Ghana is working to become one of Africa’s leading cost-effective locations for the processing of crude oil and raw natural gas into petroleum and petrochemical products for third parties and for export. Petroleum Hub Development Corporation’s CEO Charles Owusu has been speaking to Offshore Africa on the current status of the $60 billion project. Sit back and read all about the exciting updates from Ghana’s petroleum hub project
What is the Petroleum Hub all about?
In July 2017, the ministry set up a taskforce made up of experts within the country. The 30-member taskforce was mandated to roll out the master plan. They travelled to Malaysia, Singapore and Rotterdam to understudy them. One of their key recommendations was the establishment of an agency to drive the vision, rather than assign it to the ministry or a regulator to set up a secretariat to run it. One major lesson from this study was that there should be a body that will serve as a one- stop centre to facilitate the ease of doing business. A one-stop centre that will help every investor that comes to the petroleum hub with the acquisition of license, permit and everything they need. All that is required from them is capital and the technical know-how and we will fast-track things for the project. Basically that was the idea that led to the legislation establishing the Petroleum Hub Development Corporation (PHDC).
And to answer your question about the petroleum hub. It came from the President’s vision to build a hub in 2030, looking at key infrastructures like refineries, petrol chemical plants, storage and jetty. We intend to have three refineries each with a capacity of 300,000 12 barrels per day as minimum and five petrol chemical plants with a capacity of 90,000 barrels per day, minimum. Additionally, we intend to build an integrated 10 million cubic metres storage facility; two jetties with multiple berths to be able to accommodate the (VLCs); that is, the very large crude carriers and the ultra large crude carriers. These constitute the key infrastructure within the hub. And the ancillaries that would support like the LNG, power plants, dry docks, state of the art laboratories, waste treatment, water treatment and all of that that would support it. There is going to be a major medical tourism centre to serve West Africa. There will be training institutions to support training. It is going to affect our school curricula. Putting all these together constitute the petroleum hub.
I understand it is a $60 billion project. Given the quantum of investment that you need, how do you hope to drive that. What sort of incentives are you giving to investors?
The entire infrastructure will cost USD $60 billion. The amount was estimated sometime in 2018. Given the COVID pandemic, Ukraine and current supply chain challenges, I think by the time we are done this number is going to be doubled or quadrupled. Your question is how are we going to do this? This is a novel idea by the government of Ghana to use lessons from our past mistakes to transform the country. We intend to make the petroleum hub self-sufficient. You recall the Ghana beyond aid mantra, which is basically being self-sufficient. So, the project is a government led project by private sector development. So all the USD60 billion is going to come from the private sector.
How do we do that? Based on our central location, our peace and fiscal incentives, because the land is going to be declared a free zone area. Government wants the private sector to come in and execute projects. The master plan has been done, market analysis has been done. And they know there is a need. The market is there already. And because of the huge nature of this project it will be done in phases. We have phase 1, phase 2 and phase 3. The key infrastructure which I mentioned; the three refineries, the five petrol chemical plants, the storage and the jetties are what we call the key infrastructure that have been phased into three. Each phase is what we are selling. The key infrastructure will be build, own and operate.
We don’t want one individual or one consortium to do phase 1, phase 2, phase 3. We • Charles Owusu, CEO, Ghana Petroleum Hub Development Corporation want to share the risk and if a consortium takes phase 1, another consortium takes phase 2, another consortium takes phase 3. They are mutually exclusive. It doesn’t mean we have to finish phase 1 before we move on to phase 2. What we are planning is to have about six to 12 months lag in between each of these phases. Each phase is estimated to be completed within five years. Going by what we have on ground the President’s 2030 time limit is realistic.
The other services and ancillaries are going to be joint ventures between the PHDC on behalf of government and the private sector with a minimum of 10 percent stake by government. We just want that private sector development mentality to drive the petroleum hub agenda. This is how we intend raising the money. The money is not from the Consolidated Fund, neither is it from the Government of Ghana, nor from loans or bonds. What government is trying to do is to help PHDC to set up. The land is going to be leased to these investors. So the project will service itself. Essentially, that’s how we intend raising the US$60 billion through the private sector.
Can you tell us a bit about what you have been able to achieve so far, in terms of the response of investors to the offers you are making to them?
What we do is to explain the Petroleum hub vision. We tell investors about our vision. We have received about 40 investors that have expressed interest. Some did not follow-up, while some kept coming. I can tell you we are almost through for phase 1. But for phase 2 and phase 3 currently we have about 20 consortiums that are interested and we have drawn a roadmap. By March we should be able to close, conclude our evaluation and select possible investors for phase 2 and phase 3. And the other ancillaries would follow.
