Lucie Blay
Blay & Associates, Accra
lucie.blay@blayandassociates.com

Davidina Dadson
Blay & Associates, Accra
davidina.dadson@blayandassociates.com

Introduction

Ghana began petroleum exploration in 1896 in the onshore Tano basin in the Western Region due to the presence of petroleum seepages found by the early explorers.^[1]

The discovery of substantial hydrocarbon reserves in 2007, along with the initiation of production from the Jubilee field in November 2010, marked the most pivotal events in Ghana’s oil and gas industry during the late 2000s.^[2] As of July 2021, Ghana had produced about 453.89 million barrels of crude oil from the three existing fields known as the Jubilee, Tweneboa Enyenra Ntomme (TEN) and Sankofa Gye-Nyame fields.^[3]

Although, hydrocarbons have been key to Ghana’s growth over the years, due to extremities faced by the world in light of climate change, there has been the build-up of pressure in the energy industry to shift from one dominated by hydrocarbons to one in which low-carbon sources play the leading role in energy use.^[4]

The COP26 event under the United Nations’ Framework Convention on Climate Change (UNFCCC) made clear mention of transitioning from coal and gradually eliminating subsidies for fossil fuels.^[5] The worldwide energy landscape has also been undergoing a transition in line with the global movement toward a low-carbon economy.^[6]

This article seeks to discuss the effects of the transition on the oil and gas industry in Ghana. It begins by defining energy transition to renewable energy and discusses the effects of the transition on the oil and gas industry specifically in Ghana. This article further discusses how Ghana is implementing the transition.

The transition to renewable energy

Energy transition is the ‘global shift from fossil fuels, such as hydrocarbons, to cleaner and more sustainable sources of energy, including renewable energy sources such as solar, wind, hydroelectric, and geothermal power’.^[7] This transition is driven by concerns about climate change, air pollution, and the finite nature of fossil fuel resources.^[8]

The transition is also driven by technological advancements, new energy policies promoted by global governments, especially in the post-Covid-19 context and evolving consumer preferences, including environmental social and governance (ESG) pressures.^[9]

The transition from the current fossil-based energy system to a cleaner one to meet global net-zero goals requires deploying new energy technologies, many of which rely on critical minerals such as copper, lithium, etc.^[10] These minerals are vital to the transition for sustaining battery longevity, performance, and energy density of all electric vehicle motors, solar panels, and wind turbines.^[11] For example the commercial quantities of lithium recently discovered in Ghana, approximately 100 kilometres south-west of the capital city, Accra,^[12] can be used to power electric vehicle motors. The Cabinet recently approved a green mineral policy set to promote the exploitation, management and regulation of lithium production.^[13] In addition to policies implemented to regulate the use of electric vehicle, the jurisdiction is to reduce the need for hydrocarbons in consumer consumption.

Effects of the transition on the oil and gas industry in Ghana

Ghana is still an up-and-coming player in the industry. Since the discovery of commercial quantities of petroleum resources, there have been several significant discoveries which promise to address Ghana’s critical energy security and equity needs.^[14]

The continuing decrease in the demand for fossil fuels, including hydrocarbons, as the World moves towards renewable energy sources, directly affects hydrocarbon exports which Ghana relies on for revenue generation.^[15] As of 2020, the oil and gas exports from Ghana stood at 67.5m barrels.^[16] The oil and gas industry in Ghana has become a major contributor to the economy with its impact currently exceeding that of the gold resources which contributed about US$2.4bn.^[17]

According to the President of Ghana, the transition from fossil fuel is expected to have a negative impact on the industry.^[18] This is due to the refocus of capital investments by the international oil companies and their financiers, as well as the lack of operating capacity of the Ghana National Petroleum Corporation (GNPC)^[19] to take over some of the assets.^[20]

The assets at risk include fuel reserves and capital goods used for the extraction, processing, and the transport of fuel. The downstream sector is also expected to experience notable changes such as the building of new compressed natural gas stations and electric vehicle charging points to meet the demand for new transport fuels.^[21]

Presently, investments in the oil and gas sector are declining as investors increase their focus on renewable energy projects. Ghana’s economy heavily depends on oil and gas revenue. A decrease in demand for fossil fuels essentially leads to reduced government revenue.^[22]

The dilemma now is how the developments in the country would be funded should Ghana give up exploring its newly found oil and gas resources due to climate change concerns – especially because, it has been ascertained that Africa’s contribution to this climate change is collectively a meagre four per cent.

