Ghanaians worry about 'oil curse'

... As Ghana begins oil production

Yesterday, Dec. 15, 2010 marked a great day in the lives of many Ghanaians because Ghana joined the list of countries producing oil on a commercial basis. The question on most people’s minds is: How does this benefit us (Ghanaians)?

His Excellency John Atta Mills, President of Ghana, was in Sekondi-Takoradi, where he was flown offshore to the FPSO Kwame Nkrumah to open the valves to make way for the flow of first oil. Jubilee Partners, which include Tullow Oil plc (34.7 percent), Anadarko Petroleum Corp (23.49 percent), Kosmos Energy (23.49 percent), Ghana National Petroleum Corporation (GNPC) (13.75 percent), Sabre Oil and Gas (2.81 percent) and E.O. Group (1.75 percent) participated in a formal celebration to commemorate the first oil, hosted by the president at the Takoradi Air force base.

The first phase of production at the Jubilee oilfield has begun, ramping up to 55,000 barrels of oil per day (BOPD) this month and 120,000 BOPD during the first half of 2011 as additional wells are completed. This marks the beginning of Ghana’s first significant commercial oil production and will allow the country to join the ranks of sizable West African oil exporters.

“History will be made today and I am very proud to be part of it. First Oil from the Jubilee field is a wonderful occasion for Ghana, its Government and People, the Jubilee Partners and Tullow. It is the culmination of a lot of dedication and hard work from a world-class team on a world-class field. So many people deserve recognition and thanks today, my personal thanks go in particular to the Government of Ghana. Their support and commitment to this project helped the Jubilee Partners ensure that First Oil for Ghana became a reality. Congratulations to everyone involved,” said Aidan Heavey, founder of Tullow Oil.

According to reports and comments from media houses in Sekondi-Takoradi, the oil revenue will afford Ghana the opportunity to meet the UN Millenium Development Goals by 2015. This is only possible if the Ghanaian government, international donors, and civil society take a number of critical steps. Without these steps, there is a high likelihood that Ghana will become yet another African country cursed with oil.

A look at how the story is carried out by news organizations and bloggers around the world:

Bloomberg: Ghana Oil Reserves to Be 5 Billion Barrels in 5 Years

State-owned Ghana National Petroleum Corp. and the government are “expecting to do technical exploration in the Voltarian basin so that in the next five to 10 years we can start doing oil production on shore,” Asaga said. The region stretches from the south along the Volta River to the north of the country, along its border with neighboring Togo, according to the GNPC’s website.

The Africa Report: Ghana Special – Oil & Corruption

How to avoid the oil curse: This time it must be different. That is the oft-heard demand from activists, politicians and business-people when discussing oil’s potential in Ghana. The discovery of the Jubilee field – with about 1.8 billion barrels – is different from its African counterparts. It is the first time substantial amounts of oil and gas have been found in one of Africa’s established democracies. Estimates on the quantum of Ghana’s oil wealth vary hugely. The common starting point is that Jubilee will produce about 120,000 barrels per day and some $1.2 billion in government revenue a year for 20 years.

The adjacent Tweneboa field is reckoned to be as big as Jubilee’s, but industry experts forecast the biggest finds will be onshore in the Keta basin. With companies like Exxon Mobil, BP, ENI and Sinopec vying to buy equity in the Jubilee field, the assumption is that Ghana has several billion barrels of reserves. A key imperative, according to the World Bank’s Sébastien Dessus, is revenue transparency. That means signing up to full disclosure under the Extractive Industries Transparency Initiative and working with civil society groups on the analysis of contracts and the monitoring of environmental impact. Then there are the corrosive effects of revenue accruing to an over-centralized government. Worst of all is the ‘Dutch disease’, under which the currency appreciates as oil revenues flow. Bank of Ghana Governor Kwesi Bekoe Amissah-Arthur says he is determined to hold down the value of the cedi against the US dollar to maintain the competitiveness of exports.

Oxfam America: Big challenges remain for managing Ghana’s oil future

By early 2011, estimates are that Ghana will be producing approximately 120,000 barrels of oil per day. The Jubilee field has 500 million barrels of proven reserves and a potential for over 1 billion barrels. The production rate is expected to supply more than $400 million to the government’s 2011 budget and around $1 billion per year into the country in the early years. Promising indications from adjacent exploration oil wells could mean even higher levels of production and reviews in the next few years.

David Throup of Online Africa Policy Forums Blog points out that:

Ghana urgently needs to improve its infrastructure: it needs new sewers and water pipes and ring-roads in Accra, a revamped electricity grid, improved generating facilities at Akosombo, improved rail-links from Accra to Kumasi and Tamale and on to Burkina Faso, and a renewed and extended network of secondary and tertiary feeder roads through the rural hinterland. Others will argue for improving educational and health facilities. Such development spending would generate employment in construction and ancillary services, and hopefully promote sustained economic activity and growth. In a society where 60-70 percent of the population depends on smallholder agriculture for their livelihoods and 90 percent of the population in urban areas depends on the informal sector, such job-generating spending could be beneficial. But the money must be spent wisely and over a number of years if it is not to exacerbate inflation and exceed Ghana’s capacity to absorb the spending.

In her post, "Let it flow, Let it flow, Let it flow: Oil pumping starts in Ghana today," Abena Serwaa expressed her opinion on what needs to be done.

Despite my skepticism, if we have the right policies in place governing how we handle our oil, we could potentially reap positive benefits from this gift. The question is: do we have policies already in place?