Global Business Reports CONTENTS Industry Explorations
18 22 35 27 59 45 68 54 69 CHALLENGES
EXPERT OPINIONS EXPERT Industry leaders give their Hydrocarbon development An exploration of the various
opinions on Ghana’s geological FUELLING GROWTH promises to be an “enabling challenges facing the Ghanaian potential, the countries electric- industry”, providing the en- hydrocarbon sector, including ity issues, and the future of oil ergy support further economic finding experienced employees, and gas in the country growth and encouraging the the logistical hurdles, and the financial sector’s development. business environment.
Overview Running Towards Prosperity
8. Ghanaian Hydrocarbons INTRODUCTION AND OVERVIEW 10. Interview with the Ghanaian Ministry of Energy DR. JOE ADJEI, MINISTER OF ENERGY
Upstream Oil Undeniable Potential
14. The Jubilee Fields INTRODUCTION AND OVERVIEW 16. Interview with Tullow Oil GAYHEART MENSAH, HEAD, INVESTOR RELATIONS AND CORPORATE COMMUNICATIONS 17. Exploration Potential THE POSSIBILITY OF UNDISCOVERED RESERVES 19. Interview with Ghana Oil Company Ltd CHRIS ACKUMMEY, DIRECTOR
Upstream Gas Providing for Ghana’s Energy Needs
22. Powering Prosperity PROVIDING ENERGY FOR GHANA’S GROWING ECONOMY 24. Interview with Volta River Authority KWEKU A AWOTWI, CHIEF EXECUTIVE 25. Gas Production THE DEVELOPMENT OF GHANA’S ASSOCIATED GAS 26. Interview with AA Horizon TOUFIC HAROUN, DIRECTOR
Services Engineering Progress
30. The Service Industry INTRODUCTION AND OVERVIEW 31. Interview with Global Energy Ventures DARREN LAST, OPERATIONS MANAGER, GHANA 33. Interview with Expro ALLAN SUTHERLAND, GHANA COUNTRY MANAGER 34. Interview with SGS MICHAEL SAVAGE, MANAGER 35. Local Content DEVELOPING THE GHANAIAN SKILLSET 37. Interview with Takoradi Gas Ltd ANURA KALUARACHI, GENERAL MANAGER 38. Interview with Technip Ghana JOHN OSEI WUSU, COO
4 Global Business Reports // GHANA OIL & GAS Industry Explorations Global Business Reports Industry Explorations CONTENTS EXPERT OPINION SPECIAL REPORT FINAL THOUGHTS 58 48 68 69
George Aboagye, CEO of the The so-called “Dutch Disease” Thoughts on the future Ghana Investment Promotion has proven to be a common potential of Ghana’s oil and gas Centre (GIPC), explains the sup- affliction in resource-based industry, its role in the country’s port provided by his organisation African economies. With the economy, and the challenges it to foreign investors right guidance, however, Ghana must overcome to achieve this, can avoid this danger. from leading businessmen.
39. Interview with Menergy ROY ABOKU, BUSINESS DEVELOPMENT 41. Logistic Solutions IMPORTS, EXPORTS, AND DISTRIBUTION 43. Interview with ASO Orwell ERNEST POKU, COUNTRY GENERAL MANAGER 44. Interview with Damco FRANK TONY ESHUN, MANAGING DIRECTOR 45. Interview with Greenline Logistics SORAYA ANGLOW, CEO
Special Report The Dangers of Dutch Disease
48. Growth Brings Challenges GHANA’S SUSCEPTIBILITY TO “DUTCH DSIEASE”
Challenges and Opportunities The Business Environment
54. Doing Business INTRODUCTION AND OVERVIEW 56. Interview with Matthews Consult ANTHONY MATTHEWS, MANAGING PARTNER 57. Interview with Shawbell Consulting PHYLLIS CHRISTIAN, CEO 58. Ghanaian Support for Foreign Investors GEORGE ABOAGYE, CEO, GHANA INVESTMENT PROMOTION CENTRE 59. Paying for Progress THE GHANAIAN FINANCIAL INDUSTRY 61. Interview with Edward Mensah, Wood & Associates Ltd JAMES WOOD, MANAGING DIRECTOR 63. Interview with Fidelity Bank NANA YAW KORANTENG, HEAD ENERGY/MINING, OIL AND GAS CORPORATE BANKING DEPARTMENT 64. Interview with the Ghana Stock Exchange EKOW AFEDZIE, DEPUTY MANAGING DIRECTOR 65. Interview with Barclays BENJAMIN DABRAH, MANAGING DIRECTOR
Appendix Into the Future
68. Final Thoughts 70. Index 71. Credits
This research has been conducted by Angela Harmantas, Pavlina Pavlova, and Tom Hurst | Edited by Barnaby Fletcher | A Global Business Reports Publication | For more information, contact [email protected] or follow us on Twitter @GBReports.com
Industry Explorations Global Business Reports // GHANA OIL & GAS 5 Global Business Reports ARTICLE Industry Explorations Ghanaian Hydrocarbons A brief overview of the oil and gas industry
