Charles Owusu, CEO of the Petroleum Hub Development Corporation (PHDC), talks to The Energy Year about plans for Ghana’s petroleum and petrochemicals hub and the advantages it holds for incoming investors. PHDC is tasked with setting up an integrated petroleum and petrochemicals hub in Ghana’s Western Region.
What is the investment plan behind the petroleum and petrochemicals hub?
The hub will be an area with a network of infrastructure for the processing of crude oil and raw natural gas into refined petroleum and petrochemical products for the purpose of trading, storage, transportation and distribution to third parties and for export.
The hub will be located on a 20,000-acre [81-square-kilometre] plot of land in the Jomoro Municipality in the Western Region of Ghana as a free zone. The estimated cost for the entire hub per the master plan is USD 60 billion and it will be implemented in three phases.
What are the origins of the petroleum hub vision?
The petroleum hub originated from the president’s Ghana Beyond Aid vision, which aims to make the country self-sufficient. It was about creating jobs for Ghanaians and adding value to the rich natural resources, which is in line with the country’s industrialisation agenda.
Without energy, the industrialisation agenda is not possible. I am confident that under the able leadership of the minister of energy, the vision will be realised.
We want to start a refinery and petrochemicals processing and trading hub, similar to what Singapore and Malaysia have done. There are currently no hubs in Africa.
Looking at the world map, there is no hub in Africa and Ghana is well situated to serve as one. We want to develop the downstream sector in order to become a trading hub by leveraging our location, our low political risk and the stable security and safe environment.
This corporation was created in 2020 through the Petroleum Hub Development Corporation Act, 2020 (Act 1053) to drive the whole agenda in terms of securing licences, permits and other required governmental support.
What impact will this have on the people of Ghana?
We expect a 70% increase in GDP. At minimum, it will create 780,000 jobs for the youth and people of Ghana. In order to foster local content development, the corporation will implement training programmes for artisans and graduates to create opportunities for Ghanaians to work in the hub. In addition, qualified local companies will get the opportunity to provide goods and services to the hub.
How will the hub leverage Africa’s demand for imported refined fuels
Africa depends on imports for more than 51% of its petroleum and petrochemical products. Given the operationalisation of the African Continental Free Trade Area (AfCFTA), headquartered in Accra, Ghana, which treats Africa as a single market, demand is anticipated from the region to the entire continent.
As we speak now, there are a lot of countries in the sub-region that are dependent on us for petroleum products, especially the landlocked ones. As of 2016, annual consumption in the sub-region was about 30 million tonnes, with 62% of that consumed by Nigeria, followed by Ghana and Senegal.
This is why we are going to build three refineries, each of them with a capacity of 300,000 bpd. That will get us at least 900,000 bpd in total. The idea is that each refinery will start at 300,000 bpd but should be able to expand to 500,000 bpd by 2030 or 2035. That means the hub’s minimum capacity is 900,000 bpd, but this could be expanded to 1.5 million bpd.
How will the hub help Ghana add value to its raw materials?
The hub is based on four major types of infrastructure: refineries, petrochemical plants, storage and jetties with port facilities. There will be five multi-purpose plants to produce lubricants, fertilisers and cosmetics, depending on the needs of the market, with a 90,000-bpd capacity each.
We are expecting three of these petrochemical plants to be fed with gas, and two to be fed with crude oil. The feedstock will come from byproducts of the refineries.
We are anticipating building tank farms with 10 million cubic metres of storage capacity, of which, 8 million cubic metres will be for the finished product and 2 million cubic metres will be for crude oil.
The hub will also have the jetties and port infrastructure for receiving the raw materials for the petrochemical plants, crude oil and discharging the finished products after it is refined. We are looking at establishing a minimum of two jetties with multiple berths so we can take all sorts of vessels.
What other types of infrastructure are you aiming to develop around the hub?
We plan to develop four ancillary parts as well. We are looking at repairs and maintenance, LNG terminals, nautical services, inspection, calibration and testing.
This testing facility will help ensure that both raw materials received and finished products ready for export, meet all the required quality standards and procedures and conform to best international industry practices.
The hub will have its own 500-MW gas-fired combined-cycle power plant, as well as a residential and commercial area with water and waste treatment.
Our long-term vision involves constructing our own dry dock and having the capacity to build FPSOs in-country.
How is the corporation planning to attract investors’ interest?
The general corporate tax rate in Ghana is 25%, whilst that of the petroleum upstream and mining sectors is 35%. However, because the hub is a free zone enclave, its corporate tax will be 15% after a 10-year tax holiday.
The government will provide both economic and regulatory incentives to investors such as corporate tax exemptions and waivers. These waivers will cover import duties and taxes and levies on machinery and equipment.
Investors can also be sure of a robust and stable legal and regulatory system, opportunity to repatriate profits and dividends and double taxation agreements.
Other benefits of investment include Multilateral Investment Guarantee Agency (MIGA) membership as well as bilateral investment treaties and guarantees against expropriation.
In addition, Ghana has a conducive business environment with a skilled workforce, stable macroeconomic and political conditions and a strategic location that easily connects to markets for these products.
What will the contracting terms be in the corporation’s relationship with investors?
The corporation is not a regulator itself but a facilitator, a one-stop service centre. We are a liaison between the government and the investors. Our board of directors is incredibly diversified.
We have a plan to work with the NPA, EPA, Energy Commission and the Ghana Free Zones Authority to help facilitate incident-free and smooth regulatory compliance.
The hub is open to local and foreign companies, joint ventures and all legal and legitimate businesses globally.
The key infrastructure within the hub – such as refineries, storage facilities, petrochemical plants, jetties and port infrastructure – will be solely private-sector investments (under a build, own, operate model or BOO), while the ancillaries will be done through joint ventures between the government through PHDC and the private sector.
The investor will run the project in perpetuity if it falls under key infrastructure whilst the ancillaries will depend on the terms within the JV agreements.
The government will designate the entire hub area as a free zone enclave, ensuring tax incentives for investors and developers, a reliable and transparent legal framework, security and a conducive business environment as well as the provision of basic infrastructure such as rail, roads and utilities that are required for the operationalisation of the hub.
The local content law for JV partners does not apply to companies operating in the hub.
What is the estimated timeframe for development?
If all goes well, by the end of Q1 2022 we should sign an agreement for phase one and we could start developing the land as early as Q2 of 2022.
There are three phases of this project. Each phase should take about five years to build. We divided it into phases because we don’t want delays in the project development and implementation.
We are going to assist companies to obtain permits and licences to make the process smooth and investor friendly. Investors are encouraged to work with the corporation to facilitate the acquisition of permits and licences.