GB&F looks ahead after one year of oil drilling and export

A press release from the Ghana National Petroleum Corporation (GNPC) on August 18th stated that the Ghana Group (Government of Ghana (GoG) and GNPC) successfully lifted their third entitlement Jubilee crude oil from the FPSO Kwame Nkrumah. The quantity of nearly one million barrels provided an accumulated government royalty of 5 per cent and accumulated participating interest of 13.75 per cent to GNPC. Such news definitely suggests that Ghana is on its way to birthing a certified oil city.

Before the discovery of oil in the Western Region in 2007 by the U.S. company Kosmos, Sekondi-Takoradi, the regional capital, was already noted for being an industrial and commercial centre, contributing to the economy through the export of Ghana’s abundant natural resources.

These included timber, cocoa, coconut, oil palm,  plywood and minerals such as gold, diamonds, iron, bauxite, and manganese.

Now with the arrival of oil, petroleum products are being refined from crude and the by-products are being marketed as well, among them asphalt, paraffin wax, tar, and sulphur. In light of this, the Ghana Free Zones Board is developing the 2,200-acre Sekondi Export Processing Zone as a designated export hub.

When Kosmos made its discovery, it estimated the Jubilee field would hold about 1.8 billion barrels, which made it among the biggest finds in West Africa.

Tullow Oil, the  company contracted to extract the oil, promised to produce roughly 55,000 barrels a day when President John Atta Mills sanctioned the start of drilling in November last year.

Today, almost one year later, investment is gradually shifting away from traditional commodities to oil.

Mid last month, GNPC signed a Memorandum of Understanding (MOU) with PetroSaudi International Ltd to push forward a strategic alliance to develop the upstream oil and gas industry. The MOU involves the development of oilfield services, infrastructure and national capacity building.

The upmarket Beach Road neighbourhood of the city, comparable to the Ridge area of Accra, overlooks the ocean and is lined with the business properties of multinational companies, including executive chalets, golf links, private residences, offices and clubhouses.

But this is not necessarily good news for the average Takoradi man and woman. The rush to acquire property has led to an exponential rise in expatriates, causing astronomic increases in transaction costs, which are mostly done in US dollars.

To bring the issue down to basics, a quick comparison of food prices shows that many native Takoradians  may not be able to cope. A large sized grilled tilapia dish costs GH¢8 in Accra, GH¢8 in Kumasi but GH¢10 in Takoradi at similar eateries. GB&F found that, on average, a three-bedroom house for a middle class family could be rented in 2006 for GH¢80 a month. Average national inflation rates of 10.7 per cent in 2007 and 10.9 per cent in 2010 should have resulted in the same property renting for GH¢150, all other factors excluded. However, rent is now between GH¢180-200 for the same type of property.

Finding work in the region is also not as straightforward as the influx of investment dollars would suggest. “I grew up here, things are very expensive now – -comparable to living in Tema,” a security guard at Ghacem clubhouse said. “Without a good certificate you cannot make it here. Those with good qualifications get good jobs, good income and a good living.”

However, those with a solid education are relocating to Western Region from Accra. “Salaries are very good, the oil companies are paying very well,” one graduate told GB&F. “I am aware of salaries ranging between GH¢3,000-7,000 a month for locals and I am here to scout the terrain and move here.”

Despite more job opportunities and accelerated economic growth, Takoradi’s transport infrastructure, particularly around Market Circle, the centre of trade and business,  does not befit an oil city. It took a member of GB&F staff nine hours to travel to Takoradi and back from Accra.

The Bitumen Plant Manager of Shell Ghana in Takoradi said, “It is true that the cost of living has gone up, traffic is almost static and rent has gone up from GH¢100 to GH¢300. However, our business has not been affected because the drilling is upstream but we are downstream, involved in only storage and selling of refined fuel.”

Traditional chiefs in Ghana have been calling for 10 per cent of the oil revenues to be repatriated to the region as a royalty for some time. The idea is that the funds would be used to invest in the people of the region, thereby deterring criminal activity like the kidnappings that has bedevilled the Niger Delta, Nigeria's oil producing region, in recent years.

The socioeconomic benefits for both government and explorers on one side and the locals on the other are enormous if proper measures are taken. According to a CIA World Fact Book in 2008, the US was the number one importer of both crude oil and oil products in terms of barrels per day (bbl/day).

With Ghana now exporting about 1,000,000 barrels and with the current market price of oil at US$ 81.59 per barrel according to Bloomberg figures as at mid-August, the country is looking to make a gross income of US$81,590,000 per lifting.

According to GNPC’s aforementioned press release, “Since production began in the last quarter of 2010 there have been 14 liftings (equivalent to over 13.5 million barrels) by the Jubilee partners. GNPC and GoG have so far lifted three times, representing a total quantity of 4,975,700 barrels of oil.”

Late last year, President John Atta Mills signed a loan agreement with China amounting to about US$13 billion which was expected to be pumped into the transport, agricultural and oil and gas sectors’ infrastructure developments. But refurbishing loans is as important as signing the loan deal to ensure that the debt does not become a necessary evil. Nonetheless, such loans might be put to good use to help transform Takoradi into a city equal to metropolis like Abu Dhabi.

With about 1.6 billion barrels of crude to be explored, Ghana is surely the best business destination in West Africa, with the added benefit of a peaceful democratic environment. The oil business is the icing that will turn Ghana’s cities into ultra modern ones starting from Takoradi, the home of the “black gold”.