Ghana: Mixed Outlook For Energy Sector
– As US pulls out of global climate action
Story: Isaac AIDOO, Accra
The withdrawal of the United States from the Paris Climate Agreement under President Donald Trump has created a mixed outlook for Ghana’s energy sector.
The Paris Agreement is an international climate change agreement adopted in December 2015 by nations that are Parties to the United Nations Framework Convention on Climate Change (“UNFCCC”). The Executive Order on Paris Agreement withdrawal, signed by President Trump on January 20, 2025 and titled “Putting America First in International Environmental Agreements,” starts the process of withdrawing the United States from any agreement, pact, accord, or similar commitment made under the UNFCCC.
The Executive Order seeks to limit the United States’ financial contributions to other countries in furtherance of mitigating climate change and adapting to climate change globally.
Commenting on the development, Economic Analyst and Africa Programme Officer at the Natural Resource Governance Institute (NRGI), Denis Gyeyir noted that while the decision to pull out of the climate agreement poses challenges for global climate action, it could also result in increased funding for hydrocarbon exploration.
For Ghana, this could mean a temporary boost to its oil sector, as declining hydrocarbon production remains a pressing concern.
This shift by the US aligns with Ghana’s strategic goals to revive its declining oil production. However, experts are urging caution and a balanced approach to navigate the complexities of global energy policies.
Mr Gyeyir warned against over-reliance on hydrocarbons, citing the inherent risks of policy reversals.
Future US administrations could re-join the Paris Climate Agreement, redirecting funds back to climate resilience initiatives and potentially leaving Ghana with stranded oil and gas assets.
The NRGI Africa Programme Officer pointed out that new opportunities could arise from policies under the Trump administration that encourage hydrocarbon exploration.
He stressed that a proactive government approach is essential to reversing the current decline and capitalizing on emerging opportunities.
Balancing Risks and Opportunities
Gyeyir underscored the importance of a balanced strategy, urging Ghana to carefully position itself to benefit from the short-term opportunities presented by the Trump administration’s policies while preparing for potential uncertainties.
With hydrocarbon projects often requiring over a decade to develop, long-term planning is crucial to avoid investment losses in the event of another global policy shift.
To attract investment, experts recommend that Ghana implement regulatory reforms to streamline the licensing process and create fiscal incentives for oil companies.
Production Dip
The Public Interest and Accountability Committee (PIAC) reported a 32.5% decline in Ghana’s oil production since 2019.
This production dip has had a direct impact on revenue, with annual petroleum receipts falling from $1.4 billion in 2022 to $1.06 billion in 2023. Industry experts attribute this decline to maturing oil fields, lack of new exploration activities, and reduced investments in the sector.
The Road Ahead
Additionally, diversifying the energy sector to include renewable energy projects could help the country reduce its dependence on hydrocarbons while positioning itself as a climate-resilient economy.
The government’s ability to strike a balance between leveraging hydrocarbon opportunities and addressing climate-related challenges will determine the future trajectory of Ghana’s energy sector.
As global policies evolve, Ghana’s strategic response will be crucial in navigating these uncertain waters while ensuring sustainable development and energy security. This pivotal moment for Ghana’s energy sector underscores the need for collaboration between government, industry, and civil society to create a sustainable and resilient path forward.
