Dr. Joe Oteng Adjei, Ghana's Energy Minister
Edited transcriptDavid’s introduction: Ghana’s discovery of a major offshore oil field has created a mixture of exuberance and trepidation. Ghanaians are all too familiar with the story of squandered oil wealth. How can we guarantee that the resources that will flow into the government’s treasury as result of these resources can benefit and develop this country?
David: Dr. Joe Oteng Adjei, what is the government’s strategy and vision for the oil and gas industry?
Dr. Joe Oteng Adjei: The basic vision for the government is to use this natural resource to improve the standard of living of our people. This we will do by using a transparent approach, by ensuring we work hand-in-hand with our partners and also by ensuring that the environment is protected so that at the end of it all, this resource will be a blessing to the people of Ghana and never be a curse.
David: You have a resource that is finite, what is the estimate for how long this resource will last?
Dr. Joe Oteng Adjei: On paper it’s a minimum of twenty years and a maximum of twenty-five years but I think it’s always expedient when making such analysis that you take the lowest duration which is twenty years.
David: Are we not walking a tight rope here, meaning that unless we do the right things, it is really possible that this will come and pass us by without any benefit at all?
Dr. Joe Oteng Adjei: You say “unless we do the right thing” These are choices, so it’s a choice I believe each country has the ability to make. And the government is committed to making the choice of ensuring this resource becomes a blessing to us.
David: Have we struck a fair production deal with the oil companies that will extract this resource? What kind of production arrangement do we have?
Dr. Joe Oteng Adjei: We are committed to working with our partners and we committed to ensuring that we create the necessary environment for them. We will protect their investments and we will also make sure that at the end of it all it’s a win-win. We as government will ensure whatever is due to our people, goes to our people.
David: When you say “we will ensure”, there have to be institutional arrangements and legal arrangements and we need people who understand this industry. Do we have these people?
Dr. Joe Oteng Adjei: We do. We have people at GNPC; these are young people who came together some years ago, committed themselves to learn and they’ve gone through the process and they are ready. More of these people are being trained now that we have oil. We also as government have the support; we have the men who understand the business and we also have the people who are committed to ensure that we win. The legal framework is fine. We’ve gone through the GNPC Exploration and Production Law and it is good but a few things have to be added to the regulations. We have people assisting us to draw up these regulations.
David: We’ve had gold for more one hundred years and we know the story. People do not necessarily feel that we have benefited from our gold resource. How is this different? Does it surprise you that people are skeptical and not entirely satisfied that this is really the way for us to solve our problems?
Dr. Joe Oteng Adjei: I think that we are in a different generation all together. You and I have had the opportunity to study outside, and we’ve come back home with the commitment that this will never happen again. Never again are we going to sell our natural resources to investors without ensuring that our people also benefit. These are days that you cannot do whatever you want even if you are in government.
David: But you cannot guarantee that? You have an oil field which is 140km off Takoradi with companies extracting the resource with a production facility next to it, oil going into tankers and then shipped off. Do you even know what quantities we are talking about?
Dr. Joe Oteng Adjei: The truth is GNPC, Tullow, Kosmos, Anadarko, Sabre and E. O. Group, all have an interest. There are technologies available for us to monitor these things. GNPC representing the government will ensure that we are protected. These partners are faithful people, they are committed to working with our country and not to exploit us because they know the consequences if they do anything illegal.
David: is it not the responsibility of the government to ensure that the revenues that it receives are applied for the benefit of this country. Our partners are business people, they will drill the oil and they will make their money. There is nothing wrong with that is there?
Dr. Joe Oteng Adjei: We will make sure that if the quantity is ‘X’ it will be ‘X’, there is no way they are going to subtract from the ‘X’. The use of the revenue has nothing to do with our external partners, that is the commitment that we as a government we will have to fulfill. We’ve said in our manifesto that we will join hands with international agencies to enable them monitor us so we do not use this revenue anyhow. We’ll put legislative instruments in place to ensure that we protect ourselves. Our President has assured us he’ll be transparent. Transparent meaning creating polices and rules so that any other person can assess you.
