Energy

12 Years Into Ghana’s Oil Production: Where Are The Legacy Projects?

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Ghana is fighting multiple crises on several fronts, the economic fallout of COVID-19, ballooning debt, surging food inflation, climate change, and an energy and food emergency, triggered by the Russia invasion of Ukraine.

Indeed, electricity supply by Nigeria’s National Electric Power Authority (NEPA) is more stable than the prices of goods in Ghana and most African countries today.

All countries on the African continent have not emerged unscathed. This could have been the best time for Ghana to rely on its oil and gas resources for cover. But alas!

Participants, who were mainly journalists at the Public Interest and Accountability Committee (PIAC) 2021 Annual Report review workshop held in Keta in the Volta Region from 6-8 May 2022, could not believe that there were no oil and gas legacy projects after 12 years of commercial production of oil and gas in the country.

“We cannot even boast of a single project in agricultural, health, education and other sectors which the petroleum revenue was solely used to finance in the country. This is really sad”, they said.

Thin-spread of petroleum revenue for projects

One noticeable feature of petroleum revenue is its thin-spread on development projects; and co-mingling of ABFA with other funds which Nasir Alfa Mohammed, a member and Chairman of the Legal Sub-Committee of PIAC, said is not the best.

He noted that allocations to some ABFA-funded projects have been meagre compared to the total cost of the projects. This makes it difficult to complete the projects within the contract duration, and raises the issue of thin-spreading of the ABFA on multiple projects.

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The inadequate funding made it difficult to appreciate any meaningful impact associated with the oil expenditure,  Mr Mohammed added.

The Annual Budget Funding Account (ABFA) which is the account set up by the government to receive allocation from oil and gas revenues in support of government national budgets, he noted that present and successive governments had been consistent in selecting the four priority areas as per the law.

Mr Mohammed, who is also a private legal practitioner, noted that the actual expenditure normally stretches beyond the 12 listed priority thresholds.

The non-utilisation of and accounting for the full ABFA allocation even though the budgetary amount is disbursed to the ABFA account.

Apart from receiving some paltry oil money through taxes, royalties, surface rents, among others, Ghana is yet to smell the sweet scent of oil resources, 10 years on.

Co-mingling of ABFA with other funds

For Eric Defor, Chair of PIAC Sub-committee, most projects that receive funding from the ABFA, also receive counterpart funds from other sources.

This he explained makes it difficult to monitor and assess the impact of the ABFA in project delivery to the beneficiary communities. Citizens could hardly point to any monumental project that has been fully funded with ABFA (legacy projects), Mr Defor stated.

Loss of project identifications

The Coordinator of PIAC, Isaac Dwamena, lamented that none of the project’s signage indicated that the projects were being funded with the ABFA.

The contract indicates that the funding source for all the projects is the Government of Ghana (GoG). Also, some of the project titles on site do not correspond with the project titles submitted by the Ministry of Finance, making it difficult to identify the project locations, he observed.

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While some projects were behind schedule, with contractors operating at a slow pace or works coming to a complete halt. Contractors stated that these were primarily due to payment delays.

As most of the projects visited by the PIAC were short-term fixed-price contracts, there was no room for fluctuation. Due to payment delays, this absence of fluctuation leads to cost overrun, for which contractors abandon projects, Mr Dwamena said.

Barrels of oil and revenue

A UK-based Ghanaian Petroleum Economist and Political Risk Analyst, Dr Theo Acheampong, revealed that Ghana has produced 453.89 million barrels of crude oil from three fields namely, Jubilee, Tweneboa, Enyenra, Ntomme (TEN) and Sankofa Gye Nyame (SGN) since 2010.

“A total of 452.09 million barrels (99.71%) have been lifted (that is sold) by all partners out of the 453.89 million barrels produced.

Of the 452.09 million barrels lifted, Ghana’s share has been 78.85 million barrels – this is 17.44% of the total barrels lifted. Ghana’s share comprises mostly royalties, carried and participating interest (CAPI), corporate income tax (CIT), and to a lesser extent, surface rentals”, according to him.

In terms of value, $31.62 billion has been generated from the sale of all the liftings since 2010 using yearly average crude prices, which is very close to Brent prices. All of Ghana’s crude trades at close parity to Brent so this is a reasonable assumption based on norm traded values.

“The estimated proceeds from liftings by Ghana Group is $6.55 billion (20.71% of the total value generated). This is close to its 17.44% production share. The cumulative investment made into all three fields will be in the region of $12-US$14 billion”, Dr Acheampong said.

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Journey oil production

Commercial production of oil and gas in Ghana commenced in December 2010 following the discovery of the play-opening Jubilee Field offshore Ghana in 2007 by a consortium of international oil companies (IOCs) in conjunction with the Ghana National Petroleum Corporation (GNPC), Ghana’s national oil company.

Indeed, oil and gas production and exports have provided a critical boost to the country’s economy over the past 10 years.

It has become a fundamental component of the Ghana’s industrial strategy and transition to a middle-income country, acting as the lever to provide jobs for the teeming unemployed youth and energy security for all, according to an Assessment of the Management and Use of Ghana’s Petroleum Revenues (2011-2020) released by PIAC.

To avoid the infamous resource curse and paradox of plenty which has afflicted several resource-rich countries, including its neighbours, Ghana has implemented numerous legislative and regulatory frameworks including the Petroleum Revenue Management Act (PRMA), 2011 (Act 815 as amended) to ensure effective management of the industry.

The  PRMA provides “the framework for the collection, allocation and management of petroleum revenue in a responsible, transparent, accountable and sustainable manner for the benefit of the citizens of Ghana in accordance with Article 36 of the Constitution and for related matters.”

Source:africaeyereport.com| Masahudu Ankiilu

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