How Ghana’s oil and gas industry is expanding Takoradi

As the closest city to the oil and gas exploration and production activities off the shores of Ghana’s Western Region, Takoradi has become the operational home to the upstream segment of the industry and may be about to become its administrative headquarters too. TOMA IMIRHE examines the impact this is having on business activities in area and the potential for economic expansion

The skyline of Takoradi, Ghana’s third largest city is changing, stretching further and further upwards and sideways in response to a sharp spurt in both investment and consumer spending. This is primarily the result of the discovery and subsequent commencement of production from the Jubilee oil field off shore of the Western Region of Ghana, of which Takoradi is the regional capital and which has been followed by two more oilfields in the vicinity – the Tweneboa Enyenra Ntomme [TEN] field and most recently the Sankofa Gyaname field.

Since the country’s flagship oil and gas field was discovered in 2007 and subsequently developed in a record time of just 42 months for production to commence in December 2010, several major international oil companies (OICs) and a lot more smaller ones have set up shop in Ghana in the hope of hitting oil and gas in similar fashion to the way the Jubilee partners did.

Since then ENI has hit success too raising the hopes of several other exploration and production firms including the world’s largest, Exxon Mobil. In turn, their exploration and field development activities have attracted oilfield support companies, in their droves, supplying various products and services from subsea infrastructure to catering services.

Inevitably, all these firms have established their operational headquarters in Takoradi and this in turn has fuelled a business boom of sorts, in virtually every sector. Banks, insurance companies and other financial service companies have quickly set up branches in the city. The telecom networks have arrived there with both customer service and marketing offices and with lots of new technological infrastructure to ensure seamless service.

Boom

Professional firms of lawyers, accountants and the likes have opened shops.   Even retailers of fast-moving consumer products, recreation and hospitality facilities such as hotels, restaurants and night clubs have blossomed, with new ones being set up while the older ones have been renovated and expanded, all in anticipation of growing demand and subsequent bigger business volumes.

At the same time educational facilities have enjoyed a boom as then teeming unemployed youth in this urban metropolis of some 2.5 million people have strived to position themselves in anticipation of unfolding new job opportunities.

These are the results of intense anticipation by enterprises and households alike that the arrival of the upstream oil and gas industry in Takoradi would fuel a boom in business and personal development opportunities that the much older solid mineral mining, cocoa and timber industries had largely failed to deliver. Visions of Takoradi evolving into Africa’s version of Dubai were rife and the air of anticipation became so thick that government itself found itself needing to manage those expectations in order to forestall a collective feeling of communal disappointment when the expectations, inevitably, were not quite met.

To a large extent this is indeed what has actually happened. And nowhere is this more evident than in the real estate sector, where developers of office accommodation and residential homes themselves have seen their grandiose dreams of an unprecedented boom evaporate. Over the past decade, old houses and office blocks have enjoyed complete makeovers while new estates, including mixed use developments and new office complexes have sprung up all around the city and its suburbs. Announcements have been made concerning the commencement of the development of some of the most ambitious real estate projects ever seen in Ghana such as the sprawling Apollonia, mixed use, self-sufficient, open city project, being promoted by the internationally renowned Renaissance Developers.

But today, Takoradi stands out for the sheer number of unoccupied spanking new real estate developments, both offices and residential homes. Both in the business districts and in the suburbs of the city, such offices and homes lie empty, “for sale or lease” signs fluttering forlornly in the wind. Here lies a vivid example of unmet expectations.

To be sure, the hopes of a sharp increase in property values have been met. Indeed, Takoradi now ranks as one of the most expensive cities with regards to the cost of purchasing up-market homes or office blocks and rental costs have risen sharply too. But demand has not grown nearly as fast as those sales prices and rentals have.

Problems

Here, the problem has not so much been that of the refusal of Ghana’s upstream oil and gas companies to accept the new, sharply higher price tags on real estate developments, as their actual inability to do so. The sharp slump in global oil prices since 2014 have taken their toll in the form of smaller corporate budgets for exploration and even actual oilfield development and thus smaller than anticipated growth in business for contractors and subcontractors.

At the same time, the government of Ghana, caught up inordinately high fiscal deficits and the resultant macro-economic instability has sought to tighten the fiscal regime for businesses operating in Ghana, in the hope of generating direly needed higher tax revenue flows.