Ghana’s prosperity has always been tied name “Ghana” (meaning “warrior king”) of the slave trade. to the extractive industries. The Waga- is derived, controlled the gold trade of Ghana won independence from Britain dogu Empire of the 7th to 13th century, western Africa. Muslim writers, brought in March 1957: the first sub-Saharan Afri- the capital of which lay around 500 miles to the empire through trade, spoke of can nation to achieve freedom from Euro- to the north of the country’s modern the wealth contained in the southern pean colonization. While the immediate capital, Accra, and from whose rulers the gold mines; it was reputed that even post-independence history was one of the court dogs wore golden collars. The political strife and economic uncertainty, Population: 25,241,998 (July 2012 estimate) Ashanti Empire recent decades have seen Ghana striv- Capital: Accra Yet resources have not always brought ing to reclaim its ancient prosperity. The Head of Government: President John Dramani benefits to the African continent. Euro- country has experienced uninterrupted Mahama pean’s, initially Portuguese, first arrived GDP growth since 1985; 2012 will see Currency: Cedi (GHS) on the shores of modern Ghana in the this growth enter its 28th consecutive GDP: $38.6 billion (2011 estimate) 15th century searching for the source of year. In 2011 the country posted an im- Growth Rate: 14.4% (2011 estimate) GDP per Capita: $3,100 (2011 estimate) African gold. The Dutch, the British, the pressive growth rate of 14.4%, making Economic sector breakdown: agriculture: Spanish, and other Europeans all fol- it the second fastest growing economy 28.3%, industry: 21%, services: 50.7% (2011 lowed and soon turned the country into in the world behind Qatar. Indeed, in estimate) a hub from which they could control the many ways Ghana is the poster child of a Exports: $13.13 billion (2011): gold, cocoa, extraction and exportation of gold and continent that in recent years has found timber, tuna, bauxite, aluminum, manganese ore, other minerals. This stretch of coastline its economic confidence; until 2015 it is diamonds, horticultural products consequently became known as the estimated to grow at an average of over Imports: $14.03 billion (2011): capital equipment, petroleum, foodstuffs “Gold Coast”: a littoral that gained in- 7% per annum, the eight-highest growth Major Trade Partners: China, Netherlands, UK, famy as one of the primary points of de- rate in the world. Nigeria, US parture for slaving vessels at the height Strong macroeconomic policies, a stable
Domestic Market: BURUKINA FASO Population and Poverty Source: CIA World Factbook Upper East
Upper West BENIN 25,241,998 Population 2011
Northern 11.44 M Labor Force 2011 TOGO IVORY COAST GHANA
Brong - Ahafo 51.7% Poverty Line 1992 39.5% Ashanti Poverty Line 1998
Volta 28.5% Eastern Poverty Line 2006 Greater Accra Western Accra Central 11 % Unemployment Rate 2000 50km
8 Global Business Reports // GHANA OIL & GAS Industry Explorations Global Business Reports Industry Explorations ARTICLE
government and the exploitation of the Yet the excitement should be tempered list measure driven by the upcoming country’s plentiful natural resources have by caution. This is the region, after all, for elections in December this year. This been the foundations for a growth that which the phrase “the curse of the black election may make a continuing reduc- is apparent wherever you look: vehicle gold” was created. Admittedly, Ghana tion of the fiscal deficit politically unten- purchase grew by a record 88% in 2011; seems less likely than its regional peers able, especially in a country where GDP- energy consumption is rising by an annu- to succumb to the problems stereotypi- per-capita is still only $3,100, threatening al average of 10%; 2011 saw production cally associated with resource-based the sensible macroeconomic policies the of cocoa, of which Ghana is the world’s African economies: resource national- government has previously adhered to. second-largest producer, rise to a record ism, corruption, and “Dutch Disease”. In Ghana’s track record is good. Sensible 1 million tons; and a rebasing of national terms of GDP-per-capita it outperforms policies have led the country ever closer accounts in 2011 has propelled Ghana’s its neighbours and even regional giant to prosperity (ranked seventh in Africa global position to among the lower mid- Nigeria. The proportion of its population in the Ibrahim Index of African Govern- dle income group of countries. living below the national poverty line has ance 2010). A free press (one of only five In this context, the addition of an oil and fallen from 51.7% in 1992 to 39.5% in Sub-Saharan African nations ranked as gas industry promises to bring grand re- 1998 and 28.5% in 2006, and has un- “free” by Freedom House’s Freedom of wards. In 2007, commercial quantities of doubtedly fallen further since then. In the Press 2012 report) plays an important oil were discovered off Ghana’s coast in Transparency International’s Corruption role in holding politicians