, for which it has not been possible to estimate current or future financial impacts. Most notable among these is future water availability, which is essential for GOPDC’s operations. A lack of groundwater has already affected operations at the refinery. Climate change, together with increased demand from other users, may exacerbate stress on water resources. It is important that GOPDC improves its understanding of current and future risks to its groundwater supply and develops strategies to manage them effectively. GOPDC is already undertaking a number of actions which help to build climate resilience. Based on the levels of confidence in the risk analyses, it is proposed that additional climate risk management actions for GOPDC to consider set out in the GOPDC Adaptation Action Plan below. In essence, where there is high confidence in the risk analyses, it is recommended that GOPDC investigates the costs and benefits of actions to manage the projected changes and their implications for performance. In cases of lower confidence, it is recommended to use a more exploratory approach, including research, monitoring, field trials and surveillance. For some risk areas, such as malaria and oil palm yield, the analysis has shown that the effects of present-day climate variability on profitability are already important. In these cases, it is recommended that GOPDC investigates additional actions that could be taken now to manage the impacts. 2 Ghana Oil Palm Development Company Ghana Oil Palm Development Company (GOPDC) Limited is an integrated agroindustrial company specialized in the organic cultivation of oil palm (OP), extraction of crude palm oil (CPO) and palm kernel oil (PKO) and in the refining and fractionation of CPO. The company was set up in 1975 as a state enterprise with the main objective of diversifying agricultural production in Ghana and was later transformed into a limited liability company in 1995. Located in the Eastern Region of Ghana in Kwaebibirem District, GOPDC owns and manages approximately 20,500ha of OP plantation divided between Kwae and Okumaning estates. Some 6,500ha is directly run by GOPDC staff (of which there are approximately 280), while 14,000ha is farmed by a body of 7,000 outgrowers who own land located within 30km of the oil palm mill at Kwae estate. GOPDC assists outgrowers in the development of their plantations and they sell fruits to the company. Approximately 300ha within the concession area is farmed by smallholders – farmers who are permitted to develop a temporary plantation within the estate and sell their OP fruits to GOPDC. The catchment area, as described, is shown in Figure 1 below. Figure 1: Catchment area of GOPDC operations (30km radius from Kwae mill) Kwae Concession Okumaning Concession 3 Three main operations are undertaken by GOPDC: OP plantation development; processing of fresh fruit bunches (FFBs) in the mill to produce CPO and PKO; and refining/fractionation of CPO into higher value products. Plantation development activities include seed germination, OP cultivation in the pre-nursery, nursery and main plantation, non-mechanized harvesting and collection of FFBs and transportation of FFBs to the mill. GOPDC operates a 60 ton/hour FFB mill (which is currently being increased to provide 80 ton/hour capacity) and a 60 ton/day palm kernel mill, where all FFBs are processed to produce CPO, PKO and palm kernel cake (PKC). Some 98% of CPO and is processed further at the refinery/fractionation plant (which has a capacity of 100 ton/day) to produce higher value products. Olein and stearin are the main refined products from CPO, with refined bleached deodorized oil (RBDO) and palm fatty acid distillate (PFAD), as additional, smaller volume products. To give an indication of the order of magnitude of their operation, GOPDC was expected to produce approximately 26,000 tons of olein and stearin, 1,300 tons of PKO and 1,300 tons of RPKO in 2009. This equates to approximately $20.9m in sales. Products are stored in tanks at Kwae Nucleus Estate and at Tema Tank Farm, located at Tema