BLACK GOLD: Ghanaian President John Atta Mills opens the Jubilee oil taps
Africa's Gold Coast, otherwise known as the Republic of Ghana, marked the first 100 days since its oil taps began running, on March 25, 2011. The oil in question flows from the country's offshore Jubilee oilfield, recognized by the stakeholders to be the largest oil discovery in West Africa in the last 10 to 15 years.
This discovery has injected an air of optimism amongst Ghanaians and all who have spoken to international journalists thronging the country are of the view that Ghana will prosper because of the commercial production of oil that was sensationally unveiled last December in a widely broadcast event by Ghana's President John Atta Mills.
The numbers are impressive, given that in the Jubilee oilfield there's a staggering 1 billion barrels of oil and 800 billion cubic feet of natural gas, all waiting to be sold over the next quarter century. Production at Jubilee is forecast on the Ministry of Energy's website to quickly rise to 120,000 barrels per day by May and eventually reach 250,000 barrels per day by the end of the year.
Two more offshore oilfields, Enyenra and Tweneboa, have been identified and could produce between 75,000 and 125,000 barrels per day when the taps begin running in 2014.
This year alone, if the estimates attributed to government officials is anything to go by, Ghana will rake in $500 million in revenues from oil sales.
That is a lot of money and the people in the dusty, run-down port city of Takoradi, just 60 km from the Jubilee oilfield in Ghana's west coast are thinking big.
The farmers know that the hundreds of workers trooping into the town to work in the oil sector will need food and transport to and from work. They will have to pay for that. Somehow, the oil money will find its way into the pockets of many of the ordinary Ghanaians providing these services, including the market women selling groceries.
Entrepreneurs too are heading into the town to put up mansions for sale and others to provide services.
Step by step
Dai Jones, President and General Manager of Tullow Oil Ghana, and Stuart Wheaton, Tullow's development manager, are aware of the big expectations, but see the need to manage this at a very early stage, so that people do not become disillusioned.
"Oh yes, there's huge excitement – I think some people think we're going to be the next Saudi Arabia the day after first oil arrives! But it's very important we try to manage the expectations against reality," said Dai on the Tullow website. He added that Jubilee is only one oilfield and they are still in the process of creating an oil industry. Tullow Oil Plc is the major shareholder in the Jubilee oilfield with a 34.7 percent stake.
The other stakeholders in Jubilee are Anadarko Petroleum Corp. (23.49 percent), Kosmos Energy (23.49 percent), GNPC (13.75 percent), Sabre Oil and Gas (2.81 percent), E.O. Group (1.75 percent). These companies are set to change the fortunes of Ghana, primarily known for its Cocoa exports.
The IMF's Mission Chief in Ghana, Peter Allum, said that oil will be the "big story for Ghana this year," and therefore, a major boost to the growth of the economy. However, he was apprehensive that the expectations for increased job opportunities may be, for now, a little unrealistic.
"Now [oil] won't create many jobs in and of itself. It's a very capital-intensive industry and the oil is based offshore, so a lot of those jobs are going to be expatriate jobs. But it will generate a substantial boost in revenues for the government - we estimate in the range of 6 to 7 percent of GDP," Allum told IMF's Survey Online in November last year. "If that money is used wisely, it could lead to a substantial improvement in Ghana's infrastructure and its competitiveness, and that could lead to further growth and job creation," he said.
The employment policy in Tullow Oil is to have at least nine Ghanaians out of every 10 employees working in the oilfield by 2012.
"Two years ago we had approximately 20 people and now here in Accra we are close to 300 people, in Takoradi we are close to 150 people. There is a very good, talented pool of people in Ghana, in engineering, finance, accounting and construction and with very little training, these people can effectively be employed here," he said on tullowoil.com.
On the other hand, Allum described Ghana as "very fortunate" given that its two main exports of gold and cocoa had allowed it to weather the global recession that rocked the world in 2010.
Petroleum Revenue Management Bill
The oil find comes amid high poverty levels and debilitating infrastructure in Ghana - the beacon of democracy in the troubled West Africa.
With the hope of huge revenues from oil and a goal of middle-income status in the near future, Ghana's eyes are focused on how to develop as quickly as possible.
This led to its parliament passing the Petroleum Revenue Management Bill on March 2, which looks at how the revenues will be shared and how the possible corruption - that characterizes mining in Africa - can be mitigated.
The big news in the Bill is that it opens the door for Ghana to borrow the huge amounts needed for infrastructure development, while using oil revenue as collateral. The country has an annual infrastructure deficit of $1.6 billion.
Ghana's Deputy Finance Minister Fiifi Kwetey has said that the government signed a $13 billion with Chinese financiers in September 2010. The money is aimed at funding energy, agriculture and transport projects.
The new loans, according to reports by international news agency, Reuters, include $3 billion from the Chinese Development Bank to finance Ghana's oil and gas infrastructure and agricultural development, plus $9.87 billion, signed with Chinese Exim Bank, for road, railway and dam.
Mohammed Amin Adam of Ghana's Civil Society Platform on Oil and Gas said the ability of Ghana's economy to soak up the loans has to be looked at again, because it constitutes "an important determinant of the annual budget support."
"The failure of the economy to absorb both the petroleum revenues and loans contracted by the government on the back of collateralized petroleum revenues could likely lead to 'Dutch disease' effects and other macroeconomic slips, and thereby make Ghana a convenient candidate for 'resource curse'," he writes in a detailed assessment of the Bill. The Dutch disease refers to a phenomenon when the discovery of a natural resource raises the value of that nation's currency, making manufactured goods less competitive with other nations, increasing imports and decreasing exports. The term originated in Holland after the discovery of North Sea gas.
"The fear of heavy indebtedness associated with high appetite for borrowing in resource rich countries, the weak public financial management system in the country and the persistent large fiscal deficits may weaken the resilience of the economy under a collateralized petroleum revenue regime," Amin notes in the paper.
He said that is perhaps why Ghana needs a long-term national development plan to guide spending priorities, the pace of spending and to match the economy's absorptive capacity with resource needs.
But Amin lauds the Bill as "refreshing" given its emphasis on transparency and accountability, alongside what looks like the empowerment of citizens to fight corruption. Citizens now have the legal basis to demand transparency and accountability and also monitor the compliance with the bill by government, parliament and the national and international oil companies, Amin writes in the assessment.
Part of Tullow's responsibility, according to its website, has been to provide the people of Takoradi with water wells and water storage tanks, schools and improved fishing. But the people want compensation for the drilling on their land. Takoradi Member of Parliament Kwabena Okyere Darko Mensah and his colleagues filed an amendment in February to the Petroleum Revenues Management Bill passed in March, calling for 10 percent of the petroleum holding fund generated from the western region to be given back to the Western Regional Development Fund.
The amendment was rejected but it is clearly an area the government needs to take into account in the days ahead.
(Reporting from Kenya)