accountable. two sites that would come to be known Perceptions Index 2011 it ranked 69th, The December 2012 election is expected as the Jubilee fields. The effect that this tied with the European nations of Italy to maintain Ghana’s tradition of peaceful will have on Ghana’s rise is promising; and Slovakia, and above Latin American democracy. All of this points to the coun- the “black gold” could form a basis of powerhouse Brazil. try’s ability to successfully integrate the wealth just like ordinary-coloured gold Nonetheless, however, there are risks. oil and gas industry into their growth. did in the past. The African Economic Ghana’s decision late last year to re- Today West Africa’s warrior king faces Outlook predicts the oil industry to add examine the fiscal arrangements of the a new battle; to ensure that the discov- 0.7% to GDP growth in 2012 (7.6% non- mining sector could well be a sensible ery of petroleum sustains the promising oil growth, and 8.3% with oil) and 1.4% decision in line with the International growth of its economy rather than con- to GDP growth in 2013 (6.3% non-oil Monetary Fund’s (IMF) advice to raise demning it to the mistakes of past oil growth, and 7.7% with oil). taxes. Yet some are seeing it as a popu- exploitation in the region. • 14.4% 8.8% 39.4 GDP Growth Rate Inflation Rate Gini Index 2011 Average Consumer Prices 2011 2005-06
Source: World Bank Source: International Monetary Foundation, CIA World Factbook Source: CIA World Factbook
GDP (current US dollars) World’s Fastest-Growing Source: World Bank, CIA World Factbook 39.19 Economies (20011-2015) 40 Source: The Economist, IMF (billion) China 9.5%
30 India 8.2%
Ethiopia 8.1%
20 Mozambique 7.7%
Tanzania 7.2%
Vietnam 10 7.2% Congo 7.0%
GHANA 7.0% 2003 2005 2007 2009 2011 Annual average GDP growth
Industry Explorations Global Business Reports // GHANA OIL & GAS 9 Global Business Reports INTERVIEW MINISTRY OF ENERGY Industry Explorations
Interview with which will benefit local people. How can the Ministry of Energy work Dr. Joe Adjei with other key stakeholders to empower local Ghanaians to participate in Gha- na’s oil and power development? MINISTRY OF ENERGY Ghana has been successful within the power sector. There are three different lo- What measures have been taken to en- The government has two different mod- cal companies that manufacture cables and sure that Ghana will become a major els for investment into power generation, conductors and the government has taken exporter of oil and power by 2012 and supporting independent power producers an $80 million local facility to produce all 2015? What action still needs to be taken by providing easy access to land and ba- of the required conductors for 2012. Inter- to achieve this target? sic infrastructure. Companies who choose national contractors use their own experi- Energy is critical for the development of to work with the government through the enced supervisors to ensure that projects the Ghanaian economy, although a recent PPP Model with the Ministry of Finance meet specific requirements, although local study that was carried out by the govern- can agree on what percentage of equity construction contractors are used to com- ment highlighted that access to credit and the government will take and receive help plete projects. energy are two key constraints to future if debt components are necessary. Ghana was not prepared in advance for the economic growth. Ghana experienced a The FDI for the whole of Africa decreased discovery of oil, so the country is still try- major power crisis in 2006-2007, which ul- by 12% in 2011, although Ghana’s FDI dou- ing to develop its resources to meet the timately reduced Ghana’s GDP by 1%. It bled from $650 million in 2010 to $1.2 bil- demand. Legal framework is being estab- is vital for Ghana to have an internally ro- lion in 2011. The counter-risk in Ghana has lished and the Ministry is working with bust system. The Ministry of Energy will decreased significantly because of political the private sector to train local Ghanaians, introduce a business-focused policy for stability, which has increased the amount although it will be difficult for Ghana to the export of electricity to neighboring Af- of investment into the country. Ghana will maximize the local content benefits of the rican countries. The Ministry of Energy has be able to raise the necessary investment Jubilee Fields. Twenty-four students were created structured IPP and PPP models that the country requires if it continues to accepted into the Tullow scholarship pro- to encourage the private sector to invest maintain an attractive investment