The transition has resulted in changes in energy policies and regulations in Ghana. The government has developed a national energy transition framework, a long-term framework aimed at decarbonising the energy sector. This is expected to complement existing efforts with new measures such as increased renewable energy penetration, conversion of thermal plants to natural gas and the integration of nuclear power into the energy mix.^[23]

The transition in Ghana entails a shift in energy generation technologies, fuel use, end-use equipment, and devices among others, with its implications on employment. It is projected that the transition will yield a total of 1,367,894 jobs equivalent to just over 4,344,210 job-years,^[24] with 52 per cent of these jobs being created in the construction and installation sectors. It is also anticipated that, a total of 911,929 indirect and induced jobs or approximately 2.9 million job-years, 455,965 direct jobs or approximately 1.45 million job-years will be created.^[25]

The industry highlights safeguarding its reserves by decarbonising current petroleum activities, aiming at sustaining the competitiveness of output in vital target markets which may potentially face carbon border adjustments.^[26]

The prevailing increase in ESG pressures results in highly selective upstream projects in Ghana because every project is likely to be re-evaluated on tighter metrics including the carbon intensity.^[27] Safeguarding the Ghanaian reserves by decarbonising current petroleum activities has been highlighted with the aim of sustaining competitiveness of output in vital target markets which may potentially face carbon border adjustments.^[28]

How Ghana is implementing the transition

Ghana has commenced the necessary stakeholder engagements to transition from fossil-based fuel to zero carbon.^[29] The highlights of these stakeholder engagements have been to secure a stable-base load, discuss the energy efficiency, enhance clean technology through research and development among others.^[30]

Ghana has established policies and initiatives to promote the adoption of renewable energy resources. The Renewable Energy Act for instance, is a key policy framework aimed at increasing the share of renewable energy in the country’s energy mix.

Ghana has been working on increasing its renewable energy capacity, particularly in the areas of solar and wind power. The government has signed agreements for the development of solar power projects while having plans to diversify energy sources away from fossil fuels.

Offshore wind energy is also important for sustainably meeting Ghana’s energy needs.^[31] Ghana has been exploring the potential for offshore wind energy projects, capitalising on its coastal geography. These projects could contribute to the energy transition by providing clean and reliable energy sources.

Moreover, Ghana has shown an increasing interest in electric vehicles and has been considering policies and initiatives to promote their use.

Ghana’s transition towards the United Nations’ SDGs

The average global temperature has seen a gradual increase since the Industrial Revolution. A risk which has been due to the anthropogenic greenhouse gas emissions.^[32] As a result, the UN’s Sustainable Development Goals (SDGs) SDG 13 and the 2015 Paris Agreement on Climate Change were adopted to combat climate change and its effects.^[33]

Ghana has been focusing on aligning its transition efforts, particularly in the oil and gas sector, with the UN SDGs which provide a comprehensive framework for global development that includes ESG facets. The transition towards cleaner energy sources, including renewable energy such as solar and wind, contributes to this goal by providing cleaner energy options which cut reliance on fossil fuels.

According to the IPCC, surpassing a 1.5C-degree temperature increase could lead to irreversible outcomes. Nevertheless, implementing efficient measures for the adaptation and mitigation can substantially decrease vulnerability and enhance climate resilience.^[34] By reducing its reliance on fossil fuels and investing in renewable energy, Ghana is contributing to mitigating greenhouse gas emissions and addressing climate change challenges.

Ghana’s Climate Change Policy Framework outlines strategies for mitigating and adapting to the impact of climate change, including efforts to reduce greenhouse gas emissions through the promotion of renewable energy. The bans on new independent power producers have been lifted and this can be beneficial to renewable sources of energy. The government has stated that the lifting of the ban is intended to facilitate the development of the renewable energy market and, therefore, help Ghana achieve its climate objectives under the Paris Agreement.^[35] Wind and solar energy are abundant and sustainable resources. Adding new independent power producers dedicated to these sources can increase Ghana’s energy capacity, making more electricity available to meet growing demand.

Currently, there has been development in the windfarm sector in Ada, such as the Lakela Wind Farm which can significantly contribute to Ghana’s renewable energy capacity. Another focus is the Konikablo Wind Farm which is also expected to include 60 wind turbines and further enhance Ghana’s energy capabilities.

These renewable power generations produce little to no greenhouse gas emissions compared to conventional fossil fuel-based power generation and by investing in these clean energy sources, Ghana can make significant strides towards SDG13.

Ghana Gas projects towards energy transition

Ghana undertakes various gas projects as part of its energy transition efforts. These projects aim to use natural gas resources more efficiently, reducing greenhouse gas emissions, and contributing to a cleaner energy mix.

Ghana has been focusing on using its domestic natural gas resources for power generation. The West African Gas Pipeline (WAGP) brings gas from Nigeria to Ghana, and the Ghana Gas Company (GGS) operates the Atuabo Gas Processing Plant to process Ghana’s own natural gas reserves. This gas is then used for electricity generation, reducing the reliance on more carbon-intensive fuels.

The integrated gasification combined cycle (IGCC) plant involves the development of a power station which uses gasified indigenous lignite (brown coal) to generate electricity. This project aims to diversify Ghana’s energy sources and reduce dependence on imported fuels.

Ghana has also been encouraging the use of liquefied petroleum gas (LPG) as a cleaner alternative to traditional biomass for cooking.

Conclusion

After the discovery commercial quantities of petroleum in 2007, Ghana has been taking steps to ensure a successful petroleum regime. Presently, there is also a move towards clean energy, albeit a slow one, and this transition currently only lightly affects the industry even though there is the potential for the transition to massively affect the industry soon. Ultimately, the oil and gas industry is still a major focus for Ghana, with the country having plans of new exploration activities.