The Wholesale Lies That Has Become An Integral Part Of The Fledgling Oil Industry

Thu, 4 Feb 2010 Source: Baidoo, Philip Kobina

Almost all Ghanaians, including this writer, drank a toast to the well being of the nation when the news broke that oil had been found in commercial quantities at the Jubilee Oil Field. To the best of my recollection, there was no single person who I knew intimately, that never waxed lyrical about the biggest news at the time. For those who couldn’t do it in public they eulogised in private. Even some of my African friends, though wishing that fortune had rather smiled on them, extended their best wishes. For a while it became the topic for discussion at every Ghanaian gathering and, to be honest, they were not all pleasant because of the sordid track record of our politicians. The threat of blatant mismanagement or worse clandestine theft by heartless politicians always punctuated some of these discourse and the heat generated was enough to explode a dying star.

As the jubilation died out the sketchy information that people had gleaned from their casual contacts began to take shape. A tapestry of missing links, that made the oil picture a bit fuzzy, were created out of their incredible imagination to make it appealing to their sensibilities. Mouth-watering statistics were spewed into the minds of unsuspecting Ghanaians in the Diaspora, which lack any objectivity but based on suspicious subjective analysis that collapse like a house of cards when subjected to any serious scrutiny. Sadly, a lot of this foolhardy lies meanders back to the motherland.

By the time they get to their final consumer, where it matters, those little lies have been massaged, tweaked and inflated beyond the recognition of even those who concocted it in the first place. The resultant effect of this misguided behaviour is that the expectations of the masses are unduly raised thinking that they are even going to have kerosene in their lamps for free.

One of such lies was witnessed at a friend’s family party early last year. After the usual pleasantries and gorging ourselves on numerous Ghanaian delicacies we settled down to a typical discourse from the plight of Ghanaians in the Diaspora to politics. It was just about two months after the inauguration of President Mills and feelings were still running high. Comments were partisan and emotional bordering on undeclared war of attrition, which for me was quite normal. What really scared the hell out of me was a comment by one casual friend who will be very unhappy to read this on the net but I value the welfare of my country to his friendship. He said at the time that production of oil had already begun at the Jubilee oil fields and the Mills government was raking in $2 billion every month. At the time I didn’t know much about our newly found wealth. However, I had read a piece by Bright B. Simons the Director of Development Research at IMANI centre for policy and education. And I knew that the initial production will be around 120,000 barrels a day. So I quickly made a rough calculation in my head based on the price of oil at the time and came up with a very modest figure, which was a far cry from the $ 2 billion he was touting. Armed with a figure that was just around a billion dollars for the whole year I couldn’t have registered my disgust anymore strongly. The most frightening and the reason for making reference to it is the fact that he is well educated and with even an investigative mind plus the ability to process information better than most people can. Besides the arrogance, the pontification, coupled with his dead certainty is what made the experience worth putting in the public domain. And a person like that is only a tip of the iceberg and they are wreaking a lot of havoc to our nascent and fragile democracy.

As we get ever closer to drilling the first barrel for sale the expectations of all Ghanaians is being pumped up to unsustainable levels and the rumour mills have taken a life of its own – spinning out more ridiculous lies each passing day. The fact that a single barrel has not been drilled, yet the city of Ghana oil is awash with prostitutes, prices of rent skyrocketing, frantic conversion of residential properties to office blocks in anticipation of the golden harvest is a credible barometer to measure the expectations of Ghanaians. And this is all fuelled by unsubstantiated rumours and misinformation, which I am not sure whether to categorise it as deliberate infused with spite or pure stupidity. Should you per chance witness the birth of one of such rumours and muster the courage to question the authenticity of their information or the veracity of their source you hear the standard answer: Oh my cousin works for one of the oil companies or a very good friend of mine works for one of the oil companies – not a legitimate answer that can be verified.

To weather the storm stirred by some of our unscrupulous compatriots the records needs to be set straight for the good of the national psychic. Now we all know that based on the current world prices the total revenue for the whole year will be $1.2 billion. The government granting concession rights to the various oil companies means they have property rights over the Jubilee Oil Fields. Therefore, JOF is a de facto private property till the duration of the concession. As a result of their legitimate rights to it they have used their private capital and technology to develop the fields. Besides, lets hypothetically assume that they were given, in addition, seismic data, though I cannot substantiate. However, in reality, seismic data means nothing when you still need to drill wells to find out the commercial viability of the deposits; and they cost a lot of money, which in the past has ruined a lot of private investors drilling so many dry holes. So these companies before agreeing to prospecting for oil, they will sign agreement with the government, which can enable them to recoup their investment and besides make some profit – hence the $1.2 billion pittance that will come to the government chest.

Now the truth is whatever other consumers are willing to pay for our oil is exactly the price we are going to pay for it. Because these private companies will sell the oil to the highest bidder and this is the unpalatable truth that will have to be seared into the consciousness of all Ghanaians. There are those who will rejoice when the price of oil shoots up. On the other hand, economically it’s going to be counter productive because though the government’s revenue will increases we shall still pay the going market price. Therefore to alleviate the pressure the government might have to use the extra revenue to subsidise the increase, which will not make economic sense in the long term. Should the government decide not to subsidise the increase and let it be absorbed by consumers its going to affect our economic activities in a very profound way, in the sense that, the main export of the country, that is predominantly own by Ghanaians, has an elastic demand curve. Therefore should the authorities unduly increase the price of cocoa to meet the cost of production i.e. fuel and the cost of living etc., the demand for our cocoa will fall. Because cocoa is not the only commodity used by the confectionary companies. There are substitutes and worse of all they can cut down drastically the use of the product, not to punish us as many will conclude but purely as a demand and supply decision. So with the high prices less will be sold and we will be worse off though we have oil. The only way we can have additional benefit is when production goes up beyond the current projected 120,000.

To the other side of rising oil prices, which is not very likely, nevertheless, should the price of oil fall below a certain level, the operations at JOF will be forced to shut down because revenue will not be enough to justify production. The cost of producing a barrel of crude oil from an offshore rig is not anywhere close to what pertain in places like Russia or Saudi Arabia, where a barrel can be produced at just $ 4. So there are some facts that we need to arm ourselves with to stop this senseless behaviour. They are countless but I think this will do for now.

It is therefore incumbent on us to stop this boneheaded national suicide – it helps nobody. To the die-hard NDC supporters, you don’t have to be angry when confronted with such lies. You have to show magnanimity in the face of stupidity. And to the NPP supporters, there is no need to smirk when one comes across such blatant crass because today it’s the NDC tomorrow it’s going to be you in the driving seat.

Philip Kobina Baidoo Jnr London baidoo_philip@yahoo.co.uk

Columnist: Baidoo, Philip Kobina