Ghana Girds for Vagaries of Oil Production

(JEFFREY MARLOW/New York Times) With drilling set to begin next year, Ghana is ready to become the latest oil-producing nation in Africa, joining countries like Nigeria, Angola, Equatorial Guinea and Chad. For most African nations, oil has turned out to be more of a curse than a blessing, and Ghana is trying to find ways to avoid the many pitfalls that have plagued other nations.

It has advantages. After all, President Obama recently praised Ghana as one of Africa’s most exemplary democracies — with stable governmental institutions and a relatively robust infrastructure.

Not surprisingly, foreign companies have taken notice. The largest oil field in the region to date — the so-called Jubiliee field — is jointly controlled by Tullow Oil of London, Dallas-based Kosmos Energy, and Anadarko Petroleum of Houston, along with the Ghanaian government.

(Kosmos, it seems, is poised to sell its stake, worth upwards of $3 billion.)

Mike Oquaye, Ghana’s energy minister from 2005-2006 and current leader of the opposition party in Parliament, pointed to Ghana’s political stability in a recent interview — though he suggested that the road to a peaceful oil development in the country won’t be easy.

“The real challenge is to bring the revenue in in the first place,” said Mr. Oquaye, referring to the possibility of pirate attacks similar to those that have severely curtailed Nigeria’s oil production. “The high seas will be the main area of operations,” he said, “and it’s going to be terrible.”

Mr. Oquaye believes the nation’s air force and naval capabilities will need to be significantly enhanced in order to deal with the threat.

Once the money does make it into government coffers, Mr. Oquaye said accountability and transparency through every aspect of sales and spending would be crucial. “We have to ensure that every aspect of this is computerized,” he said, “then we will be able to know where everything comes from and where everything goes.”

To stem corruption and ensure that oil money is not squandered, Mr. Oquaye believes the funds should be kept separate from all other sources of revenue and managed by a board of governors. A significant portion of the income, he said, should go into a “future generations fund” – similar to the sovereign wealth funds established in many gulf states. This would support nationwide infrastructure needs such as food processing, road , and electrification of rural regions.

Other stakeholders, however, are less optimistic that the oil money will ever make a difference for the people of Ghana.

Kofi Wayo, a board member of Ghana’s Energy Commission, said “the oil is not going to benefit Ghanians in any real way.”

Mr. Wayo said he believes Ghana was hoodwinked by the initial oil contracts, which entitle the government to just 10 percent of the profit. “Oil companies have their puppets in the government,” he said, “and the puppets are in charge.”

For his part, Mr. Oquaye acknowledged that the percentage of profit accruing to Ghana is low, but he insisted it was necessary in order to generate initial interest in Ghana’s oil reserves. He is also optimistic about the odds of developing a fruitful and peaceful oil industry. “It is only by learning from the best practices and identifying the difficulties of oil production,” he said, “that you can do it well from the very beginning.”