A strategy to unlock growth in GhanaJuly 29, 2021
David Ampofo, CEO of the Ghana Upstream Petroleum Chamber (GUPC), talks to The Energy Year about trends in Ghana’s upstream sector and the importance of creating a stable policy framework to attract investment. As a representative of the upstream sector, GUPC works to foster dialogue between public and private players.
How resilient is the Ghanaian upstream sector?
The market appears to be rebounding sooner than expected. However, we need to see more consistent progress before we can really say things are picking up. The fact that Tullow is busy again is a good thing and sends positive signals. So does Eni’s latest discovery. The potential exists, and with the right policies, the upstream sector will thrive. While we cannot predict the market, there has been a revival of late that hopefully will be sustained.
The country always looked forward to discovering its own petroleum, and it has. However, we must manage expectations. There is a common belief that when you find oil and gas, all problems are solved. Experience has shown that this is not always the case. But Ghana has the examples of many other countries to learn from and we must make it work for us.
Ultimately, hydrocarbons are a critical resource that the world economy needs and uses, even as renewable energy sources gain popularity. For now, the oil and gas resources in Ghana and those of other African countries are key drivers for economic growth.
How does GUPC contribute to the development of the upstream sector?
The Chamber provides a collective platform for member companies to engage with the government and other important constituencies. Through our efforts, the government is able to ensure that policies take into consideration the concerns of the local industry. We serve as a bridge between the regulator and the industry and help create synergies. We are a platform for frank discussions to improve relationships.
We examine issues that face the industry in a professional and research-based process and provide independent position papers that offer insight and solutions to pressing issues. They include one on the relationship between the regulator and the industry and another on the need to prioritise locally produced natural gas. There are many more to come.
As a Chamber, we also foster relationships between international and local oil companies. We want to be a point of reference for investors coming into the market looking for local companies to partner with. We are developing our capability as a facilitator to achieve this goal. We want to see more Ghanaian companies as part of the Chamber in order to mirror the situation on the ground.
We have been engaged in dialogue with the Ministry of Energy and all relevant stakeholders and taken part in a government agency strategic session looking at the challenges facing the upstream sector. Increased collaboration between the companies and government is good for the industry.
What can be done to attract investment into the sector?
Favourable policies. Policies that unlock growth. Reserve replacement strategies and re-engineering of the fiscal terms to attract investment. We are in a critical moment where the development of an investment promotion strategy is needed in the wake of dwindling upstream investment. The investment community needs to be incentivised. In addition, natural gas, which is a transition fuel, needs to be promoted. Constraints in natural gas evacuation and utilisation capacity increase the exploration risks for contractors and deter them from conducting further exploration. Accelerating Ghana’s strategic gas-led industrial drive could be a win-win for both government and investors.
Where there is an unsuccessful bidding round, the parties need to examine why. In my view, transparent mechanisms and frequent licensing rounds should be pursued. There is the need to ensure that critical seismic data gaps are closed and sufficient data is made available for the licensing rounds.
Stimulating favourable investment conditions can have a positive impact on investment.
How have local content laws changed the face of the upstream arena?
Local content is important from a business standpoint. There are several Ghanaian companies in the upstream sector that are doing a great job. In the past, the vast majority of managerial staff in many oil and gas companies were expatriates. That is no longer the case. Things have moved on.
However, we need to be clear about what we want from local content. It is an area that requires constant work and improvement. Successful local content policy means that the industry is moving towards having a larger portion of Ghanaian companies participating at the decision making table. It also means a successful transfer of skills and competencies.
We are building a database of local companies and increasing our understanding of their capabilities. They are mostly either working in logistics, fabrication or environmental disposal. We must further develop these areas of potential where there is some traction because we already have the know-how.
How important is the transition to gas for the Ghanaian economy?
Natural gas is Africa’s transition fuel. It is the primary source of fuel for our power plants and at the heart of any effort to industrialise. It is critical that we develop further our own natural gas resources. The data indicates that there are substantial reserves of natural gas offshore. Of late there has been a major discussion about the role of imported liquefied natural gas. However, if imported LNG takes market share from companies already producing gas, we are doing something wrong. Current and medium-term needs can be met with locally produced gas. Where there is inadequate local supply, LNG imports are certainly welcome. We should focus on increasing demand for natural gas especially for non-power use.