Ghana's Energy Sector, Oil and Gas News

Tullow Ghana, lead operator of Ghana’s Jubilee Field has downplayed any effect the deferment of two crude oil liftings will have on its production guidance for 2016. 

This is because the company was putting in new operating procedures to resume lifting after a two-week planned maintenance.

A source at Tullow told the GRAPHIC BUSINESS, the company was not able to lift crude oil from the Jubilee Fields due to the deteriorating condition of the turret bearing on the Floating, Production, Storage and Offloading (FPSO) vessel, Kwame Nkrumah, but that notwithstanding, lifting would resume after the planned maintenance.

As part of the government’s effort to ensure that the oil and gas sector contributes towards the transformational agenda being pursued by President John Dramani Mahama, major oil and gas projects are still being pursued in Ghana, despite the downturn of crude oil prices worldwide.

This was made known by the Petroleum Minister, Mr Emmanuel Armah-Kofi Buah, following the arrival of the FPSO Prof. John Evans Atta Mills (FPSO Atta Mills) on the shores of Ghana on March 2, 2016.

The new Board of the Ghana National Gas Company (Ghana Gas) has assured management and staff of the company that it would put in place policies and programmes to improve the company’s fiscal position.

Oil firms have put major projects in West Africa on hold because of low prices - as they have across the globe - but when the market finally picks up, development is likely to recover much more slowly in the region than elsewhere.

High costs bedevil the region, which includes established producers such as Nigeria and newer entrants like Ghana. Add to this long-standing problems of poor infrastructure, complex bureaucracy and politics, and West Africa may be well down the list for any investment revival.

Kosmos Energy, one of Ghana’s Jubilee field operators, has said it will not cut down its investments in the country’s oil sector, in spite of the falling crude oil prices on the world market.

The company will rather ensure that all capital expenditure and investments are evaluated effectively to minimise the impact of the falling prices on their operations would be minimal.

The Vice President (VP) and Country Manager of Kosmos Energy Ghana, Mr Joe Mensah, said this in Accra during an interaction with the media.

Oil fell by two per cent yesterday as weak economic data from China, the world's largest energy consumer, weighed on prices and an OPEC source played down talk of an emergency meeting to stem the decline.

China's manufacturing sector contracted at the fastest pace since 2012 in January, adding to worries about demand from the world's second-biggest economy at a time when the market is already weighed down by a large supply overhang.

"The weak China PMI (purchasing managers' index) is driving down prices because China weighs on the entire commodities sector from the demand side of the equation," Carsten Fritsch, senior oil analyst at Commerzbank in Frankfurt, said.

Brent crude for the April futures were down by 1.8 per cent, or 64 cents to US$35.35 a barrel yesterday. The March Brent contract, which expired last Friday, settled at US$34.74 a barrel.

The drop in oil prices continues to create headaches for managers of the economy.

This is because a decline in crude oil prices has negative impact on national revenues, the very resources used to develop the country.

From last year, when commodity prices, especially that of oil, started sliding, there have been calls on government to reduce ex pump prices.

This was preceded by the deregulation in the downstream petroleum sector, which brought with it excitement in that segment of the industry.

Oil rallied in its biggest two-day advance since August after a slump to a 12-year low prompted some investors to buy back record bearish bets.

Oil supplies

West Texas Intermediate for March delivery gained as much as US$1.51, or 5.1 per cent, to US$31.04 a barrel on the New York Mercantile Exchange and was at US$30.89 at 10:14 a.m. in London. The March contract has advanced 8 per cent in two days, and the generic front-month futures has surged 16 per cent since the February contract expired on Wednesday, the most since August. The volume of all futures traded was more than double the 100-day average.

Brent for March settlement climbed as much as US$1.85, or 6.3 per cent, to $31.10 a barrel on the London-based ICE Futures Europe exchange. Prices are up 10 percent since Wednesday, also the most since August.

In a spate of 53 years, the Tema Oil Refinery (TOR), Ghana’s only refinery, has moved from a profitable crude oil refining company to an idling structure of buildings and plants that is now a drain on the national purse.

The refinery, which from the onset of operations refined crude oil for Ghana and its neighbouring countries, over the years broadened its scope of operations to include procurement, storage, refinery and distribution of crude oil.

Established in 1963 by the first President, Dr Kwame Nkrumah, TOR was expected to enhance the country’s economic, investment and development programs in the energy sector, especially with the start of oil production.

