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Ghana: Who Will benefit From Oil?

When UK firm Tullow Oil announced its discovery of 600 million barrels of oil in Ghana in 2007, the blogosphere responded with variegated tones of hope and cynicism. After two years since the detection, the country has begun to prepare for oil production, but the current discussion hovers around the questions: “Who benefits and what could be the future ramifications of decisions made by Ghana’s leaders today?”

Charles Crawford, at Blogoir, commented on a piece written by Craig Murray  analyzing the cause and effect of Ghana’s oil find. He wrote this about Murray’s article:

At the same time, revenue must urgently be directed to rural infrastructure, to increasing farm prices and developing agro-processing industry, on a scale not previously attempted. Ghana already has a major problem keeping young people in farming. Think how much this will worsen when oil starts to flow.

Why should young people stay on farms now that the country is going to get rich? Ghana as the anti-Nigeria, ie a new hi-tech Singapore-style place rather than a typical agriculture exporting African country?

Is not the point of acquiring such largesse that it gives a country the chance to look at quite different options, not merely ways to impose top-down solutions based on old ideas?

A comment posted in response to the blogger’s statement by someone named Craig Murray read:

Because William Cobbett Was Right! 

Crawford’s remark about the youth still working on farms, despite the country’s apparent road to riches, has been on the minds of Ghanaians. Ghana Pundit   posted a piece by the Ghana News Agency (GNA) which addressed similar concerns:

Dr. Edward Omane Buamah, Deputy Minister of Environment, Science and Technology, has observed that the oil and gas find in the Western Region, has made unemployment among the youth in the area a big issue.  

Speaking at a special hearing on the Environmental Impact Assessment for the development of the first phase of the Jubilee Oil Fields, organised for the Western Region House of Chiefs in Sekondi, he said the region had not benefited from natural endowments like the sea, gold, bauxite, timber and other minerals.

Dr. Buamah said it was therefore normal for the youth to expect better employment prospects from Ghana's oil find.

He said direct employment into the upstream oil industry required high level of professional competence and qualification, hence the need for the youth to improve themselves to be able to take full advantage of the numerous ancillary job opportunities, which would be generated by the emerging industry.

Ghana Pundit posted another article  that touched upon a new area of concern:

Ghana’s oil find if not properly managed could spell crisis comparable to what is happening in Nigeria’s restive Niger Delta region.

A respected legal practitioner and lecturer at the University of Ghana, Law Faculty, Dr. Raymond Atuguba has chillingly revealed that militants in the Niger Delta region, notorious for blowing up oil pipes, kidnapping and demanding huge ransoms and causing unrest in the oil rich Nigerian region have started tripping to Ghana in droves.

Dr. Atuguba in an interview on the Citi Breakfast Show on Wednesday said the essence of militants’ interest in Ghana is to mentor folks in the Western Region of Ghana, on whose offshore, the country will be drilling oil to be protective of their interest.

A blog entry posted on President Atta Mills’  official campaign site stated:

President John Evans Atta Mills on Thursday reminded Kosmos Energy, one of the companies involved in the nation’s oil find in the Jubilee Fields of Cape Three Points, to be mindful of social, legal and corporate responsibilities so that local people would be part of the process and feel its benefits.

He urged the company to make use of available Ghanaian expertise as well as insulate the people against any challenges that would emanate from the drilling of oil.

A comment, in response to this post, by Ofori Amooako Elijah read:

The drilling of the oil must benefit the people of Ghana more especially, it should [be] a step in creating employment.

9 comments

  • Todd S. Schneider

    Ghanaian oil can’t be as dirty as Canadian tar sands oil. Let’s hope the revenues don’t “stick” to corrupt officials. Let’s all keep our eyes open.

