Thursday, February 27, 2014

Discovery of “liquid black gold” (oil) and Ghana’s Development


Since her independence in 1957, it has being the policy of every government of Ghana to explore her hydrocarbon deposits. Historically, exploration for oil and gas reserves in Ghana had been very limited due to the high risk nature of its terrain and low oil price environment in 2004 when the Kosmos Energy, a premier international oil and gas exploration and production company focused on the frontier with its primary areas of operation being underexplored regions along the Atlantic Margin, made initial contact with Ghana National Petroleum Corporation. Between 1898 to the late nineties an estimated hundred exploration wells had been drilled in Ghana with no significant discovery except for the Saltpond (a coastal town in the central region of Ghana) oil find in 1970.
            Today Ghana has discovered oil in commercial quantities its central region in three Points near Axim (a town on the west coast of Ghana). Although Ghanaians are excited about this oil discovery, some sections of Ghanaians are skeptical that the country may be plunged into the resource curse syndrome. This is because, countries that have a large share of natural resource exports in GDP have a much worse growth performance than those that are less reliant on natural resources. Nevertheless, the experiences of countries such as Norway, Botswana, Thailand, and Malaysia give hope that the natural resource curse can be avoided if the quality of institutions as well as policy is strong before extraction begins. Also, given the extensive opportunities that the country has to learn from
the broad experiences of oil-rich economies, there is ample opportunity to derive significant benefits from the discovery. This however, is contrary to other held views that institutions in Africa are too weak to manage properly the significant and varied interests that evolve from the development of an oil industry or any extractive industry. Numerous poor examples have often been cited to support these views, and the most recurring ones being the situations in Nigeria, Cameroon and Gabon. Thus, history of natural resource exploitation and management in Africa is certainly not a very positive one. Besides, Ghana’s own history with the extractive industries is quite contentious and this has led to debates about whether Ghana has been able to effectively apply the revenue from various extractive industries to finance its development agenda. This obviously, remains a question to be addressed properly with good research. This is especially so in view of the considerable deterioration in prominent mining communities in Ghana such as Obuasi, Prestea, Bogosu to mention but a few. These are often referred as the mining curse.
            The question of whether Ghana is properly positioned to manage the new oil boom remains topical both on the policy front and in the public discourse. The extent to which civil society groups and academics can contribute in harnessing ideas to ensure effective administration and management of the oil resources is critical. What specific policy measures and legislative instruments are required to engender transparency and accountability in the application of oil revenues, without unduly undermining private investment interests in the new sector? And, what could be a reasonable expectation about the likely benefits of the oil discovery to the Ghanaian people, particularly in the context of poverty reduction and sustained local development. How will Ghana manage the oil revenue to help transform the structure of the Ghanaian economy? How will Ghana manage the likely environmental effects? How will Ghana manage the windfall to avoid potential `Dutch Disease effects? These key questions certainly open they way for further research.

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