INTRODUCTION
Oil and natural gases are among the very important natural resources that Ghana feels proud of producing. Since the commercial discovery of oil in 2007 and the subsequent production in 2010, most indigenous Ghanaian and non-indigenous Ghanaian companies have shown interest and have had a tremendous impact in the industry.
In November 2019, Springfield Exploration and Production, an independent Ghanaian energy company and its partners, the Ghana National Petroleum Corporation (GNPC) and Explorco, announced its discovery of oil in the West Cape Three Points (WCTP) Block offshore Ghana.
We wish to educate our readers this week on the Ghanaian exploration history and the industry structure.
GHANA’S EXPLORATION HISTORY
Oil and natural gases occur in petroleum source sedimentary rocks and fortunately nearly half of Ghana’s total area is covered in it. There are four sedimentary basins in Ghana consisting of three offshore basins and one onshore. The Tano Cape Three Point Basin in the West has experienced the most exploration so far, followed by the Saltpond Basin, the Accra-Keta Basin and lastly, the Inland Voltaian Basin. The offshore basins extend from the Cote d’Ivoire-Ghana maritime border in the west to the Ghana-Togo maritime border in the east while the Inland Voltaian Basin is the largest sedimentary basin in Ghana.
Hydrocarbon exploration in Ghana’s sedimentary basins began as early as 1896 with a focus on oil and gas seepages in the onshore Tano Basin in what is now the Western Region. According to available records, the oil search was conducted by companies such as the West African Oil and Fuel Company, Société Française de Petrole and Gulf Oil Company of Ghana between 1896 to 1957. Oil exploration in the Tano and Accra-Keta Basins were revived in 1962 by Romanian oil experts up until the team left Ghana on 1967.
After the departure of the Romanian team, the government of Ghana invited private oil companies to undertake oil prospecting in Ghana. Most of the oil companies showed an interest in obtaining prospecting licenses in the continental shelf of Ghana, which was later divided into about 22 blocks; and by 1968, the entire continental shelf was under the license. Some of the oil companies included Volta Petroleum, Mobil Oil, Texaco Inc., Signal and Union Carbide and their permits authorized them to work in their licensed areas for three years.
In 1970, the first offshore wells were drilled in the Saltpond Basin leading to the discovery and production from the Saltpond field. The success of that well led to increased interest in offshore exploration in Ghana.
Several years were spent recovering and interpreting petroleum data available to improve the exploration database and packaging same for promotion to the international industry. These attracted credible exploration and production companies such as Anadarko, Tullow Oil, Kosmos Energy and also enhanced exploration activities. This led to the discoveries in 2007 in the Tano Basin by Kosmos Ghana Limited, the operators of the West Cape Three Point Block and Tullow Ghana Limited, the operators of the Deep Water Tano Block, which were developed as the Jubilee Field.
The Jubilee discovery opened the door for a rapid rise in investment and exploration activities. Ghana’s oil and gas sector has expanded considerably both in terms of core exploration and production activity and ancillary services. The upsurge in exploration activity is also reflected in the increased number of Petroleum Agreements awarded since the Jubilee Field.
INDUSTRY STRUCTURE
The Ministry of Energy and Petroleum is the government agency responsible for the formulation of policies in the two main sectors of the petroleum industry namely the upstream and downstream segments of the petroleum value chain.
1. The Upstream Sector
The upstream sector deals mainly with exploration, drilling, production and transportation of crude oil and is governed by a number of laws and regulations including the:
a. Petroleum Commission Act 2011 (Act 821);
b. Petroleum (Exploration and Production) Act 2016 (Act 919);
c. Petroleum Income Tax Act 1987 (PNDCL 188);
d. Petroleum (Local Content and Local Participation) Regulations 2013 (LI.2204); and
e. Petroleum Commission (Fees and Charges) Regulations 2015 (LI.2221).
The Petroleum Commission is the upstream sector regulator mandated to regulate and manage the utilization of petroleum resources and coordinate the policies in relation to them. At the commercial level, the Ghana National Petroleum Corporation is Ghana’s national oil company, which represents the country’s interests in the petroleum industry; in the upstream exploration and production sector. Although the Corporation is mandated to undertake activities across the industry value chain, it works alongside various international oil companies and Ghanaian entities operating offshore wells.
2. The Downstream Sector
The downstream sector is an onshore operation that revolves around refining, storage, importation, transportation, distribution and marketing of petroleum products regulated by the National Petroleum Authority (“Authority”) in accordance with the:
a. National Petroleum Commission Act 2005 (Act 691); and
b. Public Notices issued regularly by the Authority.
The Tema Oil Refinery, one of the industry players in the downstream sector, refines crude oil into petroleum products for domestic consumption. These products are transported, stored and distributed by a number of licensed bulk distribution companies. The government-owned Bulk Oil Storage and Transportation Company Limited (BOST) bears responsibility for the transmission and distribution of refined petroleum products and develop the natural gas infrastructure throughout the country, amongst others. Several licensed oil marketing companies, bulk distribution companies and downstream petroleum entities engage in the importation, sale and distribution of petroleum products.
Look out for next week’s article on the legal requirements and procedures required to set up a company to operate in the commercial upstream oil and gas sector in Ghana.
By Ewoenam Yawa Sybil Genevieve Atiase (January 2020)
Veritas International Nominees & Trustees/Aletheia Law
