Dr J O-A: Energy is critical for the development of the Ghanaian economy, although a recent study that was carried out by the government highlighted that access to credit and energy are two key constraints to future economic growth. Ghana experienced a major power crisis in 2006-2007, which ultimately reduced Ghana’s GDP by 1%. It is vital for Ghana to have an internally robust system. The Ministry of Energy will introduce a business-focused policy for the export of electricity to neighboring African countries. The Ministry of Energy has created structured IPP and PPP models to encourage the private sector to invest in Ghana. The government has created an attractive investment environment for independent power producers, and provides assistance to companies by taking an equity stake, which enables the private sector to remain the operator. The transmission sector is wholly owned by the government to enable open access to all generation companies. Ghana has begun distributing power in communities close to the country’s borders, which enables the development of communities outside of Ghana. The Ministry of Energy’s two main objectives are to create revenue through the export of oil and power and to support regional economical growth and development.
There have been more than 40 discoveries in Ghana since the discovery of the Jubilee Fields. The Ministry of Energy is working with IOCs to develop discoveries that are proven to be of commercial value. Tullow is working with the Ministry of Energy on the TED project, which is three different discoveries that have been combined together to produce 120,000 boe/day. The Ministry of Energy will have 180 days to approve Tullow’s Plan of Development. In addition, Kosmos has made four different discoveries, which is estimated to produce an additional 120,000 boe/day. These discoveries will ensure that future oil production in Ghana will be sustained. In addition, Eni and Vitol have made a discovery of 1.6 trillion cubic feet of recoverable gas reserves, which will be fast tracked to enhance the export of power.
What initiatives are the government creating in order support investment throughout the value chain from upstream, downstream and generation?
Dr J O-A: The government has two different models for investment into power generation, supporting independent power producers by providing easy access to land and basic infrastructure. Companies who choose to work with the government through the PPP Model with the Ministry of Finance can agree on what percentage of equity the government will take and receive help if debt components are necessary.
The FDI for the whole of Africa decreased by 12% in 2011, although Ghana’s FDI doubled from $650 million in 2010 to $1.2 billion in 2011. The counter-risk in Ghana has decreased significantly because of political stability, which has increased the amount of investment into the country. Ghana will be able to raise the necessary investment that the country requires if it continues to maintain an attractive investment climate with clear regulations for investors.
The government has been encouraging transmission companies to take loans within Ghana. The cost of transmission should not be a significant component in the tariff; investments have been created to make the pass through tariff as low as possible, which ultimately makes the tariff affordable for the end user. The Ministry of Energy will be able to recoup the investment that we have made in the future, although there is a lot of additional investment needed. The Ministry of Energy is also working with private financers who are willing to invest into facilities.
The biggest challenge that the Ministry of Energy will face is within the distribution sector because of the lack of technology in the equipment. The distribution system in Ghana needs to be re-designed and old transformers need upgrading to enable them to meet current demand. As the service and manufacturing sectors in Ghana continue to grow and use energy productively, investors will see that projects in Ghana can provide a return on investment. If Ghana plans and executes the Chinese gas project successfully, it will receive $15 billion of revenue over the next five years, which will ensure that the country improves in terms of education and health, which will benefit local people.
How can the government work with stakeholders to ensure that investment is used in a sustainable manner and has no negative impact on Ghana’s economic and political stability?
Dr J O-A: With exception to the social sectors, the Ministry of Energy has agreements in place so that any money that is given to any agency is on loan, so the MD has to be efficient and pay back the loan to the government. If companies fail to pay back the money, their project will be removed. Money will be channeled into education, health and social infrastructure, and the effects will be multiplied within the economy.
How can the Ministry of Energy work with other key stakeholders to empower local Ghanaians to participate in Ghana’s oil and power development?
Dr J O-A: Ghana has been successful within the power sector. There are three different local companies that manufacture cables and conductors and the government has taken an $80 million local facility to produce all of the required conductors for 2012. International contractors use their own experienced supervisors to ensure that projects meet specific requirements, although local construction contractors are used to complete projects.
Ghana was not prepared in advance for the discovery of oil, so the country is still trying to develop its resources to meet the demand. Legal framework is being established and the Ministry is working with the private sector to train local Ghanaians, although it will be difficult for Ghana to maximize the local content benefits of the Jubilee Fields. Twenty-four students were accepted into the Tullow scholarship program in 2011, which increased to 50 students in 2012. The students were given the opportunity to complete their Masters Degree in different areas and these students will return to Ghana to work in the industry. The Ministry of Energy has finished the Local Content Policy and the Implementation Structure and Guidelines and we are working with the Norwegian government to develop legal framework for accidental work with local people.
Do you have a final message for our readers about Ghana’s future development in the energy and petroleum sectors?
Dr J O-A: The Government of Ghana is committed to working with investors to establish agreements that benefit both parties. The Ministry of Energy can assure all investors that Ghana will uphold its integrity and it is our mission to banish the conception that Africa is a corrupt continent. Ghana welcomes all investors into our country, providing that they respect our laws and our people. It is vital to create employment for the growth of Ghana’s economy and it is important for investors coming into Ghana to use the same environmental standards and regulations as they would in their own countries. Ghana is prepared to set the pace for the whole of Africa.