climate gram in 2011, which increased to 50 stu- in Ghana. The government has created an with clear regulations for investors. dents in 2012. The students were given the attractive investment environment for in- The government has been encouraging opportunity to complete their Masters De- dependent power producers, and provides transmission companies to take loans gree in different areas and these students assistance to companies by taking an equi- within Ghana. The cost of transmission will return to Ghana to work in the industry. ty stake, which enables the private sector should not be a significant component in The Ministry of Energy has finished the to remain the operator. the tariff; investments have been created Local Content Policy and the Implementa- There have been more than 40 discoveries to make the pass through tariff as low as tion Structure and Guidelines and we are in Ghana since the discovery of the Jubilee possible, which ultimately makes the tariff working with the Norwegian government Fields. The Ministry of Energy is working affordable for the end user. The Ministry of to develop legal framework for accidental with IOCs to develop discoveries that are Energy will be able to recoup the invest- work with local people. proven to be of commercial value. Tullow ment that we have made in the future, is working with the Ministry of Energy although there is a lot of additional invest- Do you have a final message for our on the TED project, which is three differ- ment needed. The Ministry of Energy is readers about Ghana’s future develop- ent discoveries that have been combined also working with private financers who ment in the energy and petroleum sec- together to produce 120,000 boe/day. The are willing to invest into facilities. tors? Ministry of Energy will have 180 days to ap- The biggest challenge that the Ministry of The Government of Ghana is committed to prove Tullow’s Plan of Development. In ad- Energy will face is within the distribution working with investors to establish agree- dition, Kosmos has made four different dis- sector because of the lack of technology ments that benefit both parties. The Minis- coveries, which is estimated to produce an in the equipment. The distribution system try of Energy can assure all investors that additional 120,000 boe/day. These discov- in Ghana needs to be re-designed and old Ghana will uphold its integrity and it is our eries will ensure that future oil production transformers need upgrading to enable mission to banish the conception that Afri- in Ghana will be sustained. In addition, Eni them to meet current demand. As the ser- ca is a corrupt continent. Ghana welcomes and Vitol have made a discovery of 1.6 tril- vice and manufacturing sectors in Ghana all investors into our country, providing that lion cubic feet of recoverable gas reserves, continue to grow and use energy produc- they respect our laws and our people. It is which will be fast tracked to enhance the tively, investors will see that projects in vital to create employment for the growth export of power. Ghana can provide a return on investment. of Ghana’s economy and it is important for If Ghana plans and executes the Chinese investors coming into Ghana to use the What initiatives are the government gas project successfully, it will receive same environmental standards and regula- creating in order support investment $15 billion of revenue over the next five tions as they would in their own countries. throughout the value chain from up- years, which will ensure that the country Ghana is prepared to set the pace for the stream, downstream and generation? improves in terms of education and health, whole of Africa. •
10 Global Business Reports // GHANA OIL & GAS Industry Explorations Global Business Reports Industry Explorations FACTSHEET
Foreign Direct Investment, Balance of Payments (current US dollars) GDP Source: World Bank (purchasing power parity)
3000 2011 (million) 2,527
2500
2000 75.9 billion dollars 1500 Country comparison
1000 to the world
500
2003 2005 2007 2009 81 Source: CIA World Factbook
Budget Revenues Budget Expenditures GDP (per capita) 2011 2011 2011 8.76 10.38 3,100 billion dollars billion dollars dollars Source: CIA World Factbook Source: CIA World Factbook Source: CIA World Factbook
Exchange rates Budget Deficit cedis (GHC) per USD dollar 2011 Source: CIA World Factbook 1.5
1.4 -4.3% of GDP 1.3 Source: CIA World Factbook
1.2 Investment (gross fixed) 2011
1.1
1.0 19.9% of GDP 0.9 2007 2008 2009 2010 2011 Source: CIA World Factbook
Industry Explorations Global Business Reports // GHANA OIL & GAS 11 Courtesy of Technip SPECIAL SECTION
