Ghana’s Energy Sector and the Rawlings factor
“Ghana could not have survived the Economic Recovery Program (ERPs) of the 1980s put in place by the ruling Provisional National Defence Council (PNDC) without the strength of character and unwavering determination of Mr. Rawlings” – Naomi Chazan, 1983
Beginning 1983 under its Economic Recovery Program (ERP), the then Government led by His Excellency Flight Lieutenant Jerry John Rawlings had successfully implemented a series of macroeconomic and structural reforms which reversed the country’s profound economic decline since independence. Under the economic program, the government was committed to liberalizing the cocoa sub-sector and reforming the energy sector in order to improve efficiency and eliminate the existing fiscal burden by promoting private sector participation.
In the mid-1990s, the Ghanaian energy sector had to go through a phase change because of a shift in the overall policy framework. Before then, the country’s energy sector was financed by the government and managed by public utilities and companies. In 1994, the government led by late and former President Jerry John Rawlings initiated the process of reforming and restructuring the energy sector in the quest to improve operational efficiency and increase consumer access to electrical power and petroleum products.
The objective of the policy shift was:
To create an environment which can attract private investment for the expansion of electricity generation and refinery capacity,
To deploy technical innovation,
To ensure realistic energy pricing policy and competition, and
To incorporate use of renewable energy resources into the country’s energy mix.
The policy change was intended to eliminate government’s involvement as owner and manager of energy businesses and re-focus its role on policy-making and market regulation. Consequently, public funds can be saved to improve social infrastructure.
THE POWER SECTOR
Introduction of Thermal in Generation Mix
Prior to the draught of 1983-1984, Ghana’s electricity supply was virtually sourced from hydro; Akosombo and Kpong. Following the severity of the draught which had lowered the water level in the Volta lake beyond the minimum operating limit, the power generation potentiality of the two plants had reduced to just 30 percent of its 1980 level. This led to mandatory rationing, hence curtailment of power to customers of the two plants operated by the Volta River Authority (VRA). This was followed up by another drought in 1993-94, which again led to serious blackouts across the country. Within the period there had also been steady growth in power consumption, driven by spurred economic growth and the National Electrification Scheme, which compounded the issues.
These two power crisis induced by the droughts and the increasing demand for power exposed the country’s almost absolute reliance on hydroelectric power. The Jerry John Rawlings-led government saw the need to increase the country’s power generation capacity, and certainly add on to the existing generation mix to reduce the over dependence on hydroelectric plants.
The government represented by the then Ministry of Mines and Energy (MME) negotiated with the World Bank and its partners to secure a credit to construct the Takoradi Thermal Power Station (TTPS), Ghana’s first thermal (fossil fuel) facility. The Volta River Authority (VRA) operationalized the 330 MW combined cycle facility in 1997, with official inauguration by President Rawlings taking place in October 2000.
Introduction of IPP Concept
The government in January 1994 as part of its plan to push for the penetration of thermal plants with full participation of Independent Power Producers (IPPs), prepared a strategic framework called “Ghana Power Sector Development Policy” to among other things; develop future power generation, coordinate generation and transmission operations, develop framework electricity distribution and pricing, and formation of regulatory bodies.
Reference to the development of future power generation, the structure included but not limited to VRA continuing to develop the Volta lake, and entering into Build, Operate and Transfer (BOT) arrangements with IPPs.
In 2000, the Takoradi International Company (TICO), a joint venture between Abu Dhabi National Energy Company PJSC (TAQA) (90 percent) and the VRA (10 percent), completed construction and began operating the second combustion unit, Takoradi 2 (T2). Other wholly owned IPPs were later to follow, with their present generation assets accounting for close to 50 percent of Ghana’s installed power production capacity, thus serving as key component of the country’s generation capacity.
Extended Electricity Access
After witnessing the construction and commissioning of the enormous Akosombo Dam, the country was plunged into a state of electricity fever. Communities both far and near, were ready for ample supply of cheap power from the country’s most ambitious development project, that has created a power plant with 528 megawatt (MW) capacity.
