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Africa Series
OCTOBER 2013
Energy and Natural Resources in Ghana
As part of our Africa Series, this month we look at the issues surrounding the Energy and Natural Resources industry in Ghana. To this end, we speak to Theodore Nsoe Adimazoya from the Oil & Gas Group of Ayine and Felli Law Offices, a mid-sized law firm in Accra.
can you please give me an overview of the current energy sector in Ghana?
The petroleum and power sectors constitute Ghana`s main energy industry. Apart from mining (which has been a key contributor to the Ghanaian economy) the petroleum and power sectors contribute significantly to Ghana`s economy. The petroleum sub- sector consists of (i) upstream activities, which involve exploration, development and production of oil and gas from oil and gas fields, (ii) midstream activities, which involves the transportation of oil and gas to the refinery or processing plant, and (iii) downstream activities, which involves the refining of crude oil and distribution of the petroleum products to consumers.
Although upstream petroleum operations in Ghana are nascent, oil and gas prospects are significant. In 2007, Ghana made discoveries of oil and gas in two deepwater blocks: Cape Three Points and Tano by Texas-based Kosmos Energy and Tullow Ghana Limited. The two discoveries, referred to as the “Jubilee Field” is operated by Tullow as a unitised field. Appraisals conducted indicate that the field contains expected recoverable reserves of about 800 million barrels of light crude oil, with an upside potential of about 3 billion barrels as well as significant quantities of associated natural gas. Apart from the Jubilee Field several other commercial discoveries of oil and gas resources, stretch across Ghana`s shoreline.
In respect of downstream activities, only 60% of the national petroleum product
requirement is being met with domestic production and the balance of product requirements
is imported. Access to
petroleum products in the rural areas is inadequate due to limited infrastructure for storage and equipment for distribution and use.
The power sub-sector is dominated by hydro-electricity generation by the Volta River Authority (VRA). The VRA has monopoly over the generation of power in Ghana. The distribution function of electric power is done by the Electricity Company of Ghana (ECG). Although the main source of electric power is hydro, Ghana is endowed with renewable energy resources particularly, biomass, solar, wind energy resources and to a limited extent, mini-hydro. However,
these renewable energy sources are less explored.
can you please talk about any recent projects within this sector that you have been involved in? What were the main challenges involved and how did you overcome them?
I have been involved in quite a number of projects in Ghana`s energy sector but the most recent ones have involved disputes between the new regulator, the Petroleum Commission, and oil and gas operators in Ghana`s Jubilee Field. Pursuant to its statutory mandate, the Commission in 2012 engaged in a number of actions designed to assert its authority as the regulator of the upstream petroleum sector. In a number of correspondences with upstream operators, the Commission did not only assert its
general power to regulate the activities of operators and the industry as a whole but took a number of steps to, in its view, ensure compliance with the laws and regulations governing the operations of oil and gas contractors. Broadly, the Commission’s actions that resulted in disagreement may be categorized into four areas.
The first and probably the most fundamental category of actions is the requirement that all petroleum operators apply for and receive permits from the Commission for their petroleum operations and related activities. In a general compliance notice issued and dated August 24, 2012, the Commission asserted its power under section 3(h) of its enabling Act to receive applications and issue permits for specific petroleum activities. In the said “compliance notice” the Commission served notice to all industry operators, “to ensure that
they are
operating with a valid permit or licence from the Commission” and not to “engage the services of local (Ghanaian) or foreign (international) service-providing companies without evidence of a valid permit from the Commission.” The Commission also served notice that non-compliance with its directive to obtain licences and permits for their operations constituted a violation of section 19 of the Petroleum Commission Act.
The second category of actions by the Commission relate to what may be described as reporting requirements by petroleum operators.
correspondences with operators, Commission indicated that some operators
In a series of the