DON'T MISS : Talking Africa New Podcast – Angola's dream deferred, plus the promise of Nigerian Fintech

Energy: The only way is up

By Kwabena Mensah in Accra
Posted on Thursday, 25 December 2008 08:29

Buoyed by the promise of oil production of 120,000 barrels per day from the offshore Jubilee oil and gas field, the new National Democratic Congress government has embarked on a new strategy for the energy sector

The promise of substantial oil and gas production starting next year has triggered unprecedented foreign investor interest in Ghana – despite the global financial downturn. Although the initial oil discoveries were made by independent outfits – led by the Anglo-Irish firm Tullow Oil, together with Anadarko and Kosmos Energy of the United States – bigger oil companies from the US, Europe, China, India and Russia are now taking a closer look.

There are reports that financial problems with its private backer, the US-based Blackstone, may force Kosmos to sell its stake in the highly-prospective Jubilee field, with an asking price of more than $3bn. Insiders suggest that China National Offshore Oil Corporation and Royal Dutch Shell are frontrunners to buy the Kosmos stake.

Tullow has no such problems as a publicly-listed company having raised $2bn to develop the Jubilee fields. But with the cost of developing the field over the next three years put at $3.2bn, there will be a need for other players with deep pockets.

The National Democratic Congress government under President John Atta Mills accuses the outgoing New Patriotic Party (NPP) administration of inadequate scrutiny of oil-production contracts and of pushing weak legislation through parliament. These statutes are to be redrafted after a new round of stakeholder consultations, which the Mills government believes will bring in more revenue.

Deputy energy minister Kwabena Donkor says the National Democratic Congress (NDC) has examined the financial provisions in the plans submitted by Tullow, Kosmos and Anadarko, and their partners EO Group, Sabre Oil and Gas, and the state-owned Ghana National Petroleum Corporation (GNPC), and that changes are on the way.

Exporting oil, keeping the gas

Energy minister Joe Oteng-Adjei has already signalled a return to the strategy of GNPC under its former CEO, Tsatsu Tsikata. The new strategy would be based on the export of crude and the retention by the state of associated gas from the Jubilee field to reduce the cost of power generation by building two pipelines to fuel the 550 MW Aboadze Thermal Power Plant and the Osagyefo Power Barge, both in the Western region of Ghana close to the border with Côte d’Ivoire.

Tsikata, who headed GNPC for a decade until 2000, guided an exploration programme based on the hopes of a commercial gas find in the Tano and Saltpond basins, but the NPP government had greater success by providing incentives to oil companies to explore the deepwater concessions. In June 2007, Kosmos made the first of three major discoveries, which turned out to be the biggest anywhere in the world that year.

More scrutiny of contracts could delay the start-up of Ghana’s crude oil exports, due to reach 120,000 barrels a day. President Mills has to balance the need for legal scrutiny with meeting the growing demands of the people, especially those from the Western Region.

The NPP can be credited for sourcing Chinese state financing for the $622m Bui hydro-electric dam, due to come onstream in the first quarter of 2012. However, the catastrophic energy crisis of 2006-07 was a major factor in the party’s election defeat, undoing the economic and political gains of the NPP’s first four-year term.

At least a further $750m in investment is needed to bring about the energy revolution which successive Ghanaian governments have promised the electorate. Whether the lights stay on in Accra will be a sure sign if the Mills government means what it says.

We value your privacy

The Africa Report uses cookies to provide you with a quality user experience, measure audience, and provide you with personalized advertising. By continuing on The Africa Report, you agree to the use of cookies under the terms of our privacy policy.
You can change your preferences at any time.