Oil has been the most important economic engine of the world for the last 50 years.
But that will come to an end soon, and Ghana should prepare for that faster than many other countries.
Climate Change, Global Warming, Flooding, Fire Outbreaks, Carbon Neutral and many other things have become part of our daily information and are all part of the worldwide push for a transformation away from fossil-based energy, like oil, gas, and coal to sustainable energy like solar, wind, among others.
Gas shortage, high petrol prices, on the other hand, should create more demand, more production and more investments, but that is in my opinion just a temporary demand.
Although Ghana is just a young oil-producing nation, we managed to make our oil and gas sector an important contributor to our Gross Domestic Product (GDP.)
Again, although we Ghanaians are proud of our growing oil sector, I think we should be very careful to become over-dependent on the sector.
At this moment we generate around 1.8 billion USD of oil income, but we projected growth for the next 3 years to roughly 2.8 billion USD.
If we are not careful, that growth will not materialize, and I seriously believe that oil revenue will decline sharply in the future because of climate change restrictions as announced at the COP26.
I agree 100% with the comments made by President Nana Akufo-Addo at the COP26. Telling the world that they can’t blame Africa and other developing nations for the climate situation the world needs to address. But Africa can’t be told not to use its resources to solve a problem the developed world created unless the same compensates Ghana, Africa and the rest of the developing world for that.
But I believe that his warning and cry for attention to this problem will not result in anything until we get much closer to a disaster for the developed rich countries in the world first and the developing world as well.
The Developed World will start with a warning, by signing a statement. Another step has been taken already, they promised not to use/import products which are negatively impacting the Eco-systems.
The next step will be that banks, will be forced by laws and regulations to stop financing oil and other sectors in developing countries in the fight against climate change. This will affect the development of many poor countries around the world. Other steps that will follow are: a complete ban on imports of oil, palm-oil, cocoa, timber etc.
The complete ban on oil will start as soon as the now importers of oil and gas in the developed world can rely fully on their renewable energy sources. That will take a few years, but the decline in demand for oil and gas will start much sooner.
Ghana is in the list of oil-producing countries, a small player. But Ghana has together with some other countries a huge problem in producing oil: Ghana is completely dependent on deep-sea oil exploration.
Countries like Venezuela, Saudi-Arabia and others have shallow oil resources and “harvesting” that oil is relatively cheap. Russia has large oil and gas reserves, but they also suffer from high costs due to permafrost. Other oil-producing countries also depend on oil from under the sea, but those are mostly shallow waters and production, and they are even still more expensive than from Venezuela and Saudi-Arabia.
Our government was recently in the news in an effort to try to take over Aker Energy. But ask yourself: Why is a company as specialized in Oil and Gas production as Aker pulling out over a great deal in a new oil producing country?
The answer to that question is simple: Aker knows that within the next few years oil demand will decline and because exploration of deep-sea oil is much more expensive than an exploration of shallow oil wells it will prefer to continue in wells and countries where it is cheaper to explore oil. For example; In Nigeria, whose oil is actually delta oil and not that deep, the costs to produce 1 barrel of oil are around 21-22 USD against 36-40 for the United States in the Gulf of Mexico is much deeper.
However, the costs of producing in the real oil giants Saudi-Arabia are 2.80 – 3.00 Usd and in Venezuela 6-7 Usd. simply because their oil reserves are “just under the surface”.
You don’t need to be a genius to be able to conclude where oil companies prefer to continue producing oil when the worldwide demand declines.
Not in Ghana, or in any other deep-sea oil-producing countries, where the costs are even higher than in the USA. Not in deep-sea oil wells, not in shale oil, not in permafrost oil sources.
The complete shale oil sector in the USA collapsed, not because of current low demand but because investors are scared to invest in it, simply because shale oil extraction is also expensive.
So do you think Ghana should invest more in our deep-sea oil industry?
Do you think Government should take over oil companies that withdraw from Ghana?
Should Ghana quickly adapt and prepare for a complete loss of oil income?
I don’t have all the answers now, but I know one thing; I would be very careful with my money to invest in Ghana’s oil industry, and I think that a government should be very careful with our money.
Nico van Staalduinen,
Just a concerned Ghanaian