28 February 2008

Ghana: Crude Oil - Blessing Or Curse?


Accra — Mishaps are like knives that either serve us or cut us, as we grasp them by the blade or the handle. James Lowell Russell Ghanaians were excited last year when Kosmos Energy Group announced that it had identified crude oil in commercial quantities.

Just last weekend news filtered in that another commercial quantity of oil has also been discovered in the West Cape Three Points. The prospect for more oil discovered look great.

We have every right to celebrate the news of the oil discovery in the country particularly when the nation had just wallowed in the darkness of energy crisis for nearly a year. Moreover, with crude oil prices reaching record high, we ought to rejoice as the great book says 'again, I say rejoice'.

However, whilst rejoicing on the discovery of the oil we should not allow our heart to override our head in this matter. Crude oil is not the solution to our problem. It is like the bitter bile on the liver. One ought to be careful when attempting to take the liver as it might result in bursting the bitter bile.

Although not all Organization of Petroleum Exporting Countries (OPEC) countries are corrupt, a historical symbiosis exists between oil and corruption. Oil, corruption and failed states seem to be synonymous. However, some countries have been able to address this threat; most of them are located in North Africa. Producing countries such as Algeria, Egypt, Tunisia and even in some respects Libya, have managed to resist the temptation of sleaze. While temptation may have been countered by most North African producers, the threat of falling into the same trap remains.


It is incontrovertible that Nigeria suffers from a resource curse as we have little or nothing to show of as a country despite several years of oil exploration. Most of the proceed of their oil wealth has ended in the pockets of their leaders (gulf oil windfall and looting of the nation's treasury by the late despotic ruler General Abacha).

Resource curse is the economic notion that countries with large endowment of natural resources perform worse than countries that are less endowed. Yet some countries with abundant natural resources do perform better than others, and some have done well.

Nigeria is a heart rendering paradox. A rich country with desperately poor people. Despite its massive earning from oil, 70% of its estimated 140 million people live below the poverty line. Attempts to explain this contradiction have repeatedly identified the resource curse as the major cause of the disconnection between the country's wealth and people's well being. More than 80 million Nigerians live on less than US$1 a day, with Nigeria being ranked 144 out of 146 by Transparency International Corruption Perception Index (CPI) 2004.

In Nigeria, oil wealth has failed to generate development and has instead generated deep-seated corruption, kidnapping and war in some parts like the Niger Delta.


Norway's dependence upon oil and gas revenues present long-term challenges for the country, especially because many industry analysts believe that North Sea oil and gas production has already reached or passed its peak. In particular, the country faces pension liabilities and other welfare obligations. In response to these challenges, the Norwegian government created the Petroleum Fund in 1990, later renamed the Government Pension Fund in 2005. A portion of annual oil and gas revenues flow into the Fund each year, which serves the dual purpose of buffering the short-term variations in oil revenues and providing a mechanism to transfer current wealth to future generations. The Fund, which holds a combination of cash, bonds, and shares, holds only international assets and stood at some $240 billion in March 2006.

There is a website address whereby one can log onto to know how much has been realized on the sales of oil. The oil has become a 'public good'


Early this week government organized the Ghana's first oil and gas conference on how to manage the resources and to avoid the bitter lessons from Nigeria, Angola and Sudan. On a more serious note I was rather disappointed when participants were clamoring for the formula needed to share the oil booty. No body talked about the need for Ghana to train professional Ghanaian labour force for the new industry. We are only interested in eating the fruit but not how the fruit gets its final edible state.

As the president has said the revenue from the oil and gas in the country will be a national asset which should be used for the good of the people The President said the bringing together of civil society, oil experts and other technocrats in the oil industry was in recognition of the need to have a problem free oil exploitation.


Former Energy Minster, Mr Fred Ohene Kena has the proposed enactment of a law to regulate the management of oil resources in the country. It is believed that the legislation will also determine the distribution of wealth expected to generate from the mushrooming oil sector.


Oil is neither a blessing nor curse, it's simply a resource. The nations without oil but with commercial endowment of gold and or diamonds have same problems as those with oil. The problem of persistent poverty can be partly attributed to lack of visionary leadership coupled with inept management of state resources. Sub-Saharan Africa must solve its leadership problems and improve the management capabilities of its administrators; only then would we effectively reduce poverty. Crude oil has become like knives that either serve us or cut us, as we grasp them by the blade or the handle.

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