African News

Oil in Ghana: A Timely Warning!

12 July 2007 at 11:28 | 1011 views

By Dr Kwaku Osafo.

The news of oil discovery off Cape Three Points in the Western Region has thrown the NPP government and the general Ghanaian public into a frenzy of economic hysteria and euphoric anticipation of wealth in the nearest future.

The fact that Kosmos Energy of USA and its partners sounded cautious of the commercial viability of the discovered oil did not stop President John Kufuor (photo) to assembly all ministers and top officials for the announcement. The follow-up champagne toasting of the event shows they know more than they are willing to tell the excited Ghanaian public.

Recent research publications by Oil and Exploration Magazine have indicated huge hydrocarbon formations in the West African Coast with predictably huge oil and gas deposits and the discovery by Kosmos affirms these indications. The recent opening of the 100 million US Embassy in Accra should not be seen as an isolated incident: the State Department tid-bits on oil points to the strategic importance of West Africa in oil and gas supplies and the back and forth denial of US military bases along the West Coast including Ghana lends support the politico-economic chess game being played.

The recent economic strides by Ghana, India and Brazil and their enormous oil appetites and the unstable conditions of Iraq and Iran in oil supplies have thrown the global oil industry into turmoil with its skyrocketing prices. West Africa is the next battlefield for global oil supremacy.

It is important for ECOWAS and indeed the AU to quickly fashion a new joint oil policy in terms of production, distribution, marketing and partnership to protect our interest.

The President forewarned Ghanaians that oil could be a blessing or a curse. This appraisal is a timely warning for Africans in general. Oil has been a curse in most cases with the notable exception of Libya which has equitably used her oil revenues to uplift the mass of their people from poverty.

The story for African countries such as Nigeria, Gabon, Cameroon, Angola and Congo-Brazaville has been harrowing and sad. Oil revenues in these sister countries sprouted greed, vile ostentation, corruption, ineptness, arrogance insensitivity to the poor and needy.

The dark lamentable recesses of man’s inhumanity to man surfaced in the most criminal manner. The oil resources were not substantially and substantively used to build and improve the human resources base; only limited infrastructures in low cost housing, roads, railways, hospital etc. were undertaken. The compelling development values of equity, dignity and self- achievement gave way to dependence, subordination and profligacy.

In spite of the oil wealth in these sister countries a large percentage of their people live in absolute poverty, a condition of life so characterized by malnutrition, illiteracy and disease as to be beneath any reasonable definition of human decency.

Nigeria, which is the 8th world oil producer fared no better. It is estimated that over 300 billion dollars were stolen by politicians, civil servants and businessmen between 1973 and 2005. At a point in time Nigerian businessmen owned more private jets than Japanese ones.

The oil revenue threw the people of the Delta oil producing areas into the abyss of poverty and underdevelopment.The story is the same in the other countries where these countries neglected their agricultural industries, human resources development and went on a shopping spree in the developed countries importing luxury items and virtually everything, never once stopping to industralize their primitive economies and dignifying their wretched constituencies through education, decent housing, health and nutritious food.

The lessons for Ghana are many and multi-dimensional. Ghana ahs moved from the dignified economic development of the 50s and 60s under Nkrumah where education, social amenities, health etc were made available to all and sundry to a profligate economic system from the 70s until now where the chasm between the rich and poor is widening - where 1.4 million children who should be in school are not and 1,27 million children between the ages of 4 and 16 are in child labour.

A profligate system is where there are too many landcruisers on the streets of our cities, where there are more luxury and housing springing up to the disadvantage of low cost and middle income housing; where several government ministers, chief executives, civil servants and party functionaries travel first class instead of business class; where our hospitals are dying for refurbishment, where top government officials go overseas for the most conmon ailments; where the chasm between the developing south and the underdeveloped north is widening, and more importantly where we are selling our national assets below par in banking, gold, bauxite, diamonds etc.

Would oil revenue correct there distortions and imbalances and set us on a path of dignified development of equity, self-reliance and dignity? Before this question is answered, it is important to put the discovery and quantum of the deposit in perspective.

According to the Daily Graphic story of June 19, 2007, the original deposit of 250 million barrels may be prospected to 600 million barrels. When commercial production comes on stream in two to four years’ time with a production of 500,000 barrels per day, the monthly production will be 15 million barrels and the annual production will be 180 million giving a lifetime of 3.33 years for the 600 million barrels deposit. It is hoped other exports will follow.

What is the stream of revenues likely to accure to Ghana?. It is hoped that the contract involving GNPC which is owned by the Ghana Government and Kosmos Energy of USA is fair and forward-looking and not lopsided in favour of Kosmos. If it is not fair, it is hoped that a fairer contract with at least 30 per cent equity be ceded by Kosmos to Ghana for long term fruitful cooperation devoid of future Venezuela Chavezism.
Assuming a constant crude oil price of 70 per barrel of the 600 million barrel, the total revenue will be 42 billion. Assuming a 30 per cent overall proportion of this revenue to Ghana including royalties taxes equity a
etc total revenue will be 12.6 billion.

The actual percentage may be lower than 30 per cent as it has oftentimes been the case for gold, bauxite, diamonds etc since Ghanaian leaders and politicians are no angels, it is only realistic to make allowance for loss of revenue through thievery, corruption and economic trickery of 30 per cent, reducing the 12.6 billion to 8.82 billion for development, equal to remittances from Ghanaians abroad in two to three years. If there are adjoining discoveries, this figure could be tripled or quadrupled but the frenzy and euphoria should be moderated.

More importantly Ghanaians should do everything necessary to prevent the haemorrhage of the revenue accrued to us through thievery and corruption. The nation should reach a consensus on the priorities for the utilization of the stream of revenues for national renaissaince and development. I dare suggest a few priority areas for national consensus as follows:

1.Education to be free up to SS level and tertiary education be subsidized for both state and private.

2.Establish and build our own strategic oil reserves for 3-5 years at a time to even out supply and demand.

3.Strengthen with resources our research in the universities and institutes such as the CSIR and its affiliates.

4.Provide more low cost housing in the outlying towns away from the cities to chedck the migration to cities as one of the many measures.

5.Have an industrialization plan with the state playing a leading role to produce most commodities we consume.

6.Develop agriculture with inputs and other incentives for self sufficiency.

7.Construct a railway from North to South and in between the main cities.

8.Provide a special plan to promote the development of the North through agriculture and other projects.

9.Electricity and potable water should be provided nationwide.

10.Overall the medical and health facilities should be accessible to all the citizenry.

11.Mobilize Ghanaian experts in oil based in USA, Saudi Arabia to be part of the Ghana Oil Industry.

12.Increase the Venture fund to support Ghanaian businesses to be competitive nationally and internationally.

13.Institute strict environmental protection.

14.Institute special programes for women’s education, skills acquisition and general empowerment.

15.Set up an oil refinery plant in the Western Region and develop the Western Region with special projects.

If these measures are instituted and implemented, the oil revenue and wealth will not become a mirage but a secure pad to launch and propel our nation to prosperity and peace.