David: You speak about transparency. Are the agreements between Ghana government and the oil company’s public knowledge?
Dr. Joe Oteng Adjei: Any person who wants to have access to the petroleum agreements between GNPC, government and the partners can do so because the documents are available. If you walk into my office, I will give you a copy. There is nothing to hide there. It’s basically an agreement between the partners and government right from the period of exploration through development to production. There are no secrets around this. We will ensure that most of these documents will be on the websites of the Ministry and GNPC so that people can assess it and advise us and we will take this advice and reinforce the various contracts for future situations. Let us accept that at the beginning there was no oil find so we gave in a lot in the petroleum agreements but now we know there are positive prospects and we are re-enforcing the various contracts so there is more gain.
David: We’ve had gold and cocoa for a long time now and we understand that that is where much of Ghana’s foreign exchange comes from. What kind of revenues are we looking at from oil and gas in comparison to gold and cocoa?
Dr. Joe Oteng Adjei: Let me do some simple mathematics although I must say that these are not the actual figures. We understand that we will get about one billion barrels over the period twenty to twenty-five years. If the cost of production is $20 per barrel and we sell it at $60 per barrel on the average then there is a margin of $40. $40 multiplied by one billion will be about forty billion dollars.
David: What will you do with that revenue?
Dr. Joe Oteng Adjei: We will ensure that we use this revenue to develop infrastructure, to support health and to support education. We will make sure that this revenue benefits the catchment area so that we don’t create any tension between the people and government. We will make sure we create secondary markets so that this area becomes a growth pole. We will also make sure we reserve some part of this revenue for future generations and this can be done by using legislative instruments. Finally part of this resource will be used to support human resource development which is the only way we can sustain development on this asset.
David: What about the overall strategy to diversify? Take a country like Nigeria which is sadly an example of how the revenue is squandered. Take another country like the United Arab Emirates and you can see what they did with it; how they used the revenue to build a tourism industry. What would you do to ensure that the revenue generated from oil and gas is used to develop other sectors of the economy so that when the resource is no longer available, there are sustainable areas for growth?
Dr. Joe Oteng Adjei: That is why we said we will use the revenue to develop infrastructure, to strengthen education, to look at the health of our people. Once you do these and provide infrastructure facilities you are creating secondary markets so that some day when the resources are depleted these other areas will sustain the economy.
David: What other areas?
Dr. Joe Oteng Adjei: When the oil is produced the by-product is the wet gas. The wet gas will be brought to shore. We will put the processing plant in place and delineate the product into various gases. We will create methanol which can be sold and so doing create other sources of revenue. We will create ammonia which can be used in the production of fertilizers. Once we get the fertilizers they move into agriculture to support food production. Food will be available as cost of food will go down. We can create Liquefied Petroleum Gas and various other sources of output that can be easily exported. Once we do that we are diversifying and we are not depending only on income revenue from the oil. Rather we are using the associated gas to create other forms of revenue. Businessmen, SMEs who can take advantage of these opportunities to create secondary markets will be supported. This is the pledge that we give to the people.
David: You are speaking now about benefits from the gas and not necessarily the oil which is interesting. Is that not where our emphasis should? Perhaps we should be focusing more on the gas. There is legislation now that says you cannot flare the gas but you do not as yet have a gas processing plant and I cannot see how you will be ready in eighteen months. Where is this processing plant that you speak about?
Dr. Joe Oteng Adjei: We are working. We set the target and everybody understands that first oil production will have to be last quarter 2010.
David: That’s when production starts? Will you have the plant ready by then?
Dr. Joe Oteng Adjei: We are working assiduously to ensure that we meet the target
David: How is that possible when we understand that these things take 2 to 3 years to complete?
Dr. Joe Oteng Adjei: The previous government agreed to fast track the process. We came, we looked at the whole policy and we committed ourselves to it and as I’m talking to you people who want to manage the gas have submitted their proposals to GNPC
David: Bids from companies wanting to build the gas plant?