However, this has persuaded many oil and gas companies, especially those engaged in exploration and the supply of goods and services to the rigs, to move their operational headquarters across Ghana’s western border to neighbouring Cote d’Ivoire. Combined with smaller operational budgets for those who have stayed behind in Ghana, this has meant the expected real estate boom has been stunted in its tracks.

Those who have stayed behind have, like the indigenes who host them in Takoradi, had to deal with sharply rising cost of living. It is instructive that since 2010, when the inflow of foreign oil and gas companies began nearing its peak – and with its hordes of expatriates armed with foreign currencies and large corporate allowances and expense accounts – consumer price inflation in the Western Region, as measured by the Ghana Statistical Service, has consistently exceeded the national average. Just as instructively, some companies, who do not rely on the oil and gas industry for their industrial inputs, have opted to move to other parts of the country.

Competition

However, competition among the growing number of enterprises in all sectors of the economy is serving to stem the rise in price levels brought about by the desire of local enterprises to exploit the demand of relatively affluent businesses and households that do business in or with the oil and gas industry. But the sharply rising number of businesses and people in Takoradi and its environs is raising questions as to how prepared the city is to handle the influx.

To be sure, it is actually a twin city, comprising both Takoradi itself and neighbouring Sekondi. To all intents and purposes, the two have become a single sprawling metropolis since 1949, which is why one single local government, handles the core of both cities. Instructively, Accra and Tema are administered by separate local governments.

However, what some people refer to as “greater Takoradi” is a much larger place, spread across several districts, having enough space, and resources to host Ghana ‘s oil and gas industry without any bottlenecks.

“Because Takoradi is skewed to the port area people tend to limit Takoradi to that side but the rest of the land is up north – Esiam where the Ghana Free Zones Board has its enclave and where Wang Kang Ceramics is located – has vast lands there,” asserts Vincent Annan, Chief Executive of the Sekondi Takoradi Chamber of Commerce and Industries. ‘Then there is Daboase area, also the Agona and the Ahanta West as far as Axim area.

“The Ahanta West District is really part of Takoradi, Shama is part of Takoradi. The River Prah is there to support our water needs – we just need to, work on the pollution being done by the activities of the small-scale miners and we are good to go. People who do not live in Takoradi and do not know it well enough are the ones who say it is not big enough.”

Government commitment

The issue of Takoradi’s capacity to accommodate more businesses and institutions as well as more households and individuals has been thrown on the front-burner by the plans of President Nana Akufo Addo’s administration to move the key state-owned institutions involved in the upstream oil and gas industry – such as Ghana National Petroleum Corporation, Ghana Gas and the Petroleum Commission – to Takoradi, which would thus become their headquarters.

The plan is that this will effectively make the city the administrative as well as the operational capital of the country’s oil and gas industry, which would persuade even the international oil majors such as Tullow, Kosmos, ENI and Hess to move their respective head offices to Takoradi, since the regulatory and facilitation institutions of the State would be there as well.

Government commitment to fulfill this promise has been partly confirmed by the ongoing relocation of GNPC’s Corporate Social Responsibility department, and the GNPC Foundation to Takoradi.

Since this would result in a dramatic increase in logistical requirements and physical socio-economic infrastructure such as roads, offices, houses, schools, hospitals and the likes, there are worries in some quarters that Takoradi would not be able to support the entire industry if it relocates there. There is no unanimous opinion about this by those who live, work and run businesses in the city and its environs, but the majority argue that the city has what is required, but some more infrastructural development is needed. Indeed, most business entrepreneurs and corporate executives point out that the full relocation of the upstream oil and gas industry to Takoradi would attract sufficient investment in the needed infrastructure and social and business support services, from both the private and public sectors.

Tied to this argument is the hope that this in itself would dramatically accelerate the growth and development of the city. Here they argue that this is much overdue anyway, especially by government, since it is the capital of the region that provides the most natural resources that the economy uses to support the living standards of the citizenry nationwide.

Concerns / neglect

Indeed, there have been lots of concern among civil society that successive governments have neglected the development of the region despite its huge contributions to the economy, are inadvertently, creating the grounds for civil unrest in the near future.

“What we have now is a situation where Goldfields alone paid corporate taxes of about US$419 million in 2012 alone’, points out Vincent Annan. “That is only Goldfields and we have several other companies of that size operating in the region.

