Ghana’s crude oil sector is grappling with a persistent decline in production, marking the fifth consecutive year of dwindling output. The Public Interest and Accountability Committee (PIAC), in its recent report, highlighted a concerning trend: crude oil production fell to 48.25 million barrels in 2024, a significant drop from the peak of 71.44 million barrels achieved in 2019. While the year-on-year decline in 2024 was marginal at 0.01 percent, the cumulative effect over the past five years paints a stark picture, revealing an average annual decline of 7.4 percent. This sustained decrease raises serious concerns about the long-term sustainability of Ghana’s upstream petroleum operations, particularly given the crucial role oil revenues play in financing government programs. The dwindling production underscores the urgent need for a comprehensive assessment of the underlying challenges plaguing the sector and the implementation of effective strategies to reverse this downward trajectory.
Compounding the production woes are significant gaps in petroleum revenue management, further jeopardizing the sector’s financial health. PIAC’s report revealed that GNPC Explorco, a subsidiary of the Ghana National Petroleum Corporation (GNPC), failed to deposit US$145.68 million from oil liftings into the Petroleum Holding Fund (PHF) in 2024, a clear violation of legal requirements. This adds to a growing backlog of unpaid funds, bringing the total amount withheld by JOHL and GNPC Explorco to nearly US$489 million. The ongoing dispute between GNPC, which claims Explorco’s proceeds are exempt from PHF contributions, and PIAC, which vehemently rejects this claim, highlights the need for greater transparency and legal clarity in revenue management. This protracted disagreement not only undermines public trust in the management of oil resources but also deprives the government of crucial funds that could be allocated to development projects.
The report also sheds light on the persistent issue of unpaid surface rental arrears by international oil companies (IOCs). As of December 2024, the government is owed US$2.89 million in unpaid fees, with a staggering 60 percent of this debt attributed to three companies whose contracts were terminated in 2021. This situation raises serious questions about the effectiveness of enforcement mechanisms and the government’s ability to recover outstanding revenues. The failure to collect these dues further exacerbates the financial challenges facing the sector and underscores the need for stronger regulatory oversight and more robust measures to ensure compliance by IOCs operating in Ghana.
The combination of declining production and inadequate revenue management paints a worrying picture for Ghana’s oil sector. The continuous drop in output signals deeper structural issues that require immediate attention. Without a concerted effort to address these challenges, Ghana risks jeopardizing its long-term economic prospects, as the oil sector plays a significant role in the country’s overall financial stability.
The issues highlighted by PIAC’s report call for a comprehensive overhaul of the sector’s governance framework. Strengthening regulatory oversight, enhancing transparency in revenue management, and enforcing stricter compliance with contractual obligations are crucial steps towards restoring the sector’s financial health and ensuring the sustainable development of Ghana’s oil resources. The government must prioritize these reforms to safeguard the long-term viability of the sector and maximize its contribution to national development.
Furthermore, the government must prioritize investments in exploration and production activities to reverse the declining production trend. This includes attracting new investments, fostering technological innovation, and providing incentives for increased exploration and production. Equally important is the need to strengthen the capacity of regulatory institutions to effectively monitor and enforce compliance with environmental regulations, ensuring the sustainable and responsible development of the oil sector. By addressing these challenges head-on, Ghana can unlock the full potential of its oil resources and secure a prosperous future for its citizens.
