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hana has concluded its 2024 general elections, electing a new president and 276 members of parliament, marking a pivotal moment in its history. This milestone reflects more than three decades of democratic governance under the Fourth Republic, established in 1992. While peaceful transfers of power have become a hallmark of Ghana’s democracy in West Africa, the violence and loss of life during the 2020 and 2024 elections serve as a stark reminder of the fragility of these gains. The incoming government, scheduled to be inaugurated on January 7, 2025, faces a critical mandate: tackling persistent challenges in the energy sector. Spanning oil, gas, and power, the sector offers both significant opportunities and substantial risks. How effectively the government navigates these complexities will play a key role in shaping Ghana’s economic trajectory over the next four years.

 

The Oil Sector: Declining Production and Investment Challenges

Ghana once aspired to become a major player in the global oil market, but that promise has faded in recent years. The discovery of commercial oil reserves off Ghana’s coast in 2007 sparked high expectations, with production steadily rising to a peak of about 170,000 barrels per day by 2019. Since then, however, output has declined, falling short of earlier projections that had positioned Ghana as a potential major oil producer in Africa.

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everal factors have driven this downturn, chief among them the maturation of existing oil fields and the absence of new field developments. While Ghana’s oil reserves remain considerable, much of its production relies on aging fields, where natural depletion has led to a gradual decline. Compounding the issue is a lack of investment in the upstream sector, as international oil companies (IOCs) have shown growing reluctance to commit fresh capital to exploration and production.

The challenges can be traced to a few issues that have deterred both existing and potential investors:

 

• Local Content Implementation: Since the passage of Ghana’s Local Content Law in 2013, the policy of promoting local business participation in the oil and gas sector has seen mixed results. Over 600 local companies have entered the industry, with IOCs awarding more than $4 billion in contracts to local businesses between 2016 and 2023. However, implementation has been problematic. The government’s imposition of local content requirements beyond the law’s original framework has created friction with IOCs. Pressure on companies to engage specific local partners has delayed projects, complicated decision-making, and raised corruption concerns. For international investors, particularly those listed on foreign stock exchanges, these practices present compliance risks with anti-corruption laws in their home countries. The government’s confrontational approach toward companies that resist these demands has further eroded investor confidence.

 

• Contracting Regime and Transparency: Ghana has faced persistent issues with transparency in its contracting process. In 2018, the government launched a licensing round to award three offshore oil blocks, but the process was abruptly halted after deviations from the advertised criteria. Unforeseen demands were introduced mid-process, causing a three-year delay before the entire round was ultimately cancelled. Since then, progress on awarding new oil blocks has stalled, fueling investor skepticism about the sector’s prospects. Recently, two shallow water blocks were awarded to companies with no significant track record in oil exploration or production, echoing a similar situation in 2014 when promising blocks were granted to firms that have yet to develop them.

 

• Regulatory Challenges and Political Interference: The effectiveness of Ghana’s Petroleum Commission, the oil industry regulator, has come under growing scrutiny. Industry players have raised concerns about the Commission’s impartiality, suggesting that political considerations may be influencing its decisions. This perception has undermined the regulator’s credibility, creating uncertainty that hampers the sector’s growth. Compounding the issue, some of the Commission’s decisions have led to costly arbitration cases, casting doubt on its ability to mediate disputes effectively. Independent, transparent regulation is critical for attracting investment and ensuring the sector’s long-term sustainability.

 

 

 

 

The Power Sector: A Drain on Resources

For years, Ghana’s electricity sector has been plagued by inefficiencies, underperformance, and mounting debt, draining fiscal resources that could otherwise support economic development. The government allocates more budget funds to subsidize the power sector than it spends on education, roads, and social protection combined.

The Electricity Company of Ghana (ECG), the nation’s primary electricity distributor, has been at the center of these challenges. Persistent revenue shortfalls — exceeding 50 percent in recent years — have forced the government to intervene with financial support, creating a cycle of dependency. This reliance on state bailouts has strained Ghana’s ability to maintain a stable and reliable power supply, leading to frequent outages and growing frustration among consumers and businesses.

 

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ne major contributor to the electricity sector’s financial woes is the ECG’s persistent inability to collect adequate revenues. Inefficient billing systems, widespread power theft, and poor management practices have all worsened the situation. Procurement inefficiencies, particularly for fuel, and currency exchange rate manipulation within ECG have further inflated costs and eroded profitability. Compounding these issues, upstream gas suppliers, who provide fuel for power plants, have faced delayed payments, heightening the risk of supply disruptions and threatening the stability of the entire energy sector.

Liquidity issues in the power sector have far-reaching implications for Ghana’s oil industry. The power sector’s inability to pay its debts jeopardizes the development of upstream oil and gas activities, which play a critical role in both electricity generation and oil field operations. Gas is essential for fuelling power plants, and disruptions in its supply can trigger cascading effects throughout the energy sector. Some gas suppliers have been forced to reduce supply due to liquidity challenges, while pipeline owners have, in some cases, threatened or actually cut supply.

This deteriorating and unreliable supply poses broader risks to the economy, as businesses face higher operational costs and investor confidence in Ghana’s energy sector continues to erode.

 

The Road Ahead: Policy Redress and Strategic Action

As Ghana enters a new electoral cycle, the incoming government faces the delicate task of addressing the complex challenges in both the oil and power sectors. Tackling these issues will require bold policy action and strategic reforms in two key areas:

 

• Upstream Oil Investment: The new government will need to attract substantial investment in the upstream oil sector to reverse declining production trends. This will require improving the investment climate by enhancing transparency in the contracting process, strengthening regulatory oversight, and addressing investor concerns over local content impositions. Establishing a more predictable and stable business environment, free from undue political interference, will be essential to restoring investor confidence and securing the capital needed to develop new oil fields.

 

• Liquidity and Governance in the Power Sector: Resolving the liquidity crisis in the power sector will require a combination of financial and operational reforms. The government must strengthen the financial position of the Electricity Company of Ghana (ECG) by improving revenue collection mechanisms and overhauling procurement practices to reduce costs. Addressing challenges in the gas sector will also be essential to ensuring a stable power supply and supporting the growth of both the oil and power industries.

 

At this crossroads, the future of Ghana’s energy sector—and its broader economic trajectory—depends on the incoming government’s ability to balance risks and opportunities. Effective leadership, transparent governance, and strategic investment will determine whether the energy sector becomes a catalyst for sustainable economic growth or remains a source of financial strain and unrealized potential. Decisions made in the coming years will have lasting consequences, shaping Ghana’s future for generations to come.