Dwindling opportunities and increased regulatory risks in the oil and gas sector are pushing companies farther afield in search of exploitable reserves. Ghana’s enormous offshore potential has already attracted several independent companies to the Gulf of Guinea, which experts estimate holds roughly 10% of global supplies. However, for Ghana to capitalize on this potential boon, it will need to ensure a quick-rollout of even-handed fiscal, regulatory and environmental structures. In today’s GR Energy and Climate Brief, Stephanie Hanson of One Acre Fund analyzes the potential for offshore development off the Ghanaian coast and the hurdles which may hamstring development.

Dwindling opportunities and increased regulatory risks in the oil and gas sector are pushing companies farther afield in search of new exploitable reserves. One of the most promising new areas for exploration is the Gulf of Guinea, the stretch of ocean that runs from Liberia to Angola along the west coast of Africa. Though oil has the potential to be a boon for Ghana and other countries in the Gulf of Guinea, managing the risks associated with deepwater development will require a much more robust regulatory framework.  As development off the coast of Ghana heats up, the West African nation’s ability to implement environmental and fiscal regulations will be tested – potentially providing neighboring governments with a model of development.

Ghana’s Oil Industry

Ghana’s largest find to date - the Jubilee Field - currently produces over 70,000 barrels per day, but is expected to produce 120,000 barrels per day by July. And by some estimates, Ghana could be producing a total of 250,000 barrels per day by 2014. Leading the exploration drive are three independent operators (Tullow Oil, Kosmos Energy, and Anadarko Petroleum) and the Ghana National Petroleum Corporation (GNPC). Until 2007, the GNPC’s sole focus was on oil exploration and management of geologic data. And while there is legislation to establish an agency to monitor drilling, the absence of such an agency means the GNPC is undertaking management and oversight without the technical capacity to do so.

The Steps Taken to Ensure Oil Benefits

For Ghanaians, recent oil finds have reshaped economic realities: new reserves have the potential to boost economic growth and propel the country into middle-income status if managed properly.  Ghanaian politicians, including President John Atta Mills, frequently espouse the “blessing” that oil revenues will be for the country. The IMF estimates that the government will receive revenues of more than $400 million in 2011, and more than $1 billion in subsequent years.  Given these realities, the government has made some substantive progress on placing controls for proper revenue management. In March of this year, Ghana’s parliament passed the Petroleum Revenue Management Bill, which allocates 70 percent of oil revenues to budget support, and saves 30 percent of revenues in “Heritage and Stabilization” funds. These funds are modeled on Norway’s oil fund.

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