The Danger of Dutch Disease
Why Responsibility is Important When Developing Ghana’s Industry
Global Business Reports // GHANA OIL & GAS 47 Global Business Reports EXPERT OPINION Industry Explorations
The primary focus of the GIPC is to pro- ensure that Ghana will be able to export mote, encourage and facilitate invest- cheaper gas power as a commodity to Ghanaian ment in Ghana for both foreign and local neighboring countries like Nigeria that investors. Incentives have been created will have an increased demand for power under the GIPC Act to encourage com- in the near future. The West African Pipe- Support panies to register with the Registrar line currently imports gas from Nigeria to General and then with the GIPC as a Ghana, although we believe that this will solely Ghanaian company, foreign com- reverse and Ghana will be the net ex- for pany or joint venture. porter of power to Nigeria by 2020. The success of the GIPC can be meas- Since the Jubilee Fields discoveries in ured by the length of time that it takes to 2007, the number of companies that have Foreign register a company that is fully compliant registered with the GIPC has increased; with registration requirements. It is the currently 534 companies have registered role of the GIPC to enable companies to with the GIPC, which is a clear indication Investors establish projects and to provide them that the international investor commu- with the necessary support and services nity has become increasingly interested to facilitate production. in Ghana as an investment destination. George Aboagye, CEO, The number of jobs that are created, the The value of investment by registered Ghana Investment value of projects and volume of estab- companies in Ghana almost doubled lished companies are indicators of our from $300 million in 2008 to $550 million Promotion Centre success at the macro-level. The GIPC in 2009 and increased to $2.18 billion in (GIPC) promotes different districts and regions 2011. Registration does not guarantee by working with District Assemblies and that a company will perform, although Municipalities to secure land for inves- the response from investors to Ghana’s tors in addition to the GIPC Land Bank, economic performance has been posi- which has the same focus. tive. Some of the major successes of the This success is not solely due to the pres- GIPC have been our ability to aid the de- ence of oil and gas in the country. There velopment of projects to achieve value has been a stable political environment and create jobs. It is important for the in Ghana for over 20 years and political GIPC to grow sustainably and to en- dispensation has been improved, which courage the investment of international are factors that the international busi- banks into Ghana; this has been suc- ness community has recognized. Ghana cessful as there is interest from Ameri- has maintained low inflation levels and is can and Chinese banks. looking at initiatives to decrease interest With regards the oil and gas industry, and lending rates in order to encourage the 1994 GIPC Act does not facilitate further investment. investment into the mining and petro- Ghana has the resources to immobilize leum sectors. However, the Act was four-month reserves for import cover reviewed and the GIPC has now set lim- and the GDP of the country has shown ited constraints for the exploration and the true nature of the economy. In addi- extraction of mining and oil and gas. The tion, the profit margin in Ghana is 30%, GIPC participates in the registration of so investors are able to make money. oil and gas service companies that pro- However, local investors who borrow vide recruitment, training, transport and within Ghana have high interest rates equipment to oil and gas rigs. While the of 22%, which is a challenge for smaller GNPC is the primary player involved in companies. upstream activity, the GIPC is expected Ghana has demonstrated that it is an at- to promote investment into downstream tractive investment destination through activities. continued political stability and the coun- One example of this is the power sector. try’s commitment to improve macro- Ghana currently produces 1,000 MW, al- economic conditions. The institutions though the government has a target for that aid the development and promotion 5,000 MW of power supply to be gen- of investment in Ghana are maintaining erated in Ghana. The GIPC is looking to and continuing to develop a high level of attract independent power producers to service to the investment community. •
58 Global Business Reports // GHANA OIL & GAS Industry Explorations