Ghana's oil and gas infrastructure continues to develop as companies explore onshore and offshore potential

The decade from 2009 to 2019 was highly transformative for the Ghanaian energy sector. When the nation made its first discovery of deepwater oil and gas in 2007, biomass was the largest component in its total energy consumption. The subsequent exploitation of this new hydrocarbons resource, combined with a national drive towards electrification, saw a significant reduction in the importance of biomass – mostly firewood that was historically used to heat homes and small businesses – as an energy input, and by 2016 it accounted for just 39% of all energy consumed, compared to 49% in 2006.

Conversely, the use of petrochemicals has risen, accounting for nearly half of energy consumed in 2016 and gaining ground as both upstream and midstream oil and gas infrastructure continues to develop. Crude oil is one of Ghana’s most valuable exports and is an important contributor to GDP. According to the Bank of Ghana, in 2018 the value of crude shipped overseas reached $4.57bn, up from $3.12bn the previous year and second only to the country’s sizeable gold exports.

Recent History

Ghana’s hydrocarbons industry is a relatively new one, and oil reserve data changes rapidly as fresh discoveries are made. At the start of 2018 proven oil reserves stood at 660m barrels, with subsequent new discoveries pointing to a significantly greater resource: some 1.5bn barrels were found in offshore fields in late 2019, but the recoverable amount is yet to be determined. From January to June 2019 over 34m barrels of crude oil were produced from Ghana’s offshore oil and gas fields, namely the Jubilee field; the Tweneboa, Enyenra, Ntomme (TEN) fields; and the Sankofa field. This represents an 18.4% increase over the same period in 2018, and the highest half-year crude oil production in the country’s history.

The gas associated with Ghana’s oil finds, meanwhile, is proving to be a useful alternative feedstock for the country’s power generation system and industrial sector, which have previously relied on hydropower and expensive thermal plants fuelled by light crude oil and diesel. Furthermore, in February 2019 the Ghanaian government released its Renewable Energy Master Plan, positioning renewable energy providers to play a significant role in the national energy sphere in the years to come.

Regulation & Oversight

Numerous entities are responsible for developing and regulating Ghana’s energy sector. The Ministry of Energy (MoE) formulates the sector’s overall policies, while the Petroleum Commission oversees upstream projects. At the operational level GNPC explores oil and gas fields independently, and partners with other parties to undertake exploration and production (E&P) 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 MoE and the State Enterprises Commission monitor the segment’s performance; and the Public Utilities Regulatory Commission is the economic regulator and tariff-setter.

The principal legislation for the sector is the Petroleum (E&P) Law of 1984, which establishes the contractual relationship between the state, GNPC and prospective investors in upstream petroleum operations. In 2016 the government introduced the Petroleum E&P Act, which aims to make the sector more attractive to international investors 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 – which saw its first usage in 2019 (see analysis).

In addition, the government is working on a new gas law that will provide greater regulatory certainty and predictability in the downstream natural gas market. The goal of the new legislation is to attract fresh investment to the segment and help the government meet its goal of supplying a steady supply of natural gas feedstock to the petrochemical industry.

Geography

Hydrocarbons activity in Ghana is carried out in four main basins: the offshore Western Basin, Central Basin, Eastern Basin and the onshore Voltaian Basin. The most active of these is the Western Basin, which contains the Jubilee field, the TEN fields and the Sankofa field, together accounting for the majority of Ghana’s upstream activity. The Central Basin contains the Saltpond field, which was discovered in 1970 and is one of the oldest oilfields in the country. In 2010 a significant fall in production led to a government decision to decommission the field. Although the Saltpond was granted a brief reprieve in early 2018, when the authorities reported that some companies had expressed renewed interest in utilising newer technologies in a bid to further exploit the area, in November 2019 a two-phase plan to fully decommission the field was finally announced.

The Eastern Basin, which is home to the Accra and Keta blocks, has also remained relatively undeveloped. Despite a number of exploration phases, the basin has yet to successfully produce oil in commercial quantities. The stratigraphy of Ghana’s offshore oil fields is characterised by hard and interbedded formations, which in some cases can result in high production costs. These expenses are mitigated by the relatively high value of the light and sweet crude that is found in some of the country’s most important fields. For example, the average price of crude oil extracted from the Jubilee field in the first half of 2019 was $64.01 per barrel, which was higher than the average Brent price of $63.23 over the same period.

