Lessons from Ghana’s first oil journey
By Stephen Nuwagira
in Accra, Ghana
“There have been ups and downs, but today we thank God Almighty for making it possible for Ghana to officially pour out its oil.” But he warned the people not to expect the country to be transformed overnight, calling for togetherness to ensure that oil benefits all and does not turn into a curse.
The Jubilee field, located 60km in the Atlantic Ocean, was discovered and developed by Tullow Oil Ghana and five partners - Anandarko Petroleum, Kosmos Energy, the Ghana National Petroleum Corporation (GNPC), Sabre Oil and Gas and the E O Group.
Ghana is projected to earn $485m from the oil field in the first year, shooting to $1b later. It will be producing 50,000 barrels of oil per day (bpd) in the first three to four months, increasing to 120,000 bpd. The country’s first exports start in January, the GNPC chief executive officer, Nana Asafa Adjaye, said. However, Ghana is yet to enact the necessary laws to govern the sector, meaning that oil firms can use the loophole to their advantage if the rules are not put in place faster. Such a state of affairs is a lesson for countries like Uganda, which are planning to start commercial oil production.
Uganda is involved in a capital gains tax row with Tullow for the past several months. But this could have been avoided had there been clear laws, argued Moses Asaga, the Ghanaian parliamentary committee on energy boss.
He pointed out that Ghana was recently caught off guard when Kosmos Energy tried to sell its stake in the Jubilee field. But they did not have the necessary laws for such a transaction at the time. However, they moved fast and drafted a policy to govern such sales. Although the deal did not materialise, Asaga adds, it made Ghana ready should such a situation arise in future. He advises that where there are ambiguous laws, the governments and firms involved should discuss and agree on the way forward for the good of the sector.He argues that it is not good for governments and oil firms to fight over issues that can be settled amicably.
Ghana is also improving its oil revenue sharing and management laws and has set up two funds. The Heritage Fund is aimed at ensuring that future generations also benefit when the resource is exhausted. The Stabilisation Fund will be used to plug revenue shortfalls or in times of financial distress.
The country is also planning to set up an investment advisory committee to manage oil funds and advise the government where to invest the oil cash.
Although Ghana is working on these laws belatedly, Uganda has more time to make the required laws that could ensure that the oil revenue is utilised well and invested properly. Uganda could also borrow a leaf from Ghana’s unitisation policy, currently before Parliament. “The policy promotes joint development of oil and gas by two or more countries when the resources transcend borders, to avoid conflicts,” Asaga said. The wrangling over the borderline in Lake Albert that is shared by Uganda and the DR Congo, which has led to loss of lives during the clashes, is the case in point.
We could also pick a leaf from the way Ghana positioned herself by ensuring that the GNPC, a government body and one of the Jubilee partners, is fully involved in the oil exploration and drilling. Therefore, Ghana gets taxes and money from its shares in the oil fields. This also ensures proper monitoring since the government is fully involved. On the other hand, as the oil starts following, Ghanaians’ expectations have skyrocketed, just like most Ugandans look at the oil find in the Bunyoro region. Most people think their lot will change overnight as they cash in on the oil monies. But this is false hope, according to Forson Ato, a Ghanaian MP. Ato says expectations are important, but must be well managed to stem dissatisfaction and mistrust among the masses.
He said the masses need to be educated on how to manage their expectations and ensure that leaders and oil firms account for the use of the oil cash. Ghana is yet to do this.
As Uganda prepares to start commercial oil production, it is vital to learn from Ghana’s mistake and start educating the people, especially those surrounding the oil areas in the Albertine Graben, how to handle their expectations. Early planning by the governments for the oil areas and the country at large to avoid last minute efforts is essential too. Helping people to establish enterprises can enable Ugandans benefit from the oil industry.
Aidan Heavey, the Tullow chief executive, says it is a responsibility of governments and oil firms to ensure all people benefit from the oil cash. According to a top official at the E O Group, the only local partner in the Jubilee venture, it is better to “go out and take the bull by the horn.” He argues that if citizens do not set local enterprises to provide services to oil firms, foreigners will fill the gap, meaning that all the profits will be repatriated.
Bob Ken, a Ghanaian lawyer and a governance and management analyst, says people’s expectations can best be managed by building social infrastructure like roads, health centres and schools, especially in the oil-rich areas, and setting up of hi-tech industries to provide employment opportunities and improving the standards of living. This, he adds, the Ghanaian government has plans that will ensure the country’s western region gets a good share
of the oil revenue and spreading the benefits across the country.
He is against the idea of communities in the oil-rich areas to demand a specific share of the oil cash, arguing that treating them in a special way is not a right, but social justice since they would be the ones to be most affected by oil activities. He calls for openness in dealing with the oil money or the oil companies.
This, he adds, will enhance trust and prevent conflicts, saying Norway and Canada have done it with resounding success.
NUTSHELL:
As a Nigerian I find this story particularly interesting for one reason; here we have Uganda taking Oil and Gas lessons from Ghana- a country which will only start full exports of crude in January 2011. Nigeria has been pumping crude oil for decades. This reference to Nigeria is not so much in the merits or demerits of the Nigerian system of laws governing oil and gas but in the ''Ghanaian way''; this way has produced the famous ghana bread, ghana chocolate, ghana gold and now ghana oil. The country has successfully managed its resources and has produced internationally competitive products and brands. Now other countries are looking to this virgin oil and gas territory for lessons; this is a statement of work well done. Go on Ghana!!!....The world is watching you.
Well what more can we say. The dynamics of the game are much more different now,especially for the Ghanian's and Ugandans.
ReplyDeleteAs at the time we found oil, we were still walking away from the clutches of colonialism, a people with a vision so blurry and leadership not sure of what they really wanted. More so, a people that have been clustered with foreign interest, of which all these foreigners have pursued their national interest, while we have in the midst of these loopholes i.e having no set national interest and sustainable laws. These factors amongst others, led to the unfortunate development of the personal interest syndrome. Thereby leading to creation of cabals that have refused to let go their perceived "personal blessings".
Nonetheless, it has not been all a negative story, we've had some achievements and successes. Oil proceeds have led to some level of infrastructural development in Nigeria and has sponsored thousands of students to access international education. Oil money has enabled us to develop the military, which enabled us to take and achieve strategic decisions with regards to territorial defense and regional peacekeeping. This has also earned us a temporary position in the UN Security Council which is an important position, with regards to international politics.
Yet considering the enormous population , the ever investigative interest and sometimes diluted information of the foreign media, the malignant diseases of corruption and the long absence of purposeful leaders (and not country heads) Nigeria may have to step up the game, bite its pride and take some lessons from the old successful oil producing countries (Canada and Norway) and the new boys on the "bloc" (Ghana and Uganda).