Ghana is losing its shine as the best investment destination for oil exploration and petroleum (E&P) companies, the Chief Executive Officer of the Ghana Upstream Petroleum Chamber, David Ampofo, has said.
This is evidenced in the mass exits of firms, the reduction in crude oil production and the government’s inability to sign new exploration agreements since 2017, he said.
Mr Ampofo said the government must, therefore, reassess its business approach to the oil and gas business to help arrest the falling standards and reclaim the country’s spot.
He said that was needed to retain existing firms as well as attract new ones into the sector to help revive it.
In an interview with the Graphic Business, the CEO said the current environment for operators in the E&P space was not the best and the continuous exit of firms was evident.
“Growing and replacing reserves in the country is challenged. The business environment to enable such growth is simply not there and the legal disputes and company exits are bad for business,” he said.
“The only two active operators, Tullow and ENI, are in arbitration with the government while AGM is exiting.”
“We are also not clear on the expectations and path forward for Aker.”
“So, there is no clear path for growing and replacing our reserves and that negatively impacts revenue to the government,” he said.
The CEO of the chamber said the development threatened the billion US dollar industry.
With oil providing the government with almost US$1 billion in annual revenue to the kitty, Mr Ampofo said it was critical that the issues leading to the unprecedented exits and legal tussles were urgently addressed.
Beyond the revenue, he said the industry was a significant contributor to the economy and efforts to ensure its smooth operation must be prioritised.
Currently, domestically produced gas contribute about 90 per cent of gas for power and 50 per cent of local liquefied petroleum gas (LPG) demand.
The country’s total proven oil reserves from producing fields are also about 527 million barrels while total proven gas reserves from producing fields are about 1.4 trillion cubic feet (tcf).
The CEO said the benefits from those reserves could only be realised when properly harnessed.
“The business environment must be right to retain incumbent companies while attracting other investors,” he said.
“Our discussions with both incumbent and international investors point to the fact that Ghana is losing its attractiveness as the best place for oil and gas investments. Something urgent needs to be done before we lose out completely,” he added.
Mr Ampofo said the worsening business climate was also evident with the rise in arbitrations between the firms and the government.
He also cited the fiscal regime governing the sector, noting that imposition of a one per cent tax on operators was crippling.
“Creeping taxes are common place and the latest being the growth and sustainability tax bill, which is recommending one per cent of gross production on E&P companies and five per cent of profit tax on upstream services.”
“There does not appear to be any recognition for stabilisation clauses,” he said, noting that major players exited in the last couple of years partly due to lack of stability clauses.”
“They include Exxon, Anadarko and now AGM and this does not include the numerous service companies that have already left due to lack of upstream business.”
“Production has been in decline since 2019. No new exploration agreement has been signed since 2017. Production from existing fields is plateauing,” he said.
The only two active operators, Tullow and ENI, are in arbitration with the government while AGM is exiting.