To get an assessment on the oil and gas industry from the industry itself, and what the prospects are for the year 2024, the B&FT has been speaking to the Chief Executive of the Ghana Upstream Petroleum Chamber, David Ampofo.
Q: What is the outlook for the industry this year?
A: This year is unique because it’s an election year. I would imagine that government would do all in its power to attract as much investment as possible. It is all about exploration and making sure that benefits along the oil and gas value chain are harnessed efficiently. Without exploration there is no value chain. Efforts to make sure there is ongoing drilling that leads to production should be the goal. Tullow Oil and partners are expecting five wells to come on stream this year to increase production. Pecan Energies is in discussion with government regarding the development of the Pecan Conventional Oilfields while some resolution is expected on the ENI/Vitol and Springfield dispute. Coupled with a potential for surge in market conditions, we should expect a positive outlook for Ghana’s oil and gas industry for 2024.
Q: What would you say are the key challenges?
A: The first thing that comes to mind are creeping charges and taxation. That is the one thing inhibiting the growth of the industry. The build-up of unexpected and arbitrary charges and taxes over time impacts companies cost/revenue ratio. Over the last few years, several unexpected charges and taxes have been introduced. There is the COVID-19 Health Recovery Act, Growth and Sustainability levy, the birthing crude loading and offloading charges, the emissions levy and the recently introduced mining sector road rehabilitation project charges, to name a few. These additional taxes and charges can stifle the growth of the oil and gas industry. Indeed, creeping taxation affects the economic balance of petroleum agreements. The lack of stability and predictability on a matter as important as tax means businesses cannot even be sure what their investment returns are likely to be. It is in Ghana’s continued interest to encourage exploration and development of its hydrocarbon reserves by attracting foreign capital, but these creeping taxation impediments need to be urgently addressed. When creeping taxes and levies become the norm, tax avoidance and disinvestment become inevitable.
Q: Are there any other specific areas that the industry would like to see progress on?
A: Drilling, drilling and drilling. Given the energy transition where Africa’s oil and gas industry is entering a new era, it is important that strategic considerations are made to boost exploration and production. We have to establish what Ghana’s net-zero future might look like in the light of an expedited oil and gas exploration programme. Our oil and gas reserves have been under-explored, but have great potential toward energy security. There are strong arguments that the remaining supply of oil and gas will not sustain us beyond the next quarter century. So, let’s create a business-friendly environment that is attractive to foreign investors who want to invest toward both our onshore and offshore resources. This would mean that Ghana’s oil and gas fiscal arrangements will need to be revised to attract more investment. Many countries are reviewing their regulations to make them more business-friendly. The Petroleum Commission has been working on this. It would be great if work on this could be expedited this year.
Q: What about the dispute between ENI/VITOL and Springfield? Where are things currently?
A: As you already know, the matter is in international arbitration and a decision is expected early this year. We hope that whatever the outcome, it will bring an end once and for all to an issue that has been holding back the industry for so long and allow all the parties to get back to producing oil.
Q: So, what can we look forward to from the Chamber this year?
2024 is an interesting year for the Chamber. Essentially, we are focused on helping our members and the general public understand how we can secure Ghana’s energy future. We intend to work and collaborate with all stakeholders in making sure that their respective roles enhance industry’s efforts and reaffirm our position that more can be done and achieved if we work together. Our Ghana oil and gas conference, scheduled for the 4-5 September 2024, is under the theme ‘Securing Ghana’s Energy Future’. You should also expect the 2024 Annual Upstream Petroleum Report sometime during the year and the various position papers we intend to publish. It is a brand new year with great potential. Our hard work together will ensure a flourishing oil and gas industry.