Recent news indicates that oil of commercial quantity has been struck off-shore near Cape Three Points in the Western Region. The discovery has been made by a consortium of companies including Tullow Oil. The Chief Executive of Tullow Oil, Mr Aidan Heavey, has been reported to have said that the company was on track to meet its target of producing the first oil in Ghana by 2010.
An excited president John Kufuor told the BBC in an interview during which he actually had a glass of the oil in one hand and champagne in the other and was proudly presenting it (the oil) to dignitaries at a party that; “We’re going to really zoom, accelerate, and if everything works, which I pray will happen positively, you come back in five years, and you’ll see that Ghana truly is the African tiger, in economic terms for development.” On what planning basis did the president make this assertion?
The Interior Minister, Mr Kwamena Bartels, on the other hand, indicates that the NPP administration plans to send groups of people to visit other African oil producing countries. “We have to learn the lessons from these African countries. What did they do wrong? We are already are putting together about six different teams to go to three Africa countries and three others, which have oil and to find out from them, what did they do wrong and what did they do right, so that we don’t fall into the same pit. We need to learn the lessons that others learn bitterly,” Mr. Kwamena Bartels, the Interior Minister was quoted to have said in Accra.
Mr. Bartels does not come across as one of the NPP’s “best brains” (the NPP claims to have Ghana’s best brains – see 'BARTELSIASIS' Or The Kwamena Bartels Syndrome By: Okoampa-Ahoofe, Kwame, Ghanaweb.com, 2006-11-24, http://www.ghanaweb.com/GhanaHomePage/features/artikel.php?ID=114410). Mr Bartels ought to have learned some useful lessons in the past from how Ghana has received the short end of the stick over the years in relation to the exploitation of the country’s other mineral resources such as gold, bauxite, diamond and manganese, and forest products like cocoa and timber. Neither did the Honourable Minister give the impression that he and his NPP administration had learned any lesson about oil production from the Saltpond field that has been producing about 1,000-1,500 barrels of oil per day on and off since 1978. A recent publication of the US Department of Energy indicates that in 2001, Ghana National Petroleum Corporation (GNPC) produced an estimated 9,000 barrels per day (bbl/d) of crude oil from the Saltpond and the Tano oilfields. One is, therefore, left to wonder as to what the Honourable Minister knows about the Ghana National Petroleum whose former chief executive the NPP administration has been hounding in the courts for the past six years. What would he want to learn from other African countries that he could not learn from Ghana’s own past experiences at Tarkwa and Aboso, Prestea, Obuasi, Bogoso, Dunkwa-on-Offin, Nsuta, Awaso, Samreboi, Akwatia, Mim, etc? What does NPP know about the West African Gas Pipeline Project? What did NPP learn from the electric power shortage of last year? Honourable Minister, before you send any delegation outside Ghana, let us do our homework first by understanding where Ghana has been by studying the “rentier” policies of the past with regards to our mineral and other natural resources.
With regards to oil, the framework for managing the upstream petroleum industry in Ghana is established and given legal backing by two main statutes, PNDC Law 64 and the Petroleum Exploration and Production Law, PNDC Law 84, supplemented by the Petroleum Income Tax Law, PNDC Law 188 of 1987.
Flowing from the Petroleum Exploration and Production Law is the Model Petroleum Agreement (MPA). The benefits from any discovery are spelt out in the Petroleum Agreement before its execution. In the case of Kosmos/Tullow discoveries the State may derive its benefits from Royalty of 5%, Carried Interest of 10%, Average Additional Interest of 3.75% and Income Tax of 35%. In a lay person’s language, Ghana stands the chance of taking in about 38% of oil to be pumped, in cash or in oil.
If one were to assume a production of 100,000 barrels per day, which is the minimum expected from the Mahogany/Hyedua Field in full field development, the computation of the Ghana’s benefits is estimated to be about 38,209 barrels per day. Assuming a long term price of US $60 a barrel per day, this share will amount to about US $2,292,540.00 per day which would translate to US $836,777,100.00 per annum.
