Recent discoveries of extensive reserves of oil and gas has propelled Ghana into the spotlight in recent years. However, despite holding the sixth largest oil reserves on the continent, unlike its West Africa neighbour Nigeria, the illicit hydrocarbons trade in Ghana remains on a relatively small-scale and has not attracted the same magnitude of attention.

As an archetype of democratic stability and good governance in the sub-region, a severely corrupt environment - in which hydrocarbons theft thrives - has not entrenched itself in government or the petroleum industry, unlike in Nigeria.

Although small-scale tapping activities, the diversion of fuel, and the hijacking of fuel trucks have been recorded, these opportunistic practices rarely make the national press; and large-scale bunkering and theft at terminals, tank farms and refinery storage tanks, is not currently a pervasive issue for the nascent oil producing state.

However, despite Ghana’s solid reputation, there are fears that the illicit hydrocarbons trade is growing. The expansion and increase of petroleum exploration and production in recent years – combined with a slump in the economy – has ultimately led to the establishment of the so-called Petroleum Black Market (PBM). In 2016, more than 420,000,000 litres of petroleum were estimated to have been sold through illegal channels; equating to more than 10% of Ghana’s total consumption for last year.

Ghana has also been identified as a potentially key transit / transshipment point for illicitly obtained hydrocarbons before they are distributed to global markets.

Key Trends
Ghanaian hydrocarbons theft is categorised into several different methods of illicit activity: the illegal diversion of export products to the domestic market, the illegal sale of non-taxed petroleum products as petrol, the smuggling of fuel outside of Ghana, fuel adulteration, piracy, small-scale fuel syphoning, pipeline tapping and oil bunkering.

Traditionally, Ghana’s illicit hydrocarbon sector has benefited from years of government fuel subsidies, which resulted in Ghanaian fuel prices remaining cheaper than in other countries in the region. This maintained a conducive environment for unscrupulous dealers to continue to divert the product, with the consequence that the product was never available at the prescribed price.

More recently, the illegal diversion of export products to the domestic market, in which less-taxed products destined for export to landlocked countries (such as Mali and Burkina Faso) are diverted and sold on the domestic market at lower prices than legitimate OMCs, has become more prevalent.

In terms of identifying those responsible for the theft of hydrocarbons in Ghana, although low-level criminal elements are involved in the industry to some degree (i.e. tapping and loading oil), large-scale oil theft and sale requires more technical sophistication and sophisticated networks (comprised of facilitators, logistics and security advisors, domestic and foreign transporters, purchasers and sellers, oil company workers, and of course, military and political officials). In short, and according to Shadow Governance industry sources, there are growing concerns that hydrocarbon theft in Ghana is largely directed by company insiders from licenced distribution companies, likely with political connections and political protection.

Impact
For Ghana, the most significant impact of the illicit hydrocarbons trade is undoubtedly economic.

Not only is Ghana losing millions in revenue from the illicit trade, the government, along with OMCs, is failing to benefit from the associated tax revenues from the sale of the products.

Ghana’s economy is already suffering due to a combination of continued low global commodity prices and mismanaged government funds. And although President Nana Akufo-Addo’s new government was elected on the promise to sort out Ghana’s economic crisis and to establish a more business-friendly investor environment in the country, if hydrocarbon theft gains any more prominence, Ghana’s status as a nascent oil producer and attractive FDI destination would be severely affected.

Of course, there are other political, social and environmental impacts that emanate from downstream hydrocarbon theft; when combined, they pose a significant challenge to the ruling government.

Conclusion
The government has introduced several schemes to try and throttle the illicit hydrocarbons trade. These include fuel marking technology (aimed at preventing fraud via the adulteration of fuel products) and tracking systems (aimed at preventing fraudulent transportation cost claims).

However, although the government appears to be attempting to combat the increasingly problematic Petroleum Black Market, there appears to be no real effort to combat fuel smuggling from the top – suggesting some form of complicity of political elite. Although President Akufo-Addo was elected on an anti-corruption platform, progress is likely to be impeded by those political and business elites with vested interest in the illicit sector who remain reluctant to confront the issue.


This is a preview of a 17-page Report that will be released in the Shadow Governance store on 17th May 2017, entitled “Ghana: Downstream Hydrocarbon Theft – Key Trends & Illicit Networks”. The report covers key trends in hydrocarbon theft, the structure of illicit networks involved in hydrocarbon theft, and a summary of associated costs that result from these illicit operations.