  • John-Peter Amewu

    As the country prepares towards this new regime, the Ghanaian people wants to know how the country will derived its maximum satisfaction from the sales revenue as promised by the President Atta Mills. They will like to see the maximum utilization of the revenue to advance the economic and social development of the country as against a parochial interest of very few politicians and non politicians alike. Though this discovery is set to transform the country if good management practices are adopted, there has been little public debate on some of the available strategies for Ghana to escape from a possible resource curse. The discovery of Oil and Gas often brings about dreams of wealth and prosperity for developing countries. In Ghana the recent discovery has, has raise the hope and aspiration of the average Ghanaians for a better Ghana in the near future. In all too many, as seen in countries such as Nigeria and Sierra Leone, these discoveries have instead been associated with devastating political conflict and lasting economic setbacks. It is time, the peolple of Ghana get quick understanding about the oil regim. The oil is just the depletion of the countrie’s natural resources. The value from the oil sales is a cost but not a revenue. But if this cost is well manage GHANA may derived some benefits from the depletion of the assets. Cost Management procedures must strongly be considered if Ghana as a Nation wants to gain from the oil. External influence is another indirect cost Ghana will have to watch in its attempt to satisfy Ghanaian people. The oil should be a blessing not a curse provided we put aside politics and work towads achieving the Growth potential of the Country. We can grow at 7% for the next ten years provided we put our houses into order. The Asian Tigers are doing it why not the Black Star of Africa.

    • Todd and John, thanks for your comments.

      @ John — you raise very important points. I think this unforseen management malpractice is what has prompted President Mills to give statements about the use of revenues etc. From my knowledge – through interviews of non-profits/businesses in Africa – one of the challenges they encounter is management issues. Some of the strategies, I understand, used to run certain businesses in Africa either aren’t in correlation with that of the West’s or individuals positioned to manage them get off track. Now, the fact that an African leader or any other leader has accrued some of the highest levels of education doesn’t necessarily make him or her a great candidate to tackle these issues. Instead of rushing to sign deals, I believe Africa’s leaders can do some good by congregating to develop effective management strategies, train and equip others with the right foundation needed to handle such a “gem” as oil. But like Todd said, our eyes are wide open watching Ghana. May she emerge to be an exceptional example to the rest of the continent. Fingers crossed tightly.

  • “But like Todd said, our eyes are wide open watching Ghana. May she emerge to be an exceptional example to the rest of the continent. Fingers crossed tightly.” Absolutely agree with this.

    The key to Ghana becoming an exceptional example (or even a good example) is holding elected officials in government from successive governments, staffers in respective government ministries working in this field, and decision makers in the Ghana National Petroleum Authority accountable. Accountability comes with knowledge. The ideal would be for an independent, third-party to hold “sensitisation”, “information dissemination” (or whatever you like to call it) sessions that teach the basics of petroleum economics with journalists and the general public across the country and in the Western Region in particular so that they can confidently hold decision-makers to account. The other key consideration would be transparent accounting practices by both the production company and the government. If you look at Transparency Intl’s reports about oil company practices world-wide, they have rated companies by how transparent they are in each country they operate in. The same company may have a different rating from country to country as they may only as transparent as the country demands them to be. You can get away with all sorts of things in Chad and Sudan, but somewhere like Norway demands it. Nevertheless, others are willingly transparent no matter what the government or regime.

    Rather than “hope” (because “hope” is not a plan), Ghanaians ought to be informing themselves. I noticed with relief that workshops were being held for journalists. There are endless resources online to understand the dynamics of petroleum production and economics, but putting it in simple language is another story. This is where I “hope” that Ghanaian journalists and independent thinkers come into their own. That could truly make a difference.

  • anngell

    Hoping Ghana Government will take a deeper look and emulate on how Brunei Government is taking care of the welfare of its people due to its rich oil deposit.
    Brunei has provided the basic needs of its citizens – gratis. Young Ghanians must first make a vision on how education can make a difference. There will be a good future in Ghana if their natural resources will be managed based on the concept of public service and public welfare. Good luck!

  • Gayle, i couldn’t have agreed with you more.

    @ Anngell…the issue with Ghana/Africa, i would say, is the unofficial dynasty created by some of its leaders. Ghana has done well in embracing democracy in the last decade or so and i applaude my country for that but other sectors of the government have a long way to go. The issue of corruption – which btw, isn’t absent in any country – is so severe on the continent that it encumbers actions taken by successful countries like Brunei to be emulated. Gayle was right when she said accountability is very important, but any such accountability would be ineffective if there aren’t people ready to carry them out – transparently. Awareness, indeed, is needed but that’s also impossible without knowledge and Gayle makes an important point about that.

