Ghana targets being Petroleum hub for West Africa…. Over US$50 billion FDI needed

For Ghana to achieve its vision of becoming the petroleum hub for the West African sub-region, as announced by the Vice President Dr Mahamudu Bawumia, the country will need investment inflows of about US$50 billion.

The vision, which is one of Government’s strategic anchor initiatives, would also lead to the establishment of Ghana as a Petrochemical hub to supply refined petroleum products to meet the demands of the West African sub-region and eventually the whole continent, and further develop Ghana’s petroleum downstream sub-sector, according to the Vice President.

However, Mr Boakye Agyarko, the Energy Minister has said, over US$50 billion in foreign direct investment (FDI) would be needed to build a relevant petroleum infrastructure such as oil refineries, tank farms, pipelines, marine facilities and other allied facilities to make Ghana a petroleum hub.

He said the estimated amount was reached after the assessment made by a petroleum task force inaugurated by the government last year to develop a petroleum infrastructure master plan and road map towards the realisation of the vision.

These funds are supposed to come from public and private investments of which the government is expecting to raise 10 percent to support the construction of road networks, electricity and water facilities.

The government announced this at the just ended 2nd Edition of the Ghana International Petroleum Conference held in Accra, last week.

“The Government of Ghana has a vision to develop Ghana as a hub for refined petroleum products for the West Africa sub-region and the continent. The concept of a ‘Petroleum Hub’ is one of Government’s strategic anchor initiatives that would serve as a new pillar of growth in the Ghanaian economy,” Dr Mahamudu Bawumia stated in his keynote address.

“The project will accelerate the growth of Ghana’s petroleum downstream sub-sector and make it a major player in the economy and consequently ensure development of sustainable value, wealth creation and the progress of industry.”

Vice President Bawumia explained that, a successful implementation of the project would, apart from creating employment, have immense benefits for the players in the industry as well as the nation as a whole.

“The Petroleum Hub project will increase the presence of major international oil trading and storage companies, create regional trading champions and encourage joint ventures between local and international companies for knowledge transfer and wealth creation. It will provide value addition in our petroleum industry,” he added.

Alluding to the expected increase in Ghana’s refining capacity, Vice President Bawumia urged local industry players including Petroleum Service Providers (PSPs) and Bulk Oil Distributors (BDCs) to re-examine their business models to take advantage of the expected increase in business and take the necessary steps, including possible mergers and acquisitions, to position themselves to become multinational operators.

“The development of a hub in Ghana will require an increase in the country’s refining capacity beyond current levels, both to meet domestic demand and for export. It is therefore important that our PSPs especially the BDCs change their business model to respond to the hub plans, as there would be more products for export than their current model of importing the shortfalls in production.”

To that end, the Energy Minister assured Ghanaians and the investors that, his outfit would work diligently to achieve the vision of the government, adding that, a petroleum task force, which has been set up by the ministry to see to the realization of the government’s vision, had visited some countries that had made headway in petroleum infrastructure.

Mr Agyarko said upon extensive consultation and assessment by the task force, government was convinced that the nation had the capacity of developing petroleum infrastructure into a hub in the sub-region.

He, therefore, urged the petroleum service providers to upgrade their skills and business capacity to partner with the foreign direct investors to ensure a fair balance and significant value retention of benefits in the country.

‘‘Today, financing for new refineries has become difficult to obtain, especially as some existing refineries across the world are being shut down due to low margins.

‘‘But I believe with the right strategies and value positioning, coupled with the right environment, investors will choose Ghana and partner with us to develop infrastructure such as refinery, tank farms, pipelines, marine facilities, expanding our export capabilities and other allied facilities required to make our hub a reality,’’ Mr Boakye stated.

The government has therefore promised to provide favourable fiscal environment and incentives to attract the right investment into the petroleum downstream industry.

The minister is optimistic that the intended petroleum hub would compete favourably with other trading centres across the world, which would increase government’s revenues to accelerate economic growth.