Dr. Joe Oteng Adjei: Yes we are working very hard. Maybe we’ve not been talking but it’s because we want to get the basis right.
David: But you have not even chosen the company to build and manage the gas plant. You have fifteen month to go. What will you do to the gas if by the time production starts the gas plant is not ready? Are we back to flaring the gas?
Dr. Joe Oteng Adjei: One of the conditions we set for those proposing bids was that they have to be able to build this facility before first gas production. This means that as long as many have put forward their proposals it is possible to build before the first oil. If we do not have our facility ready before first gas we can store the gas and when the facility is ready we will bring it up shore.
David: So we will not see flaring of gas?
Dr. Joe Oteng Adjei: That is what we are going for. But let me also concede that there are people under the sea, if it happens that their lifes are at stake then we may have to flare the gas.
David: If Ghana was not to benefit at all from its oil and as a result of this we end up with a regular and efficient supply of power so that we can power our industries would that not be ultimately a key deliverable?
Dr. Joe Oteng Adjei: One of the core visions under President Mills is to find a way to reduce the price of electricity for our people. If we use diesel for power generation, it’s about 45cents per unit. If you weight it to hydro, it’s about 2 cents, which brings the price in the region of 17 to18 cents per unit. That is a little too high given the feedback from the industrialists. If we are able to use the gas for electricity generation, that is about 5 to7 cents
David: Is that what we seek to do?
Dr. Joe Oteng Adjei: We will do that. Actually in the phase one of the Jubilee plan on the gas development plan, we are going to take the gas from the rig and bring it up shore and our main goal during the first phase is to extend it to the Osagyefo plant so that we can generate about 125 megawatts. In the second phase we will move the gas to Aboadze so that we’ll have a dual feed, ie. the West African Gas Pipeline from Nigeria and our own gas from the Jubilee field. What we can do then is that, we can let most of the Nigerian gas come to the various power plants in Tema so that we have most of plants in the country using gas.
David: So the energy mix will change and Ghana’s energy will substantially come from gas. What sort of percentages are we looking at?
Dr. Joe Oteng Adjei: We need to be very careful because the quantum of gas may not be adequate to do all these things but I’m telling you where the vision is. The vision is to get to a point where every thermal plant is being fueled by gas.
David: You mentioned the West African Gas Pipeline. We have been speaking in Ghana and West Africa about this gas pipeline for at least decade and its still not here.
Dr. Joe Oteng Adjei: It’s here. There is 30 million cubic feet of gas coming from Nigeria at the moment. At the last discussions with the team, we were seeking to double the supply of power to the TAPCO Plant. But they wanted to ensure we were making use of the 30 million cubic feet of gas.
David: Will we still need it when we have substantial deposits of gas available to us now?
Dr. Joe Oteng Adjei: We will still need it because part of the vision or objective of the Ministry is not only to supply power to the people in Ghana but also to export.
David: Why don’t we first be in a position where we are efficient and looking after our needs before we talk about exporting to other countries?
Dr. Joe Oteng Adjei: I agree that the way to do this is to look inside first. However we are also in a sub-region and we’ve talked about developing our sub-region and therefore sometimes in order to support our neighbors we will have to extend help. Our system could also develop problems such that we will have to import some energy from our neighbors.
David: We don’t expect to create employment with the oil and gas industry, do we?
Dr. Joe Oteng Adjei: The oil itself is a low labour industry with a finite resource. It is the gas that we can bring on shore and create jobs.
David: The oil will create no jobs?
Dr. Joe Oteng Adjei: Very few
David: Where are these jobs?
Dr. Joe Oteng Adjei: On the rigs and it’s very technical
David: And we don’t have people who can do these jobs?
Dr. Joe Oteng Adjei: We don’t have people but we are not going to rest and accept that concept
David: Why is that? Is this not a failing of the system? There don’t seem to be people that the oil companies feel are competent enough to engage and so we lose out.