TOR which started as a simple refinery has subsequently been upgraded presently to a secondary plant with a residual fuel catalytic cracker (RFCC) and enhanced capacity of 45,000 both, equivalent to about 6,138 tonnes of crude oil per day.

After joining the league of oil producing nations, Ghana’s uphill task was to manage the high expectation that suddenly oil discovery holds the panacea for the country problems— from unemployment to more revenue translating to huge economic gains.

The high expectations were as a result of the unavailability of information to Ghanaians and even prospective industry players on the industry.

The celebration that characterised   the announcement of the discovery of oil in commercial quantities in 2007 is today making things worse as people still asked the question “where is the oil money.”

A rapid appreciation of the U.S. dollar may send Brent oil to as low as US$20 a barrel, according to Morgan Stanley.

Oil is particularly leveraged to the dollar and may fall between 10 per cent and 25 per cent if the currency gains five per cent, Morgan Stanley analysts including Adam Longson said in a research note dated Jan. 11.

A global glut may have pushed oil prices under US$60 a barrel, but the difference between US$35 and US$55 is primarily the U.S. dollar, according to the report.

“Given the continued U.S. dollar appreciation, US$20-US$25 oil price scenarios are possible simply due to currency,” the analysts wrote in the report. “The US dollar and non-fundamental factors continue to drive oil prices.”

As price of oil dips to its lowest in about 12 years, investors are becoming cautious of investing heavily in the oil exploratory activities, and this presents an opportunity to Ghana to make gas sector more attractive to international oil companies to explore and develop gas in order to become the game changer.

But the question remains; how can the gas component be developed into becoming the  game changer for Ghana, lead transformation agenda, satisfy domestic gas needs and save the country half a million dollars a year?

 It calls for the need go back to a failed attempt to create an industrial park where all oil and gas related activities can be sited and coordinated.

If not, as more activities discoveries are made, the whole country will be dotted with gas facilities and power plants in a very scattered and unplanned manner.

Ghana rushed in search of the revenue in 2007 and ignored all that needed to be place.  GNPC started planning for the indust

The government has set up a special account into which all new levies on petroleum products will be saved to enable it to defray the huge debt in the energy sector.

Presently, the energy sector debt is in the region of about US$1.4 billion, an amount which has exposed some banks badly.

A Deputy Minister of Finance, Mr Cassiel Ato Forson, who disclosed this to the GRAPHIC BUSINESS in an exclusive interview in Accra on January 6, said as per the law reviewing the taxes on petroleum, the government was bound to report on the monies accrued to Parliament every year and noted that “it is part of the measures we are adopting to ensure transparency in the use of the monies collected from the people”.

The Africa Centre for Energy Policy (ACEP) has questioned the rationale behind the continuous payment of the Tema Oil Refinery (TOR) debt recovery level, as its analysis shows that revenue generated from the levy is enough to clear the existing debt.

The ACEP maintained that between 2009 and 2015, total collection from the levy was in excess of GH¢1.9billion, which was enough to pay off the debt which had ballooned from GH¢450 million to GH¢900 million as at the end of 2009. 

Addressing a news conference in Accra, the Executive Director of ACEP, Dr Mohammed Amin Adam, said Ghanaians do not have to continue paying the levy.

“Our analysis shows that between 2009 and 2015, the total collection from the levy is in excess of GH¢1.9 billion. This effectively amortises the debt assuming an interest of 10 per cent. Ostensibly, the TOR Debt Recovery Levy has over the years been misapplied, aided by the weak oversight of Parliament,” he said.

Saudi Arabia has raised domestic energy prices by 40 per cent after the world's leading oil producer announced a record $98bn budget deficit last Monday citing rock-bottom global petroleum prices.

The budget deficit is the highest in the history of Saudi Arabia, but was not as big as some expected. The International Monetary Fund had projected a deficit of $130bn.

The kingdom has seen a sharp drop in revenues as oil prices have fallen more than 60 per cent since mid-2014 to below $40 a barrel.

Public revenues are the lowest since 2009 when oil prices dived as a result of the global financial crisis. Saudi income for 2015 was 15 per cent lower than projections and 42 per cent less than in 2014.

In order to address the situation, the Gulf kingdom has set the price of 95 octane gasoline at 0.90 riyals ($0.24) per litre up from 0.60 riyals per litre - a hike of 40 percent. The price increase took effect on Tuesday, the official SPA news agency said on its