The Akosombo power plant, which provided cheap electricity for the smelter of the Volta Aluminium Company (VALCO), had powered 500 miles of transmission lines that connected the population centers like Tema, Accra and mining areas of southern Ghana. There were no immediate plans then, to provide electricity to rural areas. However, statements capture in the press by government functionaries at the time, created the impression that the whole country would benefit from Akosombo.
Chiefs, town development committees, and other opinion leaders expressed their desire for electricity. For instance, it is reported that five days later and after Osagyefo the President turned on a switch at the Akosombo powerhouse, the traditional council of Senya Bereku wrote to inquire whether the transmission lines could be extended to their “old and historic” coastal town. Again, a Convention People’s Party (CPP) former Member of Parliament (MP) for Asebu Eddie Ampah, was said to have been convinced that his hometown Moree, close to Cape Coast, would be connected to the Volta grid in no time. He was sure that the then “Electricity Division” will at all cost provide Moree with power after having conveyed to his electorate “Osagyefo’s dream” of generating ample flow of electricity for use in every home in Ghana. To the extent that the Asebu Local Council was prepared to contribute cash and communal labor to have electricity connection. However, the expectations of immediate connections to the Volta grid were never to be.
The coup that swept Nkrumah from power in February 1966 could not end the desire and the popular quest for electricity. Petitions requesting the extension of Volta power to places close to the grid and beyond continued to increase. The National Liberation Council (NLC) regime that ousted Osagyefo encountered difficulties to cope with expectations, especially in the disadvantaged North. The extension of power to the North was described as neither technically nor economically feasible due to the small demand. In 1967, Issifu Ali NLC commissioner for the Ministry of Works and Housing could only mention a plan for rural electrification that privileged the South and Ashanti, leaving many Ghanaians, particularly those in the Northern regions with no access the Volta grid, feeling neglected.
The rural folks linked electricity access with hopes for economic development and for stemming the rural to urban migration of their youth, and phrased their efforts for access to electrical power as claims to citizenship. For them, electricity did not become the cure-all for their economic misery. Rather, this technological innovation proved to be an enhancement in existing inequities. Electricity became just another cost that extracted tight resources with few benefits.
As the time the NLC regime relinquished power to a civilian government, Osagyefo’s high hopes had not been fulfilled. A vast majority of Ghanaians were still waiting for electricity connection. Successive Military and civil governments promised to extend the grid or at least provide local generation. Yet majority of the people in rural areas remained without electricity due to low load demand, funding shortage, high equipment and construction cost, and reversal of policies. It took another 15 years until Ghana began extending the Volta grid to the North, as part of a “National Electrification Scheme”.
By the mid-1980s, Ghana had about 250,000 electricity consumers, meaning that merely 10 percent of the population had access to power. The major cities of Accra, Tema, Takoradi, Kumasi, and Cape Coast accounted for 70 percent of these consumers.
Driven by growth in demographic requirements, increased urbanization, an ever-increasing technological demand, and the aspiration to transform into a middle-income country, the Provisional National Defense Council (PNDC) under Jerry John Rawlings in 1987 committed itself to an ambitious “National Electrification Scheme.” The policy, which was targeted at achieving universal access to reliable electricity supply by 2020, gained the support of the World Bank and the International Monetary Fund. The Volta River Authority (VRA) supported the scheme by extending the Volta grid from Kumasi to Brong Ahafo, the Northern, and the Upper Regions and by taking over the distribution of electric power through its new subsidiary, the Northern Electricity Department, to Northern consumers. At the inauguration celebrating the extension of the grid to the Northern Region, Rawlings evoked the legacy of Nkrumah and declared; “This occasion marks the fulfillment of a dream conceived so many years ago”.
This singular initiative by the Rawlings-led administration, slowed down out-migration, boosted socio-economic development in rural areas, and shored up support for the Democrats in rural areas and across the Northern region. It is said that “The extension of electricity to the North, was a conduit for the PNDC government to “gain greater credibility and legitimacy.”
At the time of leaving office, the former and late President Jerry John Rawlings-led governments had increased electricity access from 10 percent to a whopping 45 percent, with an annual average growth rate of approximately 2 percent. The increase in electricity access was accompanied by extensions and improvement in transmission and distribution networks.
