The world is full of paradoxes and in Africa, the examples are numerous: Ghana is one of the poorest countries in the world, although it is the largest African producer of one of the most precious resources: gold. (paradox) Furthermore, Ghana is also the continent’s oil producer. Although its oil industry faces years of decline, In recent months, it has experienced an unexpected renaissance. According to the latest report from the Public Interest and Accountability Committee (PIAC), crude oil production in Ghana increased by 10.7% in the first six months of 2024 compared to the same period of the previous year, breaking a annual downward trend which had lasted five years. This renewed interest is significant for the country, which seeks to diversify its sources of income and reduce its dependence on gold.
Crude oil production in Ghana started in 2010when the country made its first major foray into the oil industry. However, existing fields have experienced a decline in their production levels (decline phase) in recent years, driving the total barrels produced in 2023 to a five-year low. In terms of barrels per day, the production of Ghana reached its peak in 2019 with pumping of over 218,000 barrels per day. Since then, and with covid, the country’s industry has experienced a decline that has caused crude oil production to fall even below 160,000 barrels per day. Today, the oil industry is starting to wake up.
“We hope that the increase in production in the first half of 2024 will be sustained, thus reversing the annual declines,” commented Isaac Dwamena, coordinator of the PIAC Secretariat, in statements to the agency. Reuterswhich highlighted the organization’s optimism about the future of the industry. Meanwhile, the economy is growing at around 3%, with per capita income around $2,200. Although Ghana is one of the poorest countries in the world, it is much more developed than its neighbors like Senegal or Mali.
In total, crude oil production in the first half of 2024 reached 24.86 million barrels, compared to a drop of 13.2% over the same period of 2023. This rebound is mainly due at the Jubilee South East (JSE) project, operated by Tullow Oil, which began its activity at the end of 2023 and revitalized the performance of the Jubilee oil field, the first developed in the country.
More oil, more income
The JSE project has played a crucial role in restoring dynamism to the industry, at a time when Ghana needs to strengthen its economy following the pandemic and falling commodity prices. In addition to increasing oil production, oil revenues increased by 56% year-on-year, reaching $840.8 million in June 2024, representing vital income for the government.
According to PIAC, oil revenues represent approximately 7% of the government budget, reinforcing the importance of the sector in Ghana’s economy. This increase in revenue will allow the country to advance its investment and development plans, as well as address the financial challenges linked to inflation and the cost of living, which have affected a large part of the population.
Gas succeeds oil
Gas production also saw an increase in the first half of 2024, with an increase of 7.5%, to reach 139.86 million standard cubic feet. This growth in gas production complements the recovery of the energy sector and represents an additional boost for the national economy. Gas has become a strategic resource for Ghana as it seeks to ensure a stable energy supply to its industry and reduce its dependence on costly imports.
Despite this renaissance, the industry faces both natural and technical challenges. Dwamena stressed that existing production fields require careful management to maintain extraction levels and minimize disruption. Additionally, Ghanaian law requires oil companies to allocate at least 12% of the project to the state in the form of free and charged interest, a condition that could discourage investors, Dwamena said.
“The State can take between 15 and 20% of the interest charged, depending on the negotiations, and this has been a deterrent,” he explained. In order to continue to increase production, Ghana plans to sell more exploration rights. The government’s strategy is to prevent fossil fuels from being trapped and unused underground, especially in the context of global energy transition. In the long term, Ghana seeks to generate additional income to support this transition, by focusing on a balance between the production of fossil fuels and the development of renewable energies.
Currently, several international companies operate in Ghana, such as Eni, Tullow, Kosmos and PetroSAwhich represent a combination of technical experience and investment capacity necessary to develop and modernize the sector. These companies have committed to making additional investments that could further increase production and thus generate a steady stream of revenue for the state.
However, the complexity of competition and regulation in the region highlights the need to improve investment conditions for Ghana to remain attractive in the competitive African energy market. The growth of the oil sector could mean a major economic transformation for Ghana. Unlike the gold sector, which is a traditional source of income, oil development allows the country to diversify its economy. With oil revenues, the government has the opportunity to finance infrastructure projects and social programs that benefit its citizens, in a country where the poverty rate continues to be a challenge.
The case of gold
Ghana is one of the hotspots of the world in terms of gold production. It is the largest gold producer in Africa and the sixth largest in the world. In 2023, 4 million ounces were produced in the country. Gold has become a more than essential commodity for Ghana’s economy, contributing about 7% of GDP.
Ghana’s gold mines are spread across most of the country and the history of mining dates back hundreds of years. However, a form of mining known as artisanal, illegal or small-scale mining has become the most popular (unproductive and dangerous). Although recognized by law as a legitimate source of livelihood, Evidence shows that more than 85% of small-scale mining operations are still carried out in the informal and illegal sector. of the economy outside of state regulation.
Artisanal mining, now present in 14 of Ghana’s 16 regions, has become an important source of income for poor people living in rural areas. It employs more than a million people and accounts for 40% of the gold produced in Ghana, according to the country’s Minerals Commission, which regulates all gold sales. But illegal small-scale mining wreaks havoc on the environment, agriculture, cocoa production and drinking water supplies.
With these prospects, Ghana emerges as an example of how African countries can harness their energy resources to drive economic growth and improve their position on the global stage. Even the International Monetary Fund has welcomed some of the policies undertaken by the government of Ghana which involve the use of this oil or gold money as a source of financing.