    • John-Peter

      Current development in Ghana about the future and direction of the extractive industry (Hydrocarbon) gives a major course to worry. I ve stated here sometime ago, that the oil resouces in not just a free gift from God. It comes with soo many cost implication. It is the management and complete understanding of the cost regimes that would enable Ghana as a country to translate the negatives to possitives. Unfortunately all over the world, the management of the Hydorcarbon industry is heavily control by the politicians. The Geology and Technicality of the industry has been taken over by Geopolitics. Technocrats have little to say in the industry. But even then, giving the security of the industry, there is the need for the Host Governments to play a vital role in the control of the resources. The oil will become available for all Ghanians to enjoy the benefit if and only if a good fiscal regime is design for the country. The type of contract Ghana undertake is not really the issue for Ghana now to be considering, rather the most important element to be use in the design of the fiscal system of the contract is worth looking at. It has been demonstrated that provided the elements of the fiscal regime are well considered, either the concessionary base system or the production sharing base system will end up giving the same Government Take. As i speak now, i am not very sure if Ghana Government have even appiont a Content Manager for the industry, whether the Hydrocarbon Law has gone through paliament and the most important of all whether the Licensing rounds have been programme for the future. A good fiscal system can give the Ghana Government, the necessary return on investment (ROI) or the Government take . This ROI should include the effective royalty rate (ERR) and the Government of Ghana’s (GOG) carried working interest. GOG, in deciding on its fiscal regime must design a system with the highest ROI at the same time meeting the needs of the IOCs by enacting an IOC partner intimacy policy (PIP) by an Act of parliament. Ghana must strike a balance between the PIP ACT to establish and an agenda to quickly acquire technology in the short to medium term to manage its own resources to the advantage of Ghanaian. This can be achieving by establishing global benchmarks for development technology for deep sea E&P. I am also of the view that GOG must partner with Schlumberger (industry research pioneer) with one of its Universities to open the state of the art research centre in Ghana. This centre should focus on developing geosciences software, seismic data analysis, nuclear magnetic resonance technology, and relevant technologies for reservoir management. I sincerely believe the creation of a new Regulator by an ACT of parliament to administer and oversee the introduction of competition to the upstream sector in Ghana will make the oil available to all Ghanians. The pressure for political control will increase as the Jubilee and the Tweneboa fields are developed. To avoid this GNPC must be treated as a commercial entity to avoid the agency problem in the very near future. The IOCs wants to undertake their E&P in regions where the possibility of finding a dry hole is minimal. They also want regions with high stability with higher ROI to cover the risk of investment. The IOC,s all over the world work in difficult environment whiles the NOC,s prefer the softer spots. Some IOCs are also eager to “book barrels”. It is creditable for GOG to put in place a regime that is more favourable to the NOC. But the Government must at the same time be careful about the dangers of alienating the IOCs as seen in Mexico and Venezuela and possible as will be seen in Nigeria if the Government goes ahead with the current reforms. Maximising the ROI a nation derives from Oil requires collaboration not confrontation with the IOCs. Pragmatism, not Xenophobia is a better safeguard of national interest. In Brazil the changing from the R/T based system to the PSC system could be seen as an attempt to by the NOC to have more ownership control over the hydrocarbon. These will not necessary increase the Government take and the ROI to the Brazilian Government. A well design combination of the above elements will lead to a competitive, fiscal mixed policy regime which is capable of making Ghana a long – term growth area for world Oil and production. These are my little views on how the Oil can become available to all Ghanians.

  • Black Cohen

    Ghana has all the natural resources it needs to be self sustaining and should work on its infrastructure as a whole to meet the demands of the people who are mostly poor.

    The oil if managed correctly and honestly will significantly imporve the standards of living providing that they look after their own people first.

    Ghana must make sure that they do not let the Western World take charge and cause problems within both the economical and political structure within Ghana.

    One need only look at Iraq as an example to see how the greed of the Western World can cause severe problems for that Nation who is the target.

  • “Ghana must make sure that they do not let the Western World take charge and cause problems within both the economical and political structure within Ghana.” — You’re absolutely right about this Black.

    Although decisions lie in the hands of leaders, it’s equally important for ordinary Ghanaians to continue to voice and demonstrate their interest in thwarting any Western interference that could be noxious to the nation’s economical and political structure.

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