For now that is what we have been working on with the support of the minister, the president and the board. The contract review has been done. All that is left is the board’s approval to proceed and we’ll go to the ministry for affirmation. We want to make sure whatever contract we are signing are meticulous. Though the risk is more with the private sector, but as a sovereign state we need to make sure we protect the people of Ghana. We expect to create about 780,000 jobs. We hope to close the deal, which is about USD12 billion to start.
With so many companies expressing interest in the hub project, it shows there is overwhelming support for what you are doing, right?
I think, one thing that has helped us is the structure we put in place for this project. The non- interference of government is helping investors to have their full day to thrive. And what has actually helped us is the Ukraine and Russia war that has changed the whole climate of energy transition now moving to just transition whereby every country is allowed to develop its transition to align with its developmental goals. Initially, we were getting investors from only Asia and the Middle East. But now I can tell you we are getting investors from Europe, America and all over. I think the way we have structured the model with less government interference is crucial and how we have packaged the project. Thirdly, the current Russia Ukraine war has changed the whole atmosphere of energy transition and has made Africa the next frontier. The petroleum hub offers a unique opportunity for investment. I have no doubt it is going to be the game changer and it will ultimately make Ghana the energy provider for West Africa and the continent as a whole.
Ghana’s crude and gas potential is on the decline. I believe you will depend on gas and crude supply for feedstock. I want to know, isn’t that a challenge going forward?
I can tell you Singapore hasn’t seen a drop of crude but it is one of the major hubs in the world. We are lucky to have crude in Ghana and our focus is not on crude in Ghana, because if you look at one refinery capacity that is 300,000 barrels. We produce less than that a day. Recently, there have been major discoveries in Senegal. Angola, Namibia, South Africa and what have you. We can get crude from outside Ghana, but given the energy transition, we intend to rely essentially on Africa for our feedstock. I can also assure you with the quantum of investment we are getting, we will soon close a deal of US$60 billion. The same investors can invest in our upstream. What I can say is we can use the hub to bring the big boys back. This is because they operate across the entire value chain of the industry. The oil majors can produce, as well as refine crude. With government’s commitment and support we can redefine our upstream investment strategy.
The Dangote refinery in Nigeria will soon come online. Does that put the Ghana petroleum hub under pressure?
When we started putting this policy together in 2017 July, Dangote was scheduled to come on-stream end year 2018. But it didn’t stop us. We continued. COVID came, COVID left. It delayed us, but today we are here. Now everybody is talking about petroleum hub. It is also helping Dangote to move on. People think Dangote is a competitor but I tell you he is an enabler. He is coming to help the two major West African countries tackle the energy deficit in the continent. I expect a synergy between Dangote refinery in Nigeria and the petroleum hub in Ghana. The biggest example that has happened in reality is Malaysia and Singapore. Malaysia and Singapore are even closer than Ghana and Nigeria. So they said guys we have a hub. There is a lot of spillovers.
As we speak, currently, led by PETRONAS and Saudi’s Aramco they are developing on the same 20,000 acres. It is similar to what we are doing. They have become so huge and poised to feed the entire Asian market. So, why can’t Ghana and Nigeria develop same and then feed the entire continent through AfTCTA? The continent is about 1.3 billion consumers. And looking at these consumers, Dangote alone cannot do it. The Nigerian market alone can take about 90-100 percent given the population growth. Let’s assume he is doing about 80 percent in Nigeria, the excess of 20 percent cannot feed the West African market, and the rest of the continent. So I see Dangote more of an enabler, a synergy with Ghana petroleum hub. I don’t see him as a threat. If they come on board earlier we are all going to benefit and when we come on-stream we will complement them. Then we will solve the energy deficit in the region and thereafter we move on to the whole continent.
You have been quoted as saying the petroleum hub project will create 780,000 jobs in Ghana. Can you elaborate a bit more on that?
The 780,000 jobs header was actually designed by LUSPA that is the Land Use and Special Planning Authority. That is the body mandated by law to do all our special planning. How we build, what position we all do that. So they have a way of estimating the project. And they came out with the kind of infrastructure we are going to have, the ancillaries and all of that. With the direct and indirect, 780,000 jobs. Is there any benchmark to challenge this or support that? If you go to Malaysia currently. Malaysia is doing over 402,000 that was almost two years ago. If you look at it, it means Ghana can even take more than that. I see it to be about one million given how we are going to expand, because of our deficit and all of that. But the 700,000, 800,000 jobs projection is realistic, even if you benchmark with Malaysia scenario. This gives me the drive to implement the policy to be able to give the teeming youths something to do.