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Ghana: Government Prepares to Battle the 'Oil Curse'
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UN Integrated Regional Information Networks
22 April 2008
Posted to the web 22 April 2008
Accra
Two oil exploration companies recently said the discovery of an estimated three billion barrels of oil is set to propel the country into the league of the big African oil producers when production starts in 2010.
Some 18.2 percent of Ghana's 22 million people are deemed "extremely poor" by the UN as they live on less than a dollar a day, struggling to access basic social services like health, water and education.
The potential for the oil finds to transform the economy and the lives of the poorest people is manifold.
Ghana's officials, however, say they are concerned that the oil discovery is "perhaps the greatest managerial challenge" facing the West African country in the 51 years since it gained independence.
"At this point we acknowledge that we lack the know-how to manage this enormous resource but we are blessed with the experience of others," said Francis Ackah, engineering manager of the Ghana National Petroleum Company (GNPC), the agency which oversees the country's petroleum resources.
In March 2008 Ghanaian President John Kufuor, speaking at an extractive industries forum, warned that "instead of being a blessing, oil sometimes proves the undoing of many... nations who come by this precious commodity".
Avoiding the Nigeria scenario
Oil revenues in countries like Angola, Chad, Cameroon, and Equatorial Guinea have not translated into a significant improvement in basic living standards for many of the poorest people in those countries.
Nigeria is the largest oil exporter in Africa, producing 2.5 million barrels per day, but between 2004 and 2005, it dropped seven places on the UN human development index, from 151 to 158 out of 177 countries monitored.
Over 70 percent of Nigeria's 130 million inhabitants survive on less than a dollar a day, according to the UN, even though world oil prices have soared. The oil-rich south is plagued by protracted unrest as local communities demand a share of the revenue.
This situation is what Ghanaian officials say they are keen to avoid.
Money starts flowing
The first major discovery that hinted at the riches under Ghana's coastline was announced in June 2007. A second major find was confirmed in February 2008. Both discoveries were 65km off the coastal town of Effasu.
The government is aiming to produce 100,000 barrels per day in early 2010. Output is expected to reach 200,000 barrels in five years, when Ghana would be the seventh largest oil producer in Africa.
The GNPC estimates revenue levels of almost US$3 million per day, or some US$1.6 billion per year. Ghana's current gross domestic product (GDP) is US$31.23 billion and per capita income is US$1,400.
The money has already started flowing. On 1 April US-Canadian company Tullow Oil, one of the exploration groups, declared payment of tax liabilities of US$2.3 million to the government.
Transparency
Farouk Al-Kasim, an oil resource management consultant from Norway who is in Ghana to assist in capacity building, told IRIN the biggest challenge the Ghanaian government faces is ensuring transparency from the outset and avoiding corruption.
To achieve this, the country must first review its legal framework, specifically the Petroleum Exploration and Production Law passed in 1984, Al-Kasim said.
Accusations are already flying that transparency is not working as it should.
"We need to keep an eagle eye on the contracts we are signing with the oil companies," said the Executive Secretary of Transparency International's local chapter, Vitus Azim.
He said the current agreement-signing processes with the oil companies had been "less than desirable" and that if civil society and local communities were not allowed to monitor the deals from the outset it "could spell disaster".
Ghana has consistently scored averagely on the Transparency International corruption perceptions index. In 2007 it was ranked 69 out of 180 countries surveyed worldwide.
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Kojo Kwarteng, a spokesperson for the government, dismissed the concerns. He told IRIN the government was currently most concerned about making sure it could independently verify the profits oil companies were making so it could make sure it was getting its cut.
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