Ghana begins construction of an oil refinery amid doubts about the project’s commercial viability.

Ghanaian President Nana Akufo-Addo has begun construction of a 300,000 barrel-per-day refinery that the government hopes will transform the West African nation into an oil hub for the region, but critics say the project will fail.

Ghana is the world’s second largest cocoa producer and became an oil producer in 2010. It currently produces about 132,000 barrels of crude oil per day and about 325 million standard cubic feet of natural gas per day.

“This project is expected to be a cornerstone of our national development,” Akufo-Addo said on Monday evening at the project site in the southwestern city of Jomoro, which will also include a petrochemical plant.

The first phase of the project, expected to cost $12 billion, will be financed and built by a consortium consisting of Touchstone Capital Group Holdings, UIC Energy Ghana, China Wuhan Engineering Co Ltd and China Construction Third Engineering Bureau Co Ltd, Reuters.

However, not everyone is convinced by the plan. Reuters quoted a law firm representing some of the affected farmers’ cooperatives as saying that “the government’s heavy-handed approach ignores legitimate concerns about the social and environmental impacts of the project, risks to livelihoods due to the displacement of farmers, and unresolved ownership and land rights issues in the communities.”

The commercial viability of the project does not appear to be guaranteed.

West Africa consumes about 800,000 barrels of oil per day, nearly 90% of which is imported, according to the African Refiners and Distributors Association.

Ghana’s new refinery with a processing capacity of 300,000 bpd, combined with Nigeria’s Dangote refinery with a processing capacity of about 650,000 bpd, is expected to exceed West Africa’s consumption by about 150,000 bpd. This will not only mean a complete restructuring of the region’s fuel market, but also the need for the region to export fuel to other African countries or outside Africa.

Moreover, Ghana’s refinery capacity is more than double the country’s daily oil production of 132,000 barrels. Ghana could face the same dilemma as Nigeria, either exporting oil to earn foreign exchange or supplying oil to refineries, which would still have to import more oil in either case.

Read more here: Lessons from Nigeria’s Dangote Refinery for Angola and other African countries’ desire to add value to raw materials

Author: Economic Editor
Angola Portal