Energy, utilities and resources in Ghana

The mining industry in Ghana has seen continued steady growth in strength over the past 4-5 years. The industry contributes significantly to government revenue year in year out.

Mining sector

Gold production contributed significantly to this growth in the industry. Ghana is Africa’s second largest gold producer after South Africa. The significant growth in this industry has witnessed an increase in foreign investors in Ghana. Currently there are a lot of players in the gold mining industry: AngloGold Ashanti, Newmont Ghana, Gold Fields Ghana, Chirano Goldmines and Golden Star, who continue to invest in the Ghanaian mining industry.

Nonetheless there are numerous other mining operators in Ghana such as Azumah Resources, PMI Mining, Perseus Mining Noble Mineral Resources and Adamus Resources, who have also ‘upped the ante’ in terms of developments and contributions in the industry. Azumah Resources announced in 2010 that it would be commencing a new drilling project in Wa in the North West of Ghana to increase its gold outputs.

The prominent increase in the mining industry has led to significant projects which aim at expanding the industry even further and generating more revenue for the government. The government in 2007 approved the development of a nuclear power sector, with a 400 megawatt (MW) nuclear power plant to be built by 2018. This would serve as a good power source for mining operations. Also the government also plans on building a gold refinery with output of 100 metric tons of gold per annum which also comes with its own benefits.

Due to the recent development in the industry, the government of Ghana introduced the New Minerals and Mining Act 703, 2006. The Act seeks to revise the old mining law to conform to the recent trends and development in the industry. One of the key changes made to the act was the introduction of a fixed royalty rate of 5% which overrides the earlier rate of a range of 3-6%.

However, the industry continues to face key challenges with the ever increasing galamsey operations (artisan mining) on company concessions which poses headaches for the affected mining companies. The galamsey operations pose individual health hazards for the operators as was evidenced in the landslide disaster at Dopoase in the Western Region in November 2010. Also the blackouts experienced earlier in 2011 in the country poses as an issue for mining operations in Ghana: but with the nuclear power plant underway, this problem should be curtailed.

Mining companies contribute a lot more to government revenue than taxes. A recent survey (Total Tax Contribution) conducted by PwC in 2010 indicated that for every USD 1 of corporate income tax contributed, there is another USD 1.50 contributed in other amounts.

Energy sector

Ghana’s energy sector can be classified into two main categories, petroleum and power. These categories contribute significantly to the economy.

Petroleum

Ghana’s petroleum industry is divided into the upstream and downstream sector. The upstream activities include the procurement and refining of crude oil by the nation’s only petroleum refinery, Tema Oil Refinery (TOR). The downstream activities include the marketing and distribution of petroleum products by Oil Marketing Companies (OMCs) and the pre-mixing of petroleum products for other industrial uses. OMCs operating in Ghana are mainly multinationals; however the last decade has seen an increase in the establishment of a number of small to medium scale OMCs.

Prices of petroleum products, which have steadily increased since 2003, are regulated by an independent board. The nation consumes significant volumes of petroleum products and importation of crude oil constitutes a significant portion of gross domestic product (GDP).

The Ghana National Petroleum Council (GNPC) has the mandate to explore for oil within the nation’s territory. The petroleum sector has since 2003 experienced significant growth, particularly since the discovery of oil in commercial quantities in the Jubilee fields in 2007. Some of the major oil & gas contractors include Tullow Ghana, Kosmos Energy, ENI and Hess Ghana Limited. Their sub-contractors include Schlumberger, Baker Hughes, Weatherford, Ocean Rig and Technip. Ghana’s first commercial oil lifting took place in January 2011 and in the period since then to April 2011, 4.7 million barrels of crude oil have been lifted. Currently there are about 11 Petroleum Agreements, which are agreements between the Government of Ghana, GNPC and petroleum operators signifying the increased interest in Ghana’s oil industry.

Indeed Ghana’s oil and gas prospects are significant. Recent discoveries are that the country’s oil and gas resources stretch across the country’s shoreline from Cape Three points in the West to Keta in the East. The Volta Basin as well is also believed to hold oil and gas reserves. Government through GNPC is seeking to fully maximize Ghana’s prospects in the oil industry. It has recently sought to extend the country’s continental shelf to increase the country’s oil and gas scope.

Further the arrival of the Floating Production Storage Offloading (FPSO) in June 2010, which is equipment that receives and stores crude oil, would greatly aid in harnessing oil and gas. In March 2011 it was also announced that another oil discovery had been made in Enyenra.

Power

Hydroelectricity is the primary source of Ghana’s power and is generated by the Volta River Authority (VRA).The Electricity Company of Ghana distributes electricity mainly in the southern sector of the country whiles the VRA is responsible for the northern sector.

The VRA has a monopoly over the generation of power in the country and the main source of power is hydro electric, which is environmentally friendly. A relatively small percentage of power is generated from thermal sources. Population growth, rural electrification and expansion in industries have led to an increase in thermal power. In attempt to satisfy this need the government of Ghana in collaboration with private company has completed the Takoradi thermal plant which now supplies about 650 MW of power to the VRA. There are more projects underway including the construction of a hydroelectric plant at Bui.

The Public Utilities Regulatory Commission (PURC) is responsible for regulating the cost of energy in Ghana. There has so far not been a major move towards privatisation of power by the government.

Ghana exports power to neighbouring Togo and has an agreement to export or import power to Cote D’Ivoire as the situation demands.