Looking to Ghana’s onshore resources, the Voltaian Basin covers almost half of the country’s landmass and is regarded as a potentially promising area for hydrocarbons extraction. Past surveys have identified a number of deposits in the northern region of the basin, and as of the end of 2019 the government-owned Ghana National Petroleum Corporation (GNPC) was assessing data acquired from a 2D seismic survey of the area, with a view to opening up the basin for block licensing (see analysis).

Upstream

Since its establishment in 1983 the GNPC has represented the state in the development of oil resources. The corporation is also the national gas sector aggregator and is tasked with ensuring that there is a sufficient supply of fuel to meet the country’s increasing energy needs. After the turn of the 21st century the GNPC sought out the assistance of international partners in its hunt for the country’s first commercial oil, and in 2007 US-based Kosmos Energy discovered the deepwater oil and gas reserves of what later became the Jubilee field. Development of the Jubilee field is being undertaken by Tullow Oil Ghana, which holds the largest amount of shares, with 35.5% of the total; Kosmos Energy and Anadarko, with 24.1% each; GNPC with 13.6%; and South Africa’s PetroSA with 2.7%. According to Ghana’s Public Interest and Accountability Committee, Jubilee has the largest output of the country’s three producing fields, with a production level of approximately 28.5m barrels in 2018, despite two shutdowns in that year which allowed for works to be undertaken.

Ten Fields

Tullow Oil is also the main operator of Ghana’s second most important production area, and in August 2016 began pumping the first oil from the TEN offshore fields. In 2018 they produced around 23.6m barrels, or roughly 38% of total output. Tullow currently retains a 47.2% interest in the venture, along with participants Anadarko and Kosmos Energy, which hold a 17% share each, along with GNPC with 15% and PetroSA with 3.8%. Since February 2018 the partnership has been implementing a multi-year drilling programme in the TEN fields. This area is estimated to hold 240m barrels of oil and 396bn standard cu feet (scf) of gas. The fields are connected through extensive subsea infrastructure to the Jubilee field, which aids the transport of gas to the Atuabo Gas Processing Plant – the natural gas processing facility of government-owned Ghana Western Region.

Cape Three Points

Ghana’s most recent production area accounts for around 17% of total output, producing 10.6m barrels in 2018. Italy’s Eni began production at the Cape Three Points integrated oil and gas development project in mid-2017. The first commercial oil flowed from the site in May 2018, starting with an average of 12,000 barrels per day (bpd) and increasing to 36,000 bpd by the end of the year. The principal production area is made up of the Sankofa Main, Sankofa East and Gye Nyame fields, which between them are estimated to contain 500m barrels of oil and 40bn cu metres of gas. 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. The potential of the area has attracted considerable international interest over recent years. In early 2018 the government signed a deal with US energy giant ExxonMobil to explore for oil in the deepwater Cape Three Points development project. In April 2019 Aker Energy Ghana completed a phase of appraisal drilling in the Deepwater Tano Cape Three Points block, with preliminary results showing that 5m to 15m barrels of oil equivalent production can be added to its existing output.

New Discoveries

The success of Ghana’s three oil-producing areas has caught the attention of international hydrocarbons players and opened the door to a new era of exploration partnerships. In addition to Eni, other oil and gas companies from around the world have explored onshore and offshore potential in Ghana, including ExxonMobil, Shell, BP, Texaco and Tap Oil. Ghana has also attempted to encourage domestic operators in the oil and gas sector, though its efforts have been met with mixed results (see analysis). However, a recent discovery by Ghanaian indigenous oil and gas company Springfield E&P has proven to be one of the most significant in years.

In late 2019 Springfield E&P, together with its partners GNPC and its exploration company EXPLORCO, became the first independent Ghanaian – and, indeed, the first African – energy company to drill in deepwater and find hydrocarbons. Springfield is the operator and majority interest holder of West Cape Three Points Block 2, where discovered oil reserves stand at 1.5bn barrels. The company estimates that the undiscovered potential of the block is over 3bn barrels of oil and gas, held within proven reservoir units. In early 2019 the MoE opened up six blocks for exploration, three of which were to be allocated according to a competitive bidding process (see analysis).

A total of 60 separate applications were submitted by 16 companies for the right to explore in Ghanaian territory, and in July 2019 the MoE announced that First E&P, in partnership with Elandel Energy Ghana, had been awarded exploration rights for Block 3, while Eni, in partnership with Vitol Upstream, was granted permission to explore Block 2. The third block offered in the bidding round received no applications.

