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Group Chief Executive Officer (CEO) of Ghana Goil Company (GOIL), Mr Patrick Akorli
Group Chief Executive Officer (CEO) of Ghana Goil Company (GOIL), Mr Patrick Akorli

GOIL going upstream; a venture or an adventure?

News about the leading and indigenous oil marketing company, GOIL venturing into the upstream sector of the industry, could be a feather in the cap of local content participation as well as inclusive growth. Because it will lead to a significant increase in Ghana’s participation in this God-given resource.

Although the upstream is considered one of the very profitable areas, high returns normally comes with a high risk. And success downstream is no guarantee for success upstream. Only sound commercial interest and goals could guide such a journey upstream.

Goil can be said to be one of the few businesses with significant state shareholding that has been doing consistently well over the past decade if not more.

It has posted impressive performance year-in, year-out, as a result of improved corporate governance practices, good strategies, hardworking staff, and general commitment to excel.

Its annual profit which was GH¢13.8 million in 2013 has witnessed a tremendous growth to GH¢39 million in 2017. Its total asset has also increased from GH¢75 million in 2013 to GH¢410 million in 2017.

Goil’s 2017 annual report shows that, it has adopted measures that re-engineered its market operations, in a bid to stay ahead of competition. The company enjoyed 20 percent market share in 2017 from 18.2 percent, the previous year and intends to go up to 30 percent in the short term.

It is therefore not surprising that it has the ambition to go upstream, where the big boys play.

Bold steps by the company

The bold step to add upstream to its operations follows previous efforts to venture into areas such as the supply of aviation fuel and bunkering (Marine Gas Oil), which have so far been considered successful.

With this success, it now wants to take up a bigger challenge which also fits into the general desire to see more Ghanaian firms participate in the upstream of the oil and gas industry.

In 2013, Ghana passed a legislative instrument, the Petroleum Local Content and Local Participation Regulation, 2013, L.I. 2204 to provide legal backing to the Local Content and Local Participation Policy Framework that was designed in 2011.

An important part of the Local Content Policy is that it targets a minimum of 90 per cent local participation in all areas of the oil and gas value-chain by 2020.

While the local content and participation target is most likely going to be missed, the entrance of Goil, if successful, could be a major boost to its goals and objectives.

But is GOil biting more than it can chew? Of course, credible competitors to Goil at the downstream level such as Shell and Total also play in the upstream in different jurisdictions, so it would not be doing something strange.

But is Goil up to the task considering the billions of dollars that go into upstream activities and the huge exposure to risks? Or maybe we can use Goil as a test case to support indigenous businesses to take a bite at the cherry upstream

Risk associated with exploration

As a capital-intensive industry, the nature of the oil and gas business is that risk and reward are integral part of the fundamentals, and risks are relatively straightforward, relating to uncertainties around extraction, distribution, volatile commodity prices and the perplexing political landscape – not to mention the myriad factors that can impact operating costs and liquidity.

It is likened to walking on a rope with huge reward at the end.

It requires huge capital, rear and expensive expertise, quick and effective decision making and standards that cannot be compromised and Goil must brace itself up to these risks and challenges.

To be successful in the new business, GOIL must carry its experience acquired over the years in the general petroleum sector into the upstream space, since it has already indicated that funds are readily available.

Also, since the company’s long-term profitability would depend on cost effective discovery, acquisition and development of reserves in the upstream petroleum sector; if it is unsuccessful, its results of operations and financial condition would be materially and adversely affected.

It is for this reason that GOIL should be cautious and focus on proven low risk upstream segment to reduce its exposure.

There are a number of options to be considered. It can venture into the upstream sector partnering with a bigger player and gradually scaling up its stake or acquiring an oil blog and finding suitable partners.

It can also start by taking active interest in offshore activities which is expected in the Voltain Basin. Onshore exploration and production have proven to be less capital intensive.

Goil could explore the possibility of lobbying the government to give it some leverage and preferential treatment in the expected onshore activities in the Voltain Basin.

As some have suggested, the onshore operations should be reserved for indigenous businesses.

That idea can be experimented by trying Goil, so that their (ad) venture into the upstream will not be as hostile as the terrain could be.


There is no doubt that companies must be supported to grow and indigenous companies in particular must be encouraged to become key players in the upstream oil and gas industry. In deed such a move is to help drive local content and participation agenda.

GOIL’s indication to venture into this area should therefore be welcome news. But such a decision should be calculated as well as commercially driven and not politically motivated.

Improper corporate governance practices have remained the bane of many companies with state interest, and although Goil has been one of the few lucky ones, it is not entirely insulated from it.

The oil company will therefore need to approach this objective of going upstream with all the seriousness that it requires. Probably going a step further to come out with a clear roadmap will be important as it will demonstrate how and when it intends to get there.

Getting a well-managed Goil in upstream of Ghana’s oil and gas is certainly good news but doing so well and right is better news. Go Goil, Go Ghana!


Source: Graphic.com.gh


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