October 24, 2024: The Africa Centre for Energy Policy (ACEP) has identified significant failures in Ghana’s upstream petroleum sector as a major contributor to the country’s current fiscal challenges. In a press statement issued on Thursday, October 24, 2024, ACEP highlighted ineffective policies, declining oil production, and reduced exploration investment as critical factors weakening the sector’s performance and exacerbating Ghana’s financial woes.
Speaking during the International Monetary Fund (IMF) and World Bank Annual Meetings in Washington, ACEP’s Executive Director emphasized the pressing need for reforms in Ghana’s oil and gas industry. He explained that the government’s over-reliance on optimistic oil production forecasts and poor sector governance have fueled the country’s growing fiscal problems.
“Ghana’s Ministry of Finance projected significant oil revenues, which underpinned substantial borrowing and fiscal planning. However, these forecasts were overly optimistic, leading to a mismatch between expectations and actual production,” he said.
According to ACEP, the upstream sector’s failure to attract new investment has left Ghana with declining oil outputs. Exploration efforts have slowed significantly, further impacting the country’s ability to generate revenue from its petroleum resources.
The Executive Director also criticized the lack of a coherent strategy to address technical challenges within the sector, noting that the government’s preference for litigation over scientific problem-solving has hindered progress and led to unfavorable outcomes, including the recent arbitration ruling in July 2024, which exposed Ghana’s weak regulatory practices.
A focal point of ACEP’s statement was the ongoing Afina-1x Appraisal Programme conducted by Springfield Exploration and Production Limited, which has been embroiled in controversy due to data inconsistencies.
ACEP raised concerns about the reliability of the data submitted to the Petroleum Commission, noting that the company’s estimates of the Oil Water Contact (OWC) differ significantly from the figures used by the Ministry of Energy in its unitization directive. This discrepancy, ACEP argued, wasted three years of Ghana’s time, delaying critical assessments of the Afina discovery’s commercial viability.
In addition, ACEP questioned the $50 million cost of the appraisal programme, pointing out that key reservoir flow tests could have been conducted during the initial drilling phase, thereby saving costs for the Ghana National Petroleum Corporation (GNPC) and its partners. ACEP stressed that such regulatory failures have compounded the financial burden on the state-owned enterprises involved in Ghana’s upstream sector.
ACEP’s Policy Lead for Petroleum and Conventional Energy, Kodzo Yaotse, emphasized that addressing these governance failures is essential for restoring investor confidence and ensuring that Ghana’s oil and gas sector can contribute meaningfully to the nation’s economic recovery.
“There is a growing perception that hidden interests are being prioritized over national development in Ghana’s upstream sector. This perception is detrimental to attracting much-needed investment at a time when the world is moving towards decarbonization and energy transition,” he remarked.
ACEP warned that unless Ghana adopts sound, transparent, and investor-friendly policies, the country risks further diminishing its oil and gas prospects, leaving it vulnerable as the global energy sector shifts away from fossil fuels.
The organization continues to advocate for governance reforms and strategic policy interventions that align with international energy trends while maximizing the country’s natural resource potential.
Source: Clement Akoloh/africanewsradio.com