Gas

All of Ghana’s oil-producing fields are also sources of associated natural gas, with the Jubilee field producing the largest volume in 2018, at 44.8bn scf. Roughly half of this was directed to the Atuabo Gas Processing Plant, while the remainder was reinjected, used to generate local power or flared. The TEN field produced approximately 39.5bn scf of wet gas over the same period. Meanwhile, the Sankofa-Gye Nyame field commenced commercial production in June 2018, and has since shown a daily production of over 40m scf per day. Gas plays an increasingly important role in the country’’s energy mix. According to the Energy Commission, the total flow of gas to the country’s consuming facilities was 58.5bn scf in 2018. Around 42% of this volume was imported from Nigeria via 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 remainder was derived from indigenous sources through the Atuabo plant. The bulk of 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.

Ghana Gas is responsible for operating the infrastructure required for the gathering, processing, transporting and marketing of natural gas resources. In August 2019 it inaugurated its new office complex in Takoradi. The facility, constructed by Chinese oil and gas enterprise Sinopec, is expected to act as the company’s command and control centre for the remote operation of its network of processing plants, and associated pipelines and stations.

Another significant infrastructure advancement in 2019 was the successful testing of the new Takoradi-to-Tema pipeline, owned by the West African Gas Pipeline Company. The interconnection project transports natural gas from the Western Region to the eastern area of the country, where a number of energy-focused projects are emerging in the Tema-Accra power and industrial enclave. According to Kofi Koduah Sarpong, CEO of GNPC, the company was considering exporting gas to neighbouring Côte d’Ivoire through a facility that would allow for bidirectional transfers between the two countries.

Midstream

Ghana’s midstream energy segment remains relatively undeveloped. The country’s sole oil refinery, located at Tema, opened 1963 and has a design capacity of 45,000 bpd. However, maintenance issues have since reduced its capacity to around 30,000 bpd, and the unit has yet to process any domestically produced crude oil. In mid-2019 the Tema Oil Refinery (TOR) was still running at around half of its nameplate capacity, but its management expected a return to full capacity by the end of the year. In December 2019 TOR signed an agreement with oil and energy company Woodfields Energy Resources to process some 11m barrels of crude, and announced its intention to sign similar agreements with other international traders, such as international investment firm Gemcorp and BP. Furthermore, the MoE has announced its objective to construct a new 150,000-bpd refinery by 2022.

Downstream

Meanwhile, Ghana’s downstream continues to be a more vibrant arena, thanks in large part to the government’s 2005 decision to liberalise the import, distribution and marketing of petroleum products. Accordingly, the state-owned Bulk Oil Storage and Transportation Company has lost its monopoly on the storage and distribution of Ghana’s oil products, now competing directly with private bulk oil distribution companies (BDCs). As of late 2019 the Ghana Chamber of Bulk Oil Distributors had a membership of 26 BDCs that collectively accounted for 95% of petroleum supplied to the domestic market. These firms serve the second-largest consumer market for petroleum products in West Africa, and form the basis of a petroleum product centre that extends its commercial lines across the borders to reach markets in Burkina Faso, Togo and Côte d’Ivoire.

The petroleum downstream segment saw a 15% rise in consumption in 2018, according to the latest available figures from the National Petroleum Authority (NPA). Much of this growth was the result of the authority’s successful curbing of illicit fuel activities, such as smuggling via unapproved offshore routes, the under-declaration and non-declaration of products lifted at depots, and the diversion of subsidised social products such as premix fuel, among others.

However, “retail in the downstream segment is increasingly competitive,” Ben Hassan Ouattara, managing director at Vivo Energy, told OBG. “In order to stand out, players have had to develop their offer at service stations, partnering up with fast food companies, banks and mini supermarkets, both as a means of increasing traffic and to unlock additional revenue streams as core margins are diminished.”

The NPA has also been working to extend its local content policy to the downstream segment in a bid to increase indigenous human capital and attract local value-added investments. In March 2019 the Cabinet approved a new local content policy involving the downstream petroleum industry, which covers areas such as the transport and trading of bulk petroleum products. Furthermore, the new policy allows for the establishment of a downstream content committee under the NPA. Under the proposals, companies in a number of key economic sectors, such as mining, would be required to purchase downstream products from 100% locally owned companies in order to claim their fuel tax exemption. At the close of 2019 the policy had yet to pass in Parliament; however, its potential implementation remains an ongoing source of concern for the foreign interests in the sector.

