Tag Archives: Energy

Ghana Today–a Story of Growth and Struggle

I arrived in Accra yesterday morning for my first visit in several years. While I’m here to meet with partners, colleagues,  and prospective clients, I’m also anxious to see see up closely of the changes I’ve been reading about.

A different Accra greeted me immediately. The airport arrival area was cleaner and much more orderly than before. On the way to my hotel I saw several new office buildings including the brand new Octagon. There’s also the fabulous new Movenpick. This enormous building is clearly designed for big event and caters to an international clientele.I’m  right around the corner at the Accra City Hotel, which has replaced the old Novotel on Barnes Rd. The arrived of these new premium properties are recognition of Accra as one of the premier meetings destinations in West Africa.

Later that day, during my ritual stroll around the neighborhood, I could see that much of the old Ghana remains. There’s the chaotic bustle of Makola market. The tro-tros still offer dirt cheap transportation along with new City buses tant world ont besoin ont of place in DC or Mexico City.

During the next two I will explore the current state of Ghana’s development,  focusing on energy, infrastructure, and the country’s efforts to lessen its dependence on raw commodities and become a more industrialized, higher value economy. Along the way I will highlight potential investment opportunities and suggest ways Ghana’s companies and governments can become more investor friendly. Stay tuned!

AccraCityHotel

Movenpick

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Ghana’s Currency, Millennium Challenge and Economic Prospects

The Millennium Challenge Corp. recently signed a second compact with the Republic of Ghana.http://www.state.gov/secretary/remarks/2014/08/230295.htm  This compact’s focus on the power sector addresses a major challenge to Ghana’s economic growth and to Ghanaians’ overall quality of life. The signing of the MCC compact is a good time to reflect on current economic and business conditions in Ghana.
Ghana is potentially a strong economic engine for the region and Secretary of State Kerry is right to cite Ghana’s commitment to good governance and economic prosperity. However the country faces some major challenges. Among them is the rapid depreciation of Ghana’s currency. Our data shows that the cedi lost about 27% in the 1st half of the year and has continued to fall since then. Currency weakness in Ghana is a symptom of persistent trade deficits as well as rising government spending. The financial community has noticed and has raised the issue in several forums and publications. It doesn’t change the longer term story of Ghana’s growth potential (in fact dollar based investors might find favorable prices for Ghanaian assets) but it does raise questions about how government will handle the problem while remaining investor friendly.
Red flags went up earlier this year when the government began to restrict the movement of currency, damaging Ghana’s reputation for financial openness. The more sensible answer is to change the character of Ghanaian trade. Surpluses might be a lot to ask but Ghana should at least aim for smaller trade deficits. Ramping up the nascent oil sector would help but there should also be greater orientation toward exporting in several sectors. This is why reliable electric power is so crucial. It’s location, general business friendliness and political stability make Ghana a logical export platform for the West Africa region as well as destinations further abroad. However for indigenous and foreign investors to locate in Ghana reliable electric power is essential. For that reason we should all hope for the success of this second MCC compact.

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Africa Surrounded! Oil exploration on all sides

English: Map of the African continent ქართული:...

English: Map of the African continent ქართული: აფრიკის კონტინენტის რუკა (Photo credit: Wikipedia)

 

 

 

The recent wave of oil exploration has resulted in drilling concessions in virtually every region of the continent – both offshore and further inland. I have maintained that the long term trend of energy price has to be upward as huge populations in fast growing economies such as India and China consume more energy as they industrialize and urbanize their societies. This increase in demand combined with improved drilling technology and geopolitical concerns has caused the industry to venture beyond the traditional production centers in Angola, Nigeria, and North Africa.

 

Listed here are some the projects either underway or about to start:

 

    ESTIMATED
REGION LOCATION RESOURCE BARRELS
East Africa    
1 Lamu Basin, offshore, Indian Ocean 4,900,000
2 Blocks 9 & 12A – Offshore Kenya
3 Western Kenya
4 Uganda
5 Puntland, Somalia 300,000,000
West Africa    
Offshore, Sierra Leone
Southern Africa    
Offshore, South Africa

 

 

 

We are fast approaching a point where most countries on the continent are either producing, exploring or considering exploration of oil and/or gas. This has major implications in several areas:

 

 

  • Global energy market – While I maintain that the general price trend is upward, it is not necessarily in a straight line. The addition of oil from these new sources is bound to put a brake on any price increases. However, there is also a relationship between prices and the industry’s willingness and ability to find new sources of supply.
  • Geopolitical – As the African continent, more than just a few countries, becomes identified as a source of oil it will attract the attention of major powers, who are also major consumers of oil. They are already taking an increasing interest in the politics of several countries.
  • Commercial – How will African companies and entrepreneurs take advantage of the current oil boom? What is the nature of foreign investment taking place. A few companies – Tullow of the UK, Africa Oil of Canada, Anadarko of the US, Kosmos of the US are frequently mentioned as playing a major role in exploration.
  • Development – What will be the impact on economic growth? How will the benefits of any subsequent extraction be share among the people of the producing countries? Will the new oil resource contribute the achievement of the Millenium Development Goals or will it become a curse leading to corruption and political instability?

 

 

Here are links to additional information on specific projects:

 

http://www.reuters.com/article/2012/08/17/petrosa-anadarko-idUSL6E8JH8M420120817

 

http://www.marketwatch.com/story/africa-oil-signs-farmout-with-marathon-oil-2012-07-23

 

http://www.reuters.com/article/2012/01/17/somalia-oil-idUSL6E8CH15720120117

 

http://www.examiner.com/article/west-silent-on-oil-rich-sierra-leone-cholera

 

 

 

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Smaller projects soon eligible for Carbon Emission Credits

According to the Bloomberg story below, entrepreneurs will be able to access the carbon credit market for smaller projects.  Could be time to adjust those business plans.  Investors, this is an additional boost to the ROI!

http://www.bloomberg.com/news/2012-05-15/un-to-help-give-world-s-poor-fairer-share-of-carbon-credits-1-.html

 

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Game Changing Gas Finds off East African Coast

It’s  not the cleanest fuel but it’s the cleanest fossil fuel and each new discovery promises to bring the price down and offer a cleaner alternative to oil and coal.

Anadarko proposes $15bn in new investments to access newly discovered natural gas off the coast of Mozambique–whose entire GDP is on l $12bn!

If managed correctly the subsequent increase in foreign direct investment will be a huge boost for the economies of Kenya, Mozambique, Tanzania and other East African nations.

The US Geological Survey says East Africa’s coastal region has more natural gas than Saudi Arabia!

For the full story click below:

http://www.news24.com/Africa/News/Natural-gas-boosts-East-Africa-20120619

 

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