“Rawlings left a legacy in which Ghanaians as a people and society, have the enviable opportunity to enjoy the quality of life and also to reap the benefits of a systemic development in an ever-changing global, political and economic environment” – Kevin Shillington, 1992
Establishment of Regulatory Bodies
In pursuit of the energy sector reform in mid-1990s, which was aimed at limiting the role of government to the operation of the electricity transmission network, market regulation and energy sector planning, a Parliamentary Act, Act 536, established the Public Utilities and Regulatory Commission (PURC) in 1997 to among other functions:
Regulate utility tariffs,
Ensure customer protection, and
Promote competition in the provision of energy services.
Another Parliamentary Act in 1997, Act 541 that established the Energy Commission followed, in order to:
Regulate technical standards in the provision of energy (excluding crude oil and natural gas),
Prepare, review and periodically update indicative energy plans to ensure that all energy requirements of the economy are met in a sustainable manner, and
Formulate national energy policies for the development and utilization of indigenous energy resources, in particular renewable energy sources: solar, wind and biomass.
THE PETROLEUM SECTOR
Ghana joined the league of oil and gas producing countries in December 2010, with a little over 1.18 million barrels produced oil at end of same year from the Jubilee field. Ten (10) years on, and up until June 2020 the country had produced from three fields close to 421 million barrels of crude oil, earning the country roughly US$5.32 billion over the period.
The Dollar denominated revenue receipts from Ghana’s oil production have been used to fund diverse development projects, to manage shocks to the economy or unanticipated shortfalls in petroleum revenue, and to provide an endowment to support development for future generations when Ghana’s petroleum reserves had been depleted. Some of the projects the petroleum revenue have been used to fund can be tracked to agriculture, road, rail and other critical physical infrastructure. Some of the money is also invested in industrialization, as well as service delivery in education and health.
The oil industry continue to attract key global industry players on the back of sustained investor interest, as well as significant de-risking of the Western Basin. This was evident in the 2019 Licensing Rounds Bids and Negotiations. Additionally, the data room of the Petroleum Commission attracted a considerable number of investors and industry giants like BP, Hunt Oil, Shell, among others.
Beyond the Jubilee fields, which was the first to commence commercial oil production, Ghana’s continental shelf is playing host to the Tweneboah-Enyera-Ntomme (TEN) fields and the Sankofa fields for purposes of petroleum production. More recently, Aker Energy, AGM, Springfield and a few other exploration and production companies are pronounced as entities at various stages of commencing production. The growing interest in upstream activities is expected to increase Ghana’s daily production of oil and gas, and by extension the amount of Dollar-denominated revenue to be earned by the country, to support key sectors of the economy.
The benefits Ghanaians are currently enjoying from oil production could not have been possible without the foresight of the late and former President Jerry John Rawlings who established the Ghana National Petroleum Corporation (GNPC), whose work preceded oil find in the country, and facilitated the inflow of investors into Ghana.
The GNPC was established by the erstwhile PNDC Government in 1983 by the GNPC Act, 1983 (PNDCL64) as the commercial entity in the upstream petroleum sector; charged with the primary responsibility for exploration, development, production and disposal of petroleum resources. GNPC’s establishment was followed up a year later with the enactment of the Petroleum (Exploration and Production) Act, 1984 (PNDCL 84) to govern the upstream petroleum sector.
The man Rawlings saw the green shoots. The offshore was of course looking appetizing at the time, and a dedicated body like the GNPC was needed to commit solely to the upstream. Because of GNPC’s full time dedication to exploration activities in collecting data, it reduced the efforts of private prospectors who came in, and enhanced the chances of commercial discovery.
No wonder, two decades after the establishment of GNPC, and the enactment of PNDCL 84, petroleum was discovered in commercial quantities offshore Ghana in 2007, followed by production in November 2010. The feat was achieved by the pioneering role of Mr. Tsatsu Tsikata and his team in gathering, analyzing and interpretation data for oil and gas exploration, under the vision of the late and former President.
Presently the GNPC owns a 10 percent interest in the various Ghanaian offshore oil blocks. It is also concentrating on data management of geological and geophysical information, the promotion of further exploitation sites, and the control of oil companies that are operating in Ghana.