A daily production of 200,000 barrels which could be achieved in about 5 years after commencement of production could give Ghana a total revenue of approximately US$1.6 billion per annum.
What could Ghana do with such oil revenue potential so that the oil find in Ghana will be a blessing rather than a curse?
A large body of evidence suggests that rich oil resources obstruct democracy and equitable economic growth in developing countries because of a lack of transparency, and therefore accountability, in oil revenues paid by oil companies to governments. Outside of the Middle East there are no examples of successful oil-based economic development, and even those Middle Eastern countries exhibit many of the other characteristics of oil export dependency (e.g. autocracy, corruption, human rights violations). If the oil find is to be a blessing, then there is the need for transparency and accountability – the very qualities the NPP administration has failed over the past seven and one half years. Ghana has not benefited from its mineral industry in the past either. In a study of the mineral industry, the following is the observation of some of the companies operating in Ghana: Accessing detailed information on production from some of the mining companies proved very difficult. It was extremely difficult in obtaining shipment and detailed royalties computations from Anglo gold Ashanti (Obuasi mine), Ghana Bauxite Company Ltd and Bogosu Mines Ltd. Information from the Internal Revenue Service was difficult to obtain and took over three months in some instances. Information on computations of mineral royalty payments for Anglogold Obuasi, Anglogold Bibiani and Ghana Manganese could not be obtained. Capital allowances and losses that are being carried forward in the files of the companies by the IRS could not be obtained. Efforts would be made to retrieve the information for the subsequent aggregation/reconciliation. According to the IRS, the seemingly lack of cooperation, is due mainly to the fact that there is no dedicated desk or department that deals with mining issues. Many companies and agencies, initially provided figures which were based on accruals instead of actual (Source: EITI-Ghana Report on The Aggregation/Reconciliation of Mining Benefits in Ghana, February 2007, prepared by Boas & Associates, Accra, Ghana).
Since there are no standard methods of pricing, determining the appropriate mineral royalty to be paid by gold mining companies is not possible. The royalties paid have been a pittance. Mining companies in Ghana pay close to the minimum 3% rather the maximum of 6%. The report also indicated that in spite of the application of EITI principles there were still some issues of lack of transparency in the disbursement and utilization of the money.
The challenges according to the report included lack of regulations and guidelines for the utilization of mineral royalty receipts by District Assemblies and lack of detailed information on payments made by the Regional Offices of the Administrator of Stool Lands to beneficiaries.
Government is actually not benefiting from investments in the mining sector due to gross disregard for externalities and other social costs, Mrs Hannah Owusu-Koranteng, a representative of mining communities, told delegates attending the 12th UNCTAD conference in Accra on April 23, 2008.
If the foregoing account is representative of what prevails in the extractive mineral industry in Ghana, then one wonders what would prevail in the oil industry. All the same, I will hope for the best. I suggest that other petro-chemical industries should be set up to expand the manufacturing sector of the country’s economy. The asphalt from the oil processing should give a boost to the building better roads in the country. Another oil refinery should be built in the Western Region. Western Region produces about 50% of the country’s cocoa. Bauxite, gold, diamond, manganese, rubber, palm oil, and timber are produced in that region. Yet Western Region is undeveloped. The once vibrant town of Sekondi is now a ghost town. Takoradi does not fare any better as it plays second fiddle to Tema with regards seaport activities. The Western Region – the western part of Ghana, and for that matter, all parts of the country should witness a balanced approach to development from the potential oil bonanza. The railways and the Volta Lake transportation should be rehabilitated for bulk haulage of petroleum products to the northern half of Ghana. Yapei (Pong Tamale) as the original inland port should be developed into a bulk oil storage facility to serve northern Ghana and the neighbouring countries of Burkina Faso, Mali, Niger and Cote d’Ivoire. The northern shores of the Volta Lake should be linked with electrified rapid railway network across the relatively flat terrain of the north.
In the long run, the energy resources of the country and other West African countries should be linked with the bauxite resources of the West African region to serve as the foundation for an integrated aluminum and other industries. This will put more teeth into the ECOWAS concept. In all these developments we should not neglect the agricultural sector of the Ghanaian economy.
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