In this interview with The Worldfolio, Boakye Agyarko, Ghana´s Minister of Energy, discusses how the country aims to develop a modern, diversified, efficient and financially sustainable energy sector
Ghana is a member of Ecowas, the regional organisation tasked with fostering greater economic integration. President Akufo Addo has showed true interest in fostering relations with Ghana’s neighbours and has assured the country’s commitment to ECOWAS. In your opinion, where is greater integration and cooperation needed between Ecowas members and what is the potential for the West African Power Pool to address the power supply deficiency in the region?
First and foremost, the ECOWAS project takes off from the lessons we have learned from other areas, having developed through greater unity. The EU started in 1956 in Rome and has ushered in a period of prosperity for its people. In North America, the trade relationships between America and Canada, which was later expanded to NAFTA to include Mexico. All of these projects of unification have brought greater prosperity to their peoples beyond what they would have attained if they worked alone.
The ECOWAS region of 15 West African states takes its cues and its lessons from these. We are largely the same type of people, same type of habits, dietary habits and needs, same type of climate, soils, and produce. But in bringing us together, the advantage is that we are bringing small markets to constitute a larger market that can be served through the economies of scale. We are not alone in that respect and I think that if we pursue it well, we are talking about a 350-million-strong market, which certainly is larger than the United States of America. We have a huge market that is not being tapped into.
Along the line for self-trade, making sure that we trade with ourselves to increase our output and productivity, is what has put us in this line of pursuit. So we will pursue it, and happily, our President is fully committed to it. It is through such duty, of purpose and vision, that we can fully implement the ECOWAS protocols.
On the question of electricity supply in the West African subregion, the West Africa Power Pool started many years ago, but it has floundered. It hasn’t taken off as it ought to. Happily, we are coming into times when the demand for electricity in the West Africa subregion makes it imperative that we share our resources, instead of developing independently.
For example, only a few countries in the region have hydro. We are one of them. We ought to be able to leverage the economics of hydro power generation through the rest of West Africa, as a way of making available, a stable, as well as affordable, supply of power. The West Africa Power Pool therefore has to create the necessary infrastructure and the necessary regulatory framework and environment to allow countries to trade power.
Burkina and Mali, landlocked countries, produce power on the average of about 20 cents a kilowatt-hour. Côte d'Ivoire produces power under 10 cents a kilowatt-hour. Ghana is in the average range of 13 to 15 cents a kilowatt-hour. I believe that if we all took our excess capacities and converted them to export capacities, then we should be able to sell our excess power to Burkina and Mali at a cheaper rate, than they are producing for themselves, which means that once the prices for them come down, it gives room for expansion of economic activity.
It also makes sure, apart from the costs, that we have a regular supply of stable power, so that if we are shot, we can call on Côte d'Ivoire to send us power. That is a way of removing the intermittentness and shortages in the supply of power.
We could even enlarge this further. DR Congo, on the Inga project, is going to produce almost 12,000 megawatts of power. The Power Project in Ethiopia is a 6,000-megawatt project. Combine all of these, let them produce and let us have the transmission system and the trading protocols, and sooner rather than later, Africa will have excess power that it could even think of exporting across the Mediterranean to Europe.
Why should Ghana or any independent African country just be doing single nuclear power generation? All of us in the West Africa region could simply come under the same ECOWAS protocol, and base one nuclear power plant of sufficient size and safety protocols to generate sufficient power for the entire West African region. For example, New York City has 16 or 18 million people, and one nuclear power generator could take care of all of them. Paris consumes more power than the entire country of Ghana. It is possible for us in West Africa to say that for our 350 million people, we will collaborate and cooperate and create a nuclear facility that serves the entire West Africa region through the West Africa Power Pool.
A notable target in the Strategic Energy Plan is to increase the country’s renewable energy capacity to 10 percent by 2020. Can you outline the strategies in place to help achieve this target? Why is this target important?
First of all, in terms of generation mix, we are at about one percent renewable. Not the conventional renewable because hydro is also renewable, but in terms of the solar, the wind, the waste-to-energy, biomass and so on, we are at about one percent, which is inadequate by all standards, including the Sustainable Development Goals.
We need to lift it up to about 10 percent. Why is it important? Ghana started off on the back of hydro in a period when the climate made rainfall abundant, and in many instances, we had to spill water out of the dam to protect the structural integrity of it.
We are now in a different phase. Hydro, I admit, is still the cheapest. But we are not Costa Rica, where there’s still abundant rainfall. Therefore, we cannot continue to wholly and solely depend on hydro.
On the thermal side, we are securing every six weeks about $13 million to buy crude to fire our thermal plants. For a poor country, every year, our crude oil bill is a little over $1 billion. That’s terrible. Then also gas. We are putting in a lot of the gas we found into generating thermal power.
The question we have to ask ourselves is, for all the gas we have, should thermal power generation be the only end use, or should we diversify into using part of our gas into a new petrochemical industry and a new agrochemical industry – production of fertilizer, and so on? That’s a decision we have to make.
The question is, all our resources must not go into one end-use of power generation. We are running short of those options, and it’s clear that renewable resources are abundant in our environment. We have plenty of sun. We have plenty of biomass, and we generate sufficient waste that we could transform into a useful output. Our goal is to shoot for a 10 percent generation mix from renewables. Our renewables would largely be solar, wind, waste-to-energy, and biomass.
Each of these have their own competitive advantages, and the one with the best competitive advantage, in my judgment, is solar. We are looking at two approaches to solar. One is the utility-scale solar, and the second is distributed solar.