Restoration of Petroleum Supplies
Ghana’s relationship with the Nigerian government had turned sour following the PNDC ousting of the Limann-led government in 1981. Nigeria, which Ghana at the time counted on for about 90 percent of its petroleum needs, discontinued the supply over US$150 million debt, owed Nigeria prior to the entry of the PNDC government. This happened at a time Ghana was confronted with one of the most devastating droughts in recorded history, and economic challenges. The new government led by Flight Lieutenant Jerry John Rawlings had to look elsewhere for Ghana’s petroleum needs as the country was met with stringent measures from President Shehu Shagari’s Nigerian government.
The continued shutdown of the country’s refinery for lack of crude would have meant that the over 11 million Ghanaians at the time would have been starved of petroleum products― vital commodities for purposes of mobility, commercial and industrial production, and lighting. It could have degenerated into job losses, social disturbances and possible shutdown of the Ghanaian economy.
However, the persona of Rawlings, who was pre-occupied with improving the wellbeing of the poor and masses, and his political perspectives, was to open new doors. His administration primarily sought to build stronger relations with socialist and progressive states, and so it did not come as strange when Libya led by Colonel Muammar al-Gaddafi undertook to supply the crude oil Ghanaians so much needed. The affable and charismatic late and former President on restoring and building ties with Colonel Gaddafi’s Libya negotiated for a term-contract for crude supply at favorable terms. In addition, when Major General Ibrahim Babangida took over power in Nigeria in 1985, the man Jerry John Rawlings capitalized on the change to restore bilateral trade between the two countries, and that included crude supplies from Nigeria.
The steps taken to ensure consistent supply of crude oil were necessary to forestall the collapse of the Tema Oil Refinery (TOR), which remained central to the downstream petroleum segment of the country.
Expansion and Modernization of TOR
In 1989, the government of Jerry John Rawlings undertook the first major rehabilitation of the Tema Oil Refinery (TOR) to improve the distribution of liquefied petroleum gas (LPG), and increase supply volume from 4,500 to 5,400 cubic meter. Phase two of the rehabilitation started in 1990 at an estimated cost of US$36 million.
In 1997, the hydro-skimming plant that had an initial Crude Distillation Unit (CDU) capacity of 28,000 barrels per stream day when it was commissioned in 1963 saw an expansion. A US$200 million loan facility contracted by the Rawlings-led government from a Korean consortium in 1997 made the revamping of the CDU plant possible. The capacity was increased by 60 percent from 28,000 to 45,000 barrels per stream day, as part of phase one of TOR’S expansion and modernization programme. Until date, this expansion remain the only upgrade the facility has received since its inception.
Strategic Repositioning TOR
In 1996, as part of the restructuring of the petroleum sector, the state-owned refinery began to procure and process crude oil on its own account following an industrial restructuring programme. The plan was for TOR to seek strategic partnership with private investors in line with the economic reform program, which the government was committed to liberalizing and reforming the energy sector in order to improve efficiency and eliminate the existing fiscal burden.
Hitherto the GNPC was the entity that procured the crude for the refinery to refine based on Tolling basis. The GNPC was to leave the crude procurement and refinery business for TOR, so it could focus on crude exploration and production activities.
Introduction of Premix Fuel
In the 1990s, Ghanaian fisher-folks were fueling their Out-board Motors with a mixture of RON 84 Gasoline (Regular) and Lubricant called Marine-mix. During the period, the world had to switch from Leaded-Gasoline to un-Leaded Gasoline with a higher Research Octane Number (RON). As such, fishermen in Ghana were compelled to buy the newly introduced RON 91 (Super) at a much higher price before mixing with the usual lubricant. This of course was going to increase the input costs for the fishermen.
The late and former President Jerry John Rawlings had to intervene to first have the Tema Oil Refinery formulate the Premix Fuel (a laboratory combination of Gasoline and Lubricant) purposely for firing the 2-stroke engine of the Out-board Motors used by the fishermen. The government of Jerry John Rawlings proceeded to subsidize the final price of the formulated Premix Fuel for the fisher-folks to lessen their existing burden.
