A promising future

A promising future

Marilia Cioni* and Simona Manna
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The higher the price of oil, the more the Ghanaian economy will benefit. Black gold and, above all, gas are resources that may act as a driving force for a country aiming to "create value". Interview with Theophilus Ahwireng, C.E.O. of Petroleum Commission Ghana

OPEC’s decision will help ''boost oil prices'', hopefully to a ''range between $60 and $90'', a price that will balance the needs of both producers and consumers. A result, as Theophilus Ahwireng, C.E.O. of the Petroleum Commission, explains to Oil, that would hold great value for Ghana, which currently produces 140,000 barrels per day (bpd), as the higher the price of a barrel, the greater the government’s revenue. Ghanaian energy demand ''is growing by over 10 percent per annum, and this demand is a clear indicator of the country’s economic growth''. Oil also contributes to GDP, of which ''the largest component will be gas''. But Ahwireng states ''we do not want the country to ease up in the wake of this acquired revenue. We want to see the creation of added value, an added value on which the country is working strenuously, partly because'', says the C.E.O., ''I firmly believe that one of the engines for Ghana’s growth will be oil''.

After OPEC's decision to cut production, the energy market is changing and the price of oil has stabilized, with many observers forecasting a price rise over the course of 2017. In your opinion, what will the future bring? Do you foresee any important changes in the global energy scenario?

The reality is that for the next few decades, petroleum will still be the greatest source of energy in the world, and I estimate that within petroleum products, gas will be the greatest component. What we have seen over the course of the last year or so, with the price of oil dropping from over 100 dollars to the region of 40 to 50 dollars, has been a great shock to the industry. I agree that the level around 100 dollars was a bit too much, and it hurt many economies around the world. But the sudden reduction was also a big blow to the industry. Remember that if you sell crude oil at 100 dollars a barrel, 50 dollars a barrel is not a 50 percent reduction, because the 50 dollars includes your cost of production. If your cost of production is 40 dollars, it means you move from a margin of 60 to a margin of 10. That is a gun to one’s head, and it’s a big issue. In Ghana, when we set up production at the Jubilee field, we were lucky to have good oil prices until the recent slump, and that reduction alone reduced the Government’s income significantly. That is a concern. What we expect with the OPEC decision is that there will be a gradual increase in oil prices. I want to believe that an oil price regime of something between the 60 to 90 dollar range, depending on a lot of factors, will better balance the interests of both  producers and consumers.

In particular, what are the effects of OPEC's cuts and of a possible price rise on Ghana?

Currently what is happening is that we have moved from no production in 2010 to 100,000 barrels a day. In August, we started production from the TEN fields, which are currently producing about 50,000 barrels a day. So, barring all the challenges that we have at Jubilee, we’ll be producing 140,000 barrels a day. The contribution from petroleum will be really significant if we bounce back to the 100 dollars a barrel price regime, so clearly an increase in price will boost government revenues. To give a basis for comparison, in 2014, the government’s receipts from petroleum amounted to about a billion dollars, and this figure declined to 300 million dollars in 2016, so you can see how significant a factor it is. Obviously if the number increases, we’re going to see the contribution increase as well. So, as much as consumers around the world would like to see low prices, I believe we should have a price range that puts both producers and consumers in good standing.

Theophilus Ahwireng

Theophilus Ahwireng

He is C.E.O. of Petroleum Commission Ghana. Originally a geophysicist by training, with a 1st degree in Physics from the University of Science and Technology in Ghana, Ahwireng joined the GNPC (Ghana National Petroleum Corporation).

President Nana Akufo-Addo expressed the hope that Ghana can meet the challenges of the energy sector. What are Ghana's most pressing energy goals in the future?

The good news is that our energy demand is rising annually above 10 percent and that is a very good sign. If your energy demand increases, it indirectly indicates that your economy is growing. But the real challenge has been the availability of power. I know in certain environments that is not an issue, but it has been an issue in Ghana. Ghana started very well in terms of energy, when in the 1960s, our first president developed the Akosombo Hydroelectric Power project, Ghana suddenly became a net exporter of energy. We were producing close to 1000 MW, and what we needed was about 300 MW, so we were producing about 3 times what we required. After a while, we used up our reserves and became a net importer of electricity. What is happening now is that we have moved from 100 percent hydroelectric to the region of 50-50 between hydroelectric and thermal power, and in the thermal component a large percentage is fired by gas. If in the next year the OCTP Sankofa-Gye Nyame project delivers on both oil and gas, Ghana is going to be producing about 200,000 barrels of oil a day and about 300 million standard cubic feet of gas a day. That will make a significant contribution to electricity generation in Ghana.

Ghana's GDP is growing and according to many experts, this is also linked to the increase in oil production and exportation. Do you think perspectives are positive for oil resources?

The oil contribution to GDP is growing, but we do not want to be a country that sits on revenues as we are very much interested in value addition. If we take the component that comes from oil revenue and add on the component from value addition, Ghana will do very well. I’ll give you some practical examples. We took a bold decision in Ghana to not flare any gas at all, so from our first field we decided to build the Ghana Gas plant, and today I’m pleased to say that almost all the gas produced from the Jubilee field is actually processed by the Ghana Gas Company. As a result, it is producing lean gas for power generation and providing about 50 percent of the liquefied petroleum gas needed in Ghana. So by continually generating revenue from related services, the contribution of oil to GDP total is going to grow. Our view of adding value to oil is aptly manifested in all the things we do, as for example in the area of local content. In the OCTP project we estimated that the value of contracts going to indigenous companies would exceed 20 percent, and for a six billion dollar contract we are talking about somewhat over one billion dollars, and that really is a significant contribution. We are adding value in many ways through the capacities being developed in the area of product fabrication, as there could be synergies in the utilization of these capacities.  These synergies could contribute in shipbuilding and in the mining sector, and by so doing the ability of the nation to add value will increase. I strongly believe that one of the growth poles for the country is going to be petroleum.

In Africa when we talk about energy, we often talk about access to energy. How is Ghana operating in this sense, and what are the goals for the future? Is Ghana planning to invest in renewable energy sources too?

Access to electricity in Ghana is about the highest in the Sub-Saharan region, but we are not resting on our oars. We believe much more needs to be done. Right now the growth in energy demand could be met by thermal sources such as gas fired thermal plants so the addition of these gas resources is a fantastic opportunity. In Ghana, we try to be efficient so most of our plants are combined cycle, which gives more efficiency to the gas that is being produced as well. There is also the West African gas pipeline infrastructure, which brings indigenous gas from Nigeria through Benin and Togo to Ghana. The government is determined to re-discuss these issues with Nigeria to ensure that even as we produce local gas we can increase gas imports from Nigeria as the quantity we receive now is much less than what we were originally supposed to receive. With these varied sources it is clear that we will increase our ability to deliver energy. Looking beyond hydro and thermal, Ghana’s geographical positions are well placed to deliver high solar resurce. But I concede we haven’t done much in this area of solar, and this is why we invite the international investor community to look at the possibility of undertaking a large solar power project. At the end of the day, it boils down to the economics: if the price per kilowatt-hour is good, then we will be happy to leverage that opportunity. We have a very large suppressed demand as well; there are certain industries in Ghana today that are not functioning because of lack of power. So the potential for consumption is present and fortunately through the West African power pool arrangement for excess power in Ghana, it is possible to transport this excess to nearby countries, including Nigeria itself. So I see that as an exciting opportunity, and I invite the international community to look at Ghana as a destination for investment in solar.

* Marilia Cioni is content producer and Eni press office