Ghana’s oil industry has faced significant challenges in recent years. Production levels have declined substantially since their peak in 2019. The current state of affairs paints a stark contrast to the optimistic reports circulating in the media.
Bright Simons, Honorary Vice President of the IMANI Centre for Policy and Education, has shed light on the current state of Ghana’s petroleum sector, challenging recent claims made by the Public Interest and Accountability Committee (PIAC) regarding an increase in oil production.
According to Simons, recent reports touting a significant uptick in Ghana’s oil production are both inaccurate and dangerously misleading. Despite media reports that cite an increase, Simons suggested the actual data reveal an opposite trend—a gradual yet sharp decline in oil production that could spell serious challenges for Ghana’s economy.
In a detailed analysis, Simons argued that the reality paints a far bleaker picture than what has been reported.
“Everyone who follows petroleum issues in Ghana know that the contrary is true. Oil production has been collapsing precipitously, when the full picture is taken into account.
“PIAC itself has bemoaned this situation, and has been talking about how urgent it is for measures to be introduced to stem the slide, which it puts at 9.2% per year.”
Bright Simons, Honorary Vice President of the IMANI Centre for Policy and Education
PIAC’s recent report noted that oil production between January and June 2024 averaged around 136,500 barrels per day, marking an increase of about 10% compared to the same period in 2023 when production hovered at 124,000 barrels per day.
While technically accurate, this comparison falls short of providing a complete picture, as it disregards the more concerning data from the latter part of 2024.
“Then the organization unveils a new chairman, and suddenly all is Nirvana? Totally befuddling,” Simons remarked, underscoring his confusion over the recent wave of optimistic reporting.
The foundation of Simons’ analysis lies in the timing and selection of the data used in these reports. Simons pointed out that the “10% uptick” is less consequential when viewed in the context of the year’s overall production trajectory, especially given that the temporary rise has since leveled off and production has begun to taper.
Real State of Decline in Ghana’s Oil Sector
A closer examination of data from Ghana’s Petroleum Commission reveals the ongoing struggles of the oil sector.
The uptick, according to Simons, was largely due to increased output in the Jubilee oil field following the drilling and activation of new wells starting from mid-2023, a project led by Tullow Oil and costing approximately $1 billion.
In February 2024, the J-69 well began production, briefly driving production rates higher. However, this boost was short-lived, as the production rate soon plateaued.
By March 2024, the peak had been reached, and since then, production levels have slipped back to where they stood in early 2023.
Simons provided further context by referencing third-quarter production data for 2024.
“In September 2024, output in the Jubilee field was ~84,000 barrels per day on average. In the same period in 2023, average output per day had been over 100,000 barrels, a whopping 16% drop.”
Bright Simons, Honorary Vice President of the IMANI Centre for Policy and Education
Despite substantial investments in the field, Tullow Oil has struggled with persistent operational setbacks, leading to lower-than-expected results.
Additionally, Tullow’s drilling campaign, initially scheduled to continue through late 2024, was prematurely concluded, raising concerns about the long-term sustainability of production levels.
“It is therefore mind-boggling for PIAC to create the impression that the activation of the Jubilee South East wells has somehow engendered a reversal of oil production decline in Ghana.
“This is manifestly untrue, and I don’t believe that PIAC in anyway wants to create such an impression deliberately.”
Bright Simons, Honorary Vice President of the IMANI Centre for Policy and Education
These setbacks in production are notable given the significance of oil exports for Ghana’s economy. Alongside gold and cocoa, oil constitutes one of the country’s top three export commodities, accounting for over 80% of the nation’s export revenue.
However, Ghana’s reliance on commodities leaves the country vulnerable to market fluctuations, and recent performance across these sectors presents challenges.
Cocoa has been experiencing a downturn, and the oil sector, according to Simons, appears headed toward a similar path. While gold prices on the global market have provided some economic cushion, the prospect of declining oil production could have far-reaching consequences for the country’s fiscal health.
Simons expressed concern that relying on select data points, such as the brief improvement in early 2024, masks the broader reality and diverts attention from the need for structural reform in the oil sector.
He warned that projecting an overly positive outlook risks creating complacency among policymakers and the public, delaying necessary actions to address the industry’s underlying issues.
“Distorting the real picture keeps the country from the reckoning that must be had,” Simons stated, emphasizing the urgency of facing the reality of the situation.
For Ghana, the continued decline in oil production poses challenges not only for immediate revenue but also for long-term economic stability. With a potential “fiscal Armageddon” looming, as Simons described, Ghana’s dependence on commodities like oil leaves it vulnerable to external shocks and underscores the need for economic diversification.
Simons highlighted that past episodes of high commodity prices have often led to overreliance on specific sectors, followed by economic difficulties when prices eventually dropped.
For Ghana, a sustainable path forward will require greater transparency, honest assessments, and a decisive shift away from an over-reliance on oil and other commodities.