So, if we have to spend US$10 billion to open up the capital city of the region where you have practically all your resources, what is the problem any reasonable government should have with that? It should be the right and natural thing to do and if you do not then you risk creating a situation like the one in Nigeria’s Niger Delta. It is gross negligence, gross ignorance – or maybe they just want to impoverish the people or is it because we do not agitate here in the Western Region?”

He warns: “But not all of us will sit aloof because we have seen it done better elsewhere, we have travelled to places where life is better and that is the future we see for Sekondi-Takoradi and that is what we want to transform it into.”

Way forward

To be sure, Takoradi already has the basics required for it to perform the role being planned for it. It has the most developed segment of the railway network in Ghana, largely due to the need for evacuate bulk export commodity produce – manganese, bauxite and cocoa – to the sea port. Importantly, the railway is considered a priority by the government for expansion, rehabilitation and modernization.

The sea port itself is the older of the two in the country and is even now undergoing a major upgrade to enable it accommodate bigger ships and more volumes of cargo, including specialized facilities for the oil and gas industry. A dedicated port for the oil and gas industry is also being developed at nearby Atuabo.

Takoradi also boasts an airport, owned by the Ghana Air Force but which handles commercial transport. This too is to be upgraded by the government. The immediate challenge is to empower it to handle night flights and proponents of the planned relocation argue that this will speed up the process.

“Of course, we can enable the airport to handle the flights that the oil and gas industry will need”, says Victor Adramani, Production Manager of Blanko Oil. “If we can now fly from Tamale Airport to Saudi Arabia, why not from here as well? Once the industry moves here, all other things will follow.”

The road network is extensive but would also require extensive upgrade. “There will have to be work done on the Kumasi-Tarkwa road so those coming from Kumasi can use that road and ease the pressure on the other route, says Blankson. “The road to Takoradi from Accra also has to be improved to handle the traffic that it would have to carry.”

But the biggest area of potential for the indigenes of Takoradi and therefore the city itself is that generated by the local content and participation law passed in 2014. While the law does not differentiate between enterprises owned by indigenes of the region and some Ghanaian indigenes from other parts of the country, sheer geographical proximity gives the former a head start.

Besides, local enterprises owned by Ghanaians from other parts of the country would necessarily have to operate locally in Takoradi and its environs to secure and execute contracts from the oil and gas industry in the first place and this means huge benefits for the local economy too.

Combined with the relocation of state-owned enterprises to Takoradi, local content regulations offer a huge vista of opportunity to local businesses in Takoradi, if both initiatives are properly executed.

“If these big contracts are there and we give them to Ghanaians and they receive financing and execute them and become successful, that would be a very good thing”, asserts Benjamin Afful Eshun, Chief Executive of Ahantaman Rural Bank. “We have got the Dangote’s and so on here from Nigeria and look at how we are feeling the impact.” What is wrong if through this oil industry we are able to nurture successful people who can then create jobs for the rest of us?

Once again expectations in Takoradi are on the rise, the initial disappointments after what is widely the first false start now being quickly put behind by businesses and households alike.

This time, there are several reasons to hope that Takoradi will finally attain the status it desires and that its populace will get the opportunities, with regards to both business and jobs, that they crave.

Expectations

First of all, the oil and gas industry is much bigger, and has much better prospects than when it started out initially. Ghana now has three oil and gas fields in production and importantly, the latest is the first that is owned by companies other than those who formed the Jubilee field consortium. This means a wider field of contractors and suppliers are now involved than hitherto was the case. Importantly, growth is now coming from gas as well as oil and the arrival of Ghana Gas head office in Takoradi will open up a whole new industry.

Secondly, the local content and participation law is taking hold, with the issue of fronting now being addressed. Hundreds of local enterprises are not only now registered with the international oil companies that can give out contracts, but many of them have, over the past few years, proved their capabilities and thus have won their trust and confidence.

Thirdly, the local economy itself is now better positioned to generate and benefit from the pass along effects of stronger economic growth and expansion. From real estate to tourism, from business support services to retailing, the capacity of Takoradi’s business sector has improved considerably over the past few years.

Which is why the twin city now stands on the cusp of unprecedented growth, fuelled by the arrival of the oil and gas industry’s administrative headquarters in addition to its operational headquarters. If the confidence of the business entrepreneurs and corporate executives is anything to go by, then Takoradi will live up to its role with aplomb.