Dr. Joe Oteng Adjei: We are putting together a Local Content Policy. There are about two major avenues through which the government and the people of Ghana can benefit. The first is through fiscal measures ie. through the taxes and royalties we will impose on these assets. The second is non-fiscal measures and we are stressing local participation through which our people will get involved in the ownership, control and financing of all the value chains.
David: Are our people ready?
Dr. Joe Oteng Adjei: The people are ready as we begin to get into the industry. Initially some people had no confidence that we would find the oil, now it’s no longer a theory. The gas is there, the oil is there and we are fast tracking the process. Normally people use three to four years to develop this. We are using basically two years.
David: But we are late
Dr. Joe Oteng Adjei: Yes at the beginning we are late but we are consciously going to work to develop the capacity of our people in the long term.
David: Is that part of the arrangement?
Dr. Joe Oteng Adjei: It is part of our local content policy that they should use Ghanaians. When I went to Hess and Anadarko there were Ghanaians from GNPC working with these entities. I think six of them are going to work with the sub-contractors. Modec, TMC and Technip have Ghanaians understudying now. They are going to come out before the first gas production and get involved. What we are saying is that the rest of us who want to be part of this industry should begin to train ourselves so that we will be relevant. If you are good at welding you will require some additional training as welding in this industry is done on the sea.
David: Must the people train themselves or does the government have an interest in training the people?
Dr. Joe Oteng Adjei: The government is interested in working with the leadership at the National Vocation Training Institute. When we went to Trinidad and Tobago, we visited a university where we were promised a rig for training. I spoke to the leadership of the University of Science and Technology last weekend and we are working to get these facilities to them. A lot of NGO’s are giving us support by providing training to ensure our people are ready to get involved. When I first went to the rig, the people on the riser were basically 100% Canadians and at my last visit it was 50% Ghanaians and 50% Canadians. And I was assured that by the end of the year it will be totally Ghanaian.
David: What is this story about welders being hired from the Ivory Coast?
Dr. Joe Oteng Adjei: In the short term these things will happen, and when we complete the whole Local Content Policy there will be an agency that will see to it that things are done right.
David: The local content policy is obviously is not ready, right?
Dr. Joe Oteng Adjei: No it’s not ready.
David: So many of the policies, the institutions and regulations governing the partnership are still not ready?
Dr. Joe Oteng Adjei: We assure you that we will put things in place. We are trying to put in the framework; at the right time we will bring it out for all Ghanaians to look at it and reinforce it so that together we will own the policy. I know that there will be an entity that will go to these areas to measure the local participation, the local content, local capacity development issues and be able to inform the government.
David: Isn’t it time for action rather than planning?
Dr. Joe Oteng Adjei: We are not planning. The concept is clear. It’s all about putting the concept on paper and letting other people add value to it.
David: Finally, good old corruption. Soon billions of dollars will to be flowing into the government treasury from oil. In many places we know what that does. What reason do we have to believe that the case of Ghana will be an exception?
Dr. Joe Oteng Adjei: It will be an exception because the President has committed himself and promised the people that he will run this country devoid of corruption and that is exactly what we are going to do. If it means binding ourselves as a people, as a government with legislative instruments so that we don’t easily touch what belongs to the people, we will do that.
David: I would imagine that you’ll need structures because the goodwill of the President is certainly not sufficient to prevent corruption?
Dr. Joe Oteng Adjei: This is why we said we will join international bodies which will become watch dogs for the people, so that they can have access to all the numbers, assess them and compare with any deviations. I spoke to a colleague Minister of another country and he said that in addition to the Heritage Fund meant for the people, they also have Infrastructure Fund. In the case of the Heritage Fund you cannot just pick money because they have restrictions which allow borrowing to say 2% of that Fund. And before one can access the funds one must go to cabinet and parliament. We can put structures in place to ensure that the resource benefits the people of Ghana. The President is ready and we are ready.
David: Thank you.
First Broadcast 4th July 2009, TV3 Ghana
