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Monday, 08 August 2022

T The Industry

Towards a sustainable downstream sector

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The purpose of the oil and gas industry is to meet the global energy demand and also make available related products for human consumption. The consumer is the completing variable in the cycle. Without a market, the industry is irrelevant notwithstanding the technological and engineering advancement.

The oil and gas industry is divided into three sectors; upstream (offshore/onshore), midstream and downstream. It very important for one to appreciate the various sectors, the roles they play in the chain, the advantages and challenges that come with each in order to capitalize on it for profit and consumer satisfaction. The reason is that though each of the three sectors have distinct features and roles, they are constructively and operationally connected.

For a Nation to capitalize on the opportunities that comes from this industry, conscious as well as committed measures and structures are in place so that such a height can be attained even in the face of challenges and limitations.

Not every nation can have an upstream sector until these countries discover and produce oil in commercial quantities. Nevertheless every country has a midstream and a downstream to an extent though some might be operating below expected capacity. In as much as the upstream sector is driven by production, all other things being equal the downstream and downstream depends on the market to consume the petroleum products among other factors.

In the light of the above premises it can be deduced that a country with a growing upstream sector and already established consumer market is expected to have a growing or a sustainable downstream sector. Comparatively countries without refineries or functioning refineries who turn to consume more petroleum products, experience a lot of inconveniences and go through a lot of distress

The Definite Gap

Over years Ghana as a country has encountered a lot of challenges in her downstream sector with respect to the pricing of petroleum product and the availability of petroleum product. This has affected businesses, regulators, government policies and consumers to be precise.

Why can’t Ghana have control over something she is producing? This has been the position of many Ghanaians since Ghana started producing oil in commercial. However though Ghana produces oil, Ghana relies heavily on importation of petroleum products. The real worth of Crude called the Gross Product Worth (GPW) is determined at the refinery point. Refining of oil purification of gas are critical value addition activities in the oil and gas value that cannot be underestimated by any oil producing country.

The absence of a refinery or a functioning refinery will definitely create operational instability especially in the local market for countries with growing or vibrant upstream sectors.

The Licensing and Award of Blocks

Licensing and awarding of blocks to qualified investors and operators is a positive signal that a country is committed towards to expanding as well as developing her upstream sector. An increase in production fields will eventually result in increased production capacity (barrels per day). However if the increase in daily production in crude oil does not bring about a reduction in a nations importation of refined product, then the nation is as better as not producing at all.

The downstream sector of an oil producing country should differ from that of a non-oil producing country in terms of product availability, pricing and most importantly rate of import. All other things being equal an oil producing country cannot be a heavily importing country of refined product unless it local market or demand is more than her production of crude and refinery capacity.

The Licensing of Blocks and Downstream

Consumers of refined product as well as players in the downstream sector of Ghana are all expecting the upstream sector to feed the downstream sector so that their operations can be stabilized. Recently a licensing rounds announcement has been made very soon blocks will be awarded to qualified investors and operators. How can this lead to the holistic development of the industry with emphasis on the downstream sector?

Been surrounded with a lot of landlocked countries who depend so much on Ghana’s port for petroleum products as well as other product, how can Ghana capitalize on her upstream sector to develop a robust downstream sector for herself and the sub region?

How can Ghana’s effort to increase crude oil production by awarding licensed block results in a substantive decline in the importation of refined products?

Who should be awarded the blocks; the one who will develop Ghana’s upstream sector or the one who will contribute beyond the upstream sector and ensure a sustainable downstream sector?

Towards a sustainable downstream, sector a country must be deliberate.

Sheldon Kobina Ambaah
Petroleum Economist/ Global Energy Analyst

Global Energy Insight, established in 2017, as an independent online journal focused on offering Global coverage of up-to-date news and technological advances