Q: It’s a new year and what should Ghanaians expect from the oil and gas industry with regards to revenue to government, exploration and production?
A: Government will continue receiving royalty, taxes and oil liftings as per the provisions of the Petroleum Agreements it has signed with the different companies that have invested heavily in the sector. In 2021, the industry contributed about GH11.63 billion to Ghana’s GDP; roughly 7%, and we are hoping for an increase this year. This does not include the economic multiplier effect through indirect jobs, taxes and economic activity.The Jubilee partners last year brought on stream six production wells; four at Jubilee and two at TEN, to help add to production in 2023. The OCTP partners also sustained the production of oil and gas throughout 2022. We are hopeful for a resolution of the Eni/Vitol and Springfield unitization impasse this year. It is a key investment trigger. It is important that this unitization process is undertaken in a transparent manner and in accordance with industry standards.
In the case of exploration, we expect some drilling this year. Our most recent exploration discovery was the Eban exploration prospect in 2021 and Aprokuma IX in 2022 by ENI in its block 4 and we are hoping to have more firm drilling commitments from the Exploration and Production companies this year. However, without any significant new exploration and development investments in the upstream sector, we are unlikely to see an increase in production revenue.
It is also unfortunate that no new petroleum agreements have been signed in the last seven years. We urge government to accelerate efforts in that direction. Our focus this year is to assist government bring in more oil and gas investments to make it possible for existing discoveries of oil and gas, to get to the market. We must pay particular attention to resolving the ENI/Vitol and government impasse. This single issue is hugely impacting Ghana’s attractiveness as a destination for oil and gas investments.
Q: How would you like to see the industry evolve this year?
A: The Chamber is very mindful of potential areas for growth emerging out of the energy transition discourse. Incentivizing the oil and gas industry for increased production while paying attention to the importance of natural gas in the country’s energy mix is key. We need growth in business activity; growth that serves to energize the local service companies and boost the local economy. More thriving businesses means more jobs and means more revenue for the government. I am afraid though, that currently there is very little activity and this is primarily because of the absence of continuous investment in the oil and gas industry. In times of elevated oil prices, the big question is why?
Q: What can the Chamber do about it?
A: We continue to draw the governments attention to the need to engage more with industry and provide support for it. Seeking new investors whilst in contention with current major investors is rather self-defeating. What would make a difference is if the government would engage us before making significant changes that cannot be implemented or that are met with such opposition that stalemate becomes inevitable, resulting in investors looking elsewhere. There is huge competition for industry investment around Africa and further afield.
Q: We are aware that the revenue authorities have embarked on an aggressive audit of foreign companies in the oil and gas sector. What is the Chambers view of this?
A: Whilst I understand the importance of the revenue collection drive that the tax authorities have embarked upon, too often, highly visible productive foreign companies can become easy targets. The real issue here though, is that by using the current tax laws to introduce new taxes, there is a lack of government acknowledgment of the provisions laid out in the Petroleum Agreements signed early on with the companies in question, in which applicable taxes were spelt out. These companies have stability clauses in their petroleum agreements that are meant to protect them from arbitrary impositions of all sorts. The idea behind these stability clauses is to ensure that investors are comfortable making investments, knowing that the rug cannot suddenly be pulled out from under their feet. I’m afraid unless we abide by the provisions of agreements we sign, investor confidence will remain low.
Q: Last year the Bank of Ghana requested the oil and gas industry to support governments effort in increasing forex availability in the foreign exchange market. Any update on where the industry is on this?
A: The companies have responded positively and are doing what they can through management of their operational budgets. In fact, the Jubilee, TEN and OCTP partners in the months of October and November 2022 alone, injected over $17 million from their operations in direct supply of forex to the Bank of Ghana, complimenting Government’s efforts towards increasing forex availability. Actually this is an example of how prior engagement with industry could have helped the government achieve more by focusing also on the service side of the industry where the money is spent. Focusing on the major exploration and production companies can only go so far because given their large capital expenditure projects, there is only so much they can retain.
Q: Issues on the energy transition were very prominent in the news last year. What plans does the oil and gas industry have in relation to the energy transition this year?
A: Developments worldwide last year are proof that each country needs to consider its energy security. For us at the chamber, it is obvious that oil and gas is still in high demand. We really need to find the right approach to the market to attract investment before oil and gas investment in this energy transition era disappears. Government has initiated an energy transition framework which we hope to dovetail into the Chambers efforts in seeking a balance to our energy needs. As indicated in our position paper on the energy transition, government needs to incentivize exploration and development to increase production, enhance gas infrastructure and optimize domestic gas utilization in Ghana while seizing opportunities in emerging decarbonization solutions. We need to take a long, hard look at what Ghana offers as against the rest of the world. There is a role for oil and gas in the context of the energy transition. As I’ve already mentioned there are a large number of discoveries in Ghanaian waters that have yet to be developed and if this isn’t addressed with urgency the likelihood is that the resources and revenue will remain in the ground.
Q: Many have said that governments continued stalemate on issues with ENI and AKER Energy is negatively impacting the growth of the oil and gas industry. Any opinion on that?
A: Stalemate is an understatement. Aker has so much promise. Without it Ghana’s dream of producing 200,000 barrels of oil a day, remains a dream. Government really needs to do all in its power to make that dream a reality. As for ENI, without reference to the details of the case, the sooner the case is resolved the better. Continued arbitration does no good to both parties. ENI is recognized as one of the best exploration and production companies in the world and is currently active in neighboring Cote D’Ivoire, and several other countries. The exit of Exxon from Ghana coupled with government impasse with ENI/Vitol are a huge disincentive to investors. Government should really be seeking stakeholder engagement on all these matters and resolving them as soon as is possible.
Q: What should we expect from the Chamber this year?
A: This year we will continue to encourage a focus on growth. There is potential across the board. We just need the right partnership with government to unleash it. We want to champion what is good for the sector and by extension the country. Local companies will be sustained and become important players once there is business activity in exploration, development and production from the oilfields. With the international oil companies who are members of the chamber, there is nothing more important to them than government demonstrating a commitment to the key matter of contract sanctity and a stable fiscal regime that offers returns to the investors and revenues for the government. We will continue to work towards improved stakeholder engagement. We want to partner government in delivering its vision for the sector.