Making Petroleum Products Accessible
In 1992, the government of Jerry John Rawlings sought a loan from the government of Korea to build a multi-product pipeline from the port of Tema via the Tema Oil Refinery and the Accra Plains terminal to the port of Akosombo. This pipeline project was to facilitate the transportation of petroleum products for local distribution and shipment via barge from the Akosombo port (South) to the Buipe in the Northern region. The plan was to bridge the gap between the North and the South, ensuring there is uniform distribution and pricing of petroleum products across the country.
Today the Tema-Akosombo Pipeline Project (TAPP) and the river Barging system remain the most efficient and safer means to transport fuel from the South to the North of the country. The transportation systems (pipeline and river Barges) has also presented itself as the major contributor of revenue to the Volta Lake Transport Company (VLTC).
Establishment of BOST
Very much aware that the growing demand for petroleum products across the country was confronted with distribution challenges in the face of poor distribution network system, the government led by the late and former president Jerry John Rawlings established in 1993 the Bulk Oil Storage and Transportation Company (BOST) with depots across the country. BOST was incorporated as a private limited liability company under the Companies Act 1963 (Act 179) with the Government of Ghana as the sole shareholder.
The initial mandates were:
To develop, own and manage a network of storage tanks, pipelines and other bulk transportation infrastructure throughout the country,
To keep Strategic Reserve Stocks for the country as Strategic Petroleum Reserve (SPR), and
To manage the “Zonalization” policy of the National Petroleum Authority (NPA)
These mandates were later expanded to include; the renting or leasing out part of the storage facilities to enable it generate income, and to develop the Natural Gas Infrastructure throughout the country.
In relation to the SPR programme, BOST was charged with the responsibility to build strategic reserve stocks to meet a minimum of six (6) weeks of national consumption in the short and medium term and to increase stock level to twelve (12) weeks in the long term.
In the late 90s, the government handed over to BOST strategic depots being run by the Ghana Oil Company Limited (GOIL) throughout the country. These included the Accra Plains Depot in Tema, the Mami-water Depot close to Atimpoku, the Akosombo Depot, the Kumasi Depot, the Buipe and the Bolgatanga Depots. These depots were not only for strategic reserve reasons, but also to serve the communities close by.
The SPR programme as initiated by the Rawlings-led government and the increase utilization rate of the depots by BOST at the time, helped in curtailing the persistent shortage of fuels that plagued the country in the late 90s and the early 2000s.
Ghanaians from all walks of lives, including chiefs, farmers, artisans, town development committees, and opinion leaders, strongly believe that the man Jerry John Rawlings is one individual who led them through difficult socio-economic times. To those who linked access to electric power with hopes for economic development and for stemming the rural to urban migration of their youth, and phrased their efforts for access to electrical power as claims to citizenship, they stand satisfied today, with their national pride intact.
Ghanaian fisher-folks would forever be grateful to the man Jerry John Rawlings for the formulation and introduction of the subsidized Premix fuel for their two-stroke engines, taking away the hassle with the much expensive Premium Gasoline and Marine mix Lubricant.
“Rawlings’ leadership was a mixture of populism and authoritarianism, sometimes marked by controversial pronouncements. He had the capacity to pull crowds and appeal to the ordinary man on the streets” – Kevin Shillington, 1992
Under the Economic Recovery Program (ERP), Jerry John Rawlings successfully implemented a series of macroeconomic and structural reforms that reversed the country’s profound economic decline since independence. He was committed to liberalizing and reforming the energy sector in order to improve efficiency and eliminate the existing fiscal burden by promoting private sector participation in the sector.
He led the Ghanaian energy sector to go through a phase change by initiating the process of reforming and restructuring in the quest to improve operational efficiency and increase consumer access to electrical power and petroleum products. He created and repositioned some relevant energy sector entities to harmonize the downstream and upstream petroleum sector so that Ghanaians may reap and benefit from their power and petroleum resource endowment.
Rawlings’ legacy in the Ghanaian energy sector has been tremendous. He understood the ever-changing global, political and economic environment, and appreciated the role energy security would play in that equation. Through foresight and mindful of the economics, he built physical, regulatory, and technical structures, consistent with changes within the domestic and global energy space, to guarantee that quality of life Ghanaian so desire. He is that man who lived the dream of our founding father, Osagyefo Dr. Kwame Nkrumah.