Vice President of IMANI Africa, Bright Simons has envisioned more difficulty ahead of Ghana due to how fast the country’s oil wells are drying up.
In a tweet on X, Mr. Simons stated that this subject is not on the radar at all in the current political season in Ghana although the prospect of the country’s oil running out is slicing off a significant part of the economy.
“Oil accounts for roughly a quarter of exports and, in recent years, the government’s take from the black gold has been equivalent to between 10% to 15% of total revenue. Unsurprisingly, it is next to only yellow gold in fiscal significance (even if its overall economic impact, as an enclave sector, has been more limited than was expected when the industry first appeared.)” he explained.
According to him, oil sector watchdog analysts like to talk about a 10 to 15 year horizon for the industry to disappear if reserves are not quickly added but from his gathered data, it does not look encouraging.
“The confusion may derive from using contingent resource estimates and subtracting production to date. This is, of course, not careful enough. It would be much better to observe the historical rate at which such contingent resources have converted to probable reserves and thence to proved reserves. Then factor in what unexpected declines in production are telling us about the estimation models” he said.
Looking at the latest reserve audits and production numbers, he does not see how, if new reserves are not added, the country would still have a serious industry left in 5 years but some developments support this concern.
“Readers may recall how in 2019 the Finance Ministry projected output of 500k barrels of oil per day by 2024. The heady optimism was not driven solely by hopes of the Pecan field producing by then. There were also hopes that Tweneboa, Danta, and Ntomme Far West projects would come onstream; and that the jewel in the crown, Jubilee Field, would see further expansion. Today, production hovers around 132,000 barrels a day”.
He believes that the only way a serious oil industry can remain in place by 2029 is by getting Pecan going and resolving the impasse with Eni so they can develop their finds.
“This may however still not be enough because they are projecting 80k barrels a day for Pecan but that is based on initial output ramping up from 38k barrels/day. TEN too had an expected output of 80k barrels per day. In recent times, it struggles to hit 18k barrels on a good day” he added.
He disclosed that although analysts are optimistic about Pecan coming onstream around 2028, like stated above, the volumes don’t look too promising.
He has no doubt that this is why Ghana’s largest oil producer, Tullow, has struggled on the stock market.
“Its share price was ~$15.4 when oil production started. Today it hovers around 30 US cents (~$0.3). Adding all this up paints a bleak picture for Ghana’s oil industry unless policymakers start taking the real prospect of a post-oil era seriously. It really is about time the policy-conscious public as a whole put this potential fiscal bomb on the radar” he mentioned.