Now, bear in mind that on the thermal side, we still have to incur the cost of crude and contend with pollution. On the renewable side, we don’t have to buy any feed stock, and it’s clean for the environment. We believe if we go utility-scale solar and put it out on tender, we can get an average of five cents a kilowatt-hour. More environmentally friendly, it doesn’t have crude costs, and it’s safe.
Ghana discovered oil in 2007 and started producing commercial quantities in 2010. The trials and tribulations of many oil and gas nations who have mismanaged large reserves of natural resources have been well documented. What is Ghana doing to do to avoid the mismanagement of its resources and ensure they are used for the benefit and sustainable development of the nation?
First and foremost, right from the beginning, we were very alive to the potential of an oil curse. In crafting our laws and regulations around the management of our oil resources, we look to implement the best practices of the world. We have a very strong collaborative effort with the Norwegians, who came in and shared their experience with us. We also looked at bad examples to warn us on what not to do.
I can proudly say that we crafted the Petroleum Revenue Management Act that stands the test of time amongst the best of international practices. That does not mean that it cannot be improved upon. Time and again, it will go under the necessary review to make sure that there is transparency and there is accountability.
That account is kept with the Central Bank and the details of the account are published for all to see. There is an oversight committee, like an auditor, that makes sure that the account is used according to law and purpose. Right off the bat, we have had in place good mechanisms to ensure transparency and accountability.
We are also moving in the direction where allocation of blocks is by competitive tendering so that I, as Minister, cannot sit in the four walls in my room and decide to give blocks to anybody I fancy. The competitive tendering process, which comes under Act 919, is to ensure that there is transparency in the upstream business.
The events in the Niger Delta in Nigeria caution us not to neglect communities within which lie the oil catchment areas. We are implementing strong corporate responsibility programs, social responsibility programs to ensure that the oil revenue touches the lives of all Ghanaians, where they would feel that they have not been disadvantaged or been left out because at the end of the day.
I want to make sure that we have sufficient corporate social responsibility programs that introduce the benefits of the oil wealth to all our citizens, particularly those who are in the catchment area. That is why our President is insistent that the oil money must be spent on things like free secondary school education, so that every child, every Ghanaian child, can benefit.
See, education is the leveller. Education is what gives all of us our possibilities and matures our potential. The President wants to make sure that every Ghanaian child has that opportunity. Secondly, he wants that kind of money to go into ensuring that we have a national health policy that every Ghanaian can benefit from. Thirdly, he wants the oil resources to be used in a transformational sense – agriculture and industrialization – to provide food, security, and jobs for our teeming youth.
If we succeed in redirecting our oil resources into these areas, then we will be sure that our citizens would have been touched individually and benefitted from our oil. That is the best way of making sure that you have contented people and making sure that the oil revenue has best been used for our citizens.
Ghana is one of the UK’s longest-standing and strongest partners in Africa. And the UK one of the largest investors. Among notable investments in energy we have seen in recent years: the Blue Energy Solar Energy Plant or the recent support through the UK Export Finance that will provide US$400 million for a GE Oil & Gas contract with Ghana's Offshore Cape Three Points Project. How do you assess the presence of UK firms and investors in Ghana’s energy sector? Where do you see the most opportunities for further large and mutually beneficial investments?
Our relationship with the United Kingdom dates back centuries. There has been cordial, sometimes tempestuous, especially in the colonial era, but by and large, it has been mutually beneficial. It will and must continue to be mutually beneficial.
They have assisted us in many ways outside the oil and gas industry, and also within the oil and gas industry. That cooperation is most welcome, and we will do what we need to do to encourage the enlargement of it.
The face of the oil industry has changed. It is no longer specifically identified to nation states. When I was a child, I knew BP stood for British Petroleum. Now, it doesn’t. But if it were still British Petroleum, then you could specifically say that, “Yes, this is the British entity we want to attract.” Shell, we thought, was Dutch. No longer so. So the face of the oil industry, particularly upstream, has changed. It is becoming increasingly difficult to base decisions on nation states. These conglomerates cut across all kinds of countries.
Suffice it to say that we are very interested in making sure that we create a business-friendly environment for oil companies to come and work here. Our mantra in upstream is to pursue an aggressive exploration and development policy because that’s the only way you increase investments. What we found is now bread and butter. If we milk it for the next 80 years, it will run out. It is in adding to our resources and our reserves and our fields that we can keep the thing going.
We are taking a position that will pursue very aggressive exploration and development regimes. That means that we have to have rules, regulations, and laws that are friendly and that take care our interest, as well as our investors’. Our regulatory regimes have to be predictable and reliable and stable.
Predictable in the sense that you’re asking people to invest huge sums of money today over a 50-year period. They ought to feel secure today, that the laws are not going to change on them, that the investment they make today for the 50 years is not suddenly going to be taken from them.
We need to create that environment to make it possible for these guys to risk that investment. Look, you’re asking someone to come and explore. Every well they drill is about $130 million. They could drill 10, 15 wells, all would be dry. That’s a huge risk. You have to have your physical regime and capital depreciation and all those rules to be friendly enough to make that risk worth their while.
I think that that is one of the key things we have to do.
On June 13th and 14th, we had an energy summit here. We want to engage the international oil marketing companies, banks, investors, venture capitalists, and all the stakeholders, engage them in formulating policies, rules, and regulations that all of us can live with to our mutual advantage. Our mantra of building the most business-friendly environment is our guide. We want to make sure that all companies, irrespective of where they’re coming from, feel that this is the place to do business.