Consumption

Despite recent discoveries and the ongoing expansion of its upstream infrastructure, Ghana remains an importer of energy. According to a 2019 report from the Energy Commission, the growing population and increasing urbanisation rate mean that domestic energy demand is increasing by 10-15% per year. Furthermore, natural gas, light crude oil, diesel and heavy fuel oil are required to fire the thermal plants that power Ghana (see Utilities overview).

Expected growth in services and agriculture, resulting from policies such as One District, One Factory and Planting for Food and Jobs, is also driving demand for petroleum products. For economic reasons, the country has traditionally preferred to export its higher-grade oil and import lower-grade oil largely derived from Nigeria and Equatorial Guinea. Ghana imports natural gas from Nigeria via the WAGP, although the need to do so is declining as domestic supply increases. Meanwhile, around a third of the total requirement for liquefied petroleum gas comes from local production.

The most significant input trend has been a reduction in the total import of crude oil, which dropped from approximately 1.45m tonnes in 2016 to 233,000 tonnes in 2017, falling further to 197,000 tonnes in 2018. The decline came largely as a result of a slowdown in refinery operations and the swift emergence of natural gas as a popular fuel for power stations.

Renewables

Ghana’s emergence as a regional hydrocarbons player has overshadowed its potential in renewables. According to the Energy Commission, the country 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 will make large-scale, grid-connected projects highly feasible in the future. In addition, the UN Environment Programme reported in 2015 that Ghana’s solar generation potential stood at 150 MW.

There is considerable potential to generate power through wind technology. According to the Energy Commission, average wind speeds 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 develop a commercial wind facility, although the Volta River Authority (VRA) is 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.

Recent years have, however, seen the emergence of a fledgling solar power industry. A 2.5-MW solar photovoltaic (PV) plant was commissioned by the VRA in 2013 in Navrongo, just next to the border with Burkina Faso, and in 2016 a new 20-MW solar plant was built by BXC Ghana. The same year saw a 100-KW biogas electricity generation facility connected to the national grid for the first time. Since then the Meinergy solar plant, built in 2018 in the south of the country, has added another 20 MW to the total renewable capacity. Ghana’s three solar plants and single biogas facility contribute 42.5 MW to its installed generation capacity of 4780.5 MW, representing around 0.89% of the total. Since 2009 successive governments have made legislative and policy attempts to boost the share of renewables in the energy mix.

In 2011 a new Renewable Energy Act established the legal basis for the development of commercial renewable projects, and in February 2019 the Energy Commission officially presented Ghana’s Renewable Energy Master Plan to the MoE. The investment-focused strategy aims to increase the contribution of renewables to the overall generation mix from a baseline of 42.5 MW in 2015 to 1363.63 MW by 2030 – 1094.63 MW of which is set to be grid-connected. The master plan also foresees renewable energy-based off-grid electrification options for 1000 communities, as well as greater participation in the segment by local companies. “The greatest demand for off-grid solar solutions is expected to come from banks, factories and the hospitality industry, where solar panels are cost-effective and the capital expenditure required is manageable,” Ernest E Amissah, CEO of local renewables firm SunPower Innovations, told OBG.

Ghana is also tapping hybrid solutions in renewables. In August 2019 the authorities inked a $5.7m deal with Germany to construct a 400-KW waste-to-energy plant in Kumasi. The project will use a hybrid solar PV, biogas and pyrolysis plant to produce energy from household refuse. “There are many opportunities for using waste as a resource,” Venan Sondo, general manager of domestic environmental services firm CHAiNT Group, told OBG. “Some promising applications can be found in upcycling, repurposing and reusing plastic waste, in order to create consumer items such as furniture, tyres, bags and shoes.”

Outlook

In terms of licence applications, Ghana’s underdeveloped renewables segment appears to be in the early stages of an intensive period of growth. According to the Energy Commission, by the end of March 2019, 130 provisional wholesale electricity supply licences were issued to potential independent power producers who proposed to develop 7031 MW of capacity from various renewable energy sources. Of these, nearly 64% were for PV generation. Meanwhile, excess grid capacity and an oversubscription of power purchase agreements for solar and wind projects prompted the Energy Commission to place a temporary halt on applications for utility-scale solar PV and wind projects. Most major developments are likely to emerge from upstream activities, where adjustment to the new competitive bidding system is expected to remain a preoccupation. With onshore exploration gaining momentum, regular offshore finds may be supplemented by discoveries in the Voltaian Basin.