The coming oil boom in Ghana

By Chris Hufstader
This map details Ghana's offshore oil fields, terminals, refineries and pipelines.

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There is oil under the waters of Ghana's Gold Coast. Estimates of the total amount are in the neighborhood of over a billion barrels, making it one of the largest recent finds in Africa. With oil production to start in 2010, this is seemingly great news for Ghana, the first country on the continent to transition from colony to independent state 50 years ago, and one of the most peaceful in West Africa. With this new wealth, Ghana looks to consolidate its many accomplishments in fighting poverty, and continue on its march to meet the Millennium Development Goals, a set of human development benchmarks, by 2015.

The offshore oil fields will test Ghana's ability to use the new wealth to fund health, education, protect the environment, and fight poverty. And Ghana must do so without allowing oil to breed corruption, environmental damage, and social unrest. Many other countries in Africa, like Nigeria to the east, and elsewhere have failed to do this.

"Ghana has an enviable record of good governance and stability," says Ian Gary, Oxfam America's policy advisor for extractive industries, who recently carried out a fact-finding mission in Ghana. "However, oil wealth tends to erode democratic accountability, so Ghana must ensure the right institutions and transparent policies are in place—before oil production starts."

Offshore oil drilling also has serious implications for the environment and the fishing industry if managed inappropriately. Ghana has struggled to properly regulate the mining industry in the country, and the effects on the environment have been serious in some areas that have seen cyanide spills. This calls into question the Environmental Protection Agency's capacity to manage an active offshore oil industry.

There may also be significant effects on fishing communities. Fishermen will have to stay away from the oil-producing zone and will have concerns that increased operations and the possibility of spills could affect their livelihoods. In addition, shoreline communities are already clamoring for a slice of future revenues.

Oil on the Gold Coast

Ghana's first producing field, the "Jubilee," named for the fact that it was discovered in the same year the country celebrated 50 years of independence, may reach a production level of 120,000 barrels of oil each day by the middle of 2010. Depending on oil prices and future production levels, Ghana could soon see more than $1 billion added to government revenues each year, according to conservative estimates by the German development agency GTZ. Even much lower estimates easily eclipse current revenues from mining (largely gold) exports, which currently comprise roughly five percent of Ghana's economy.

To ensure Ghana uses this oil wealth well, Gary says that the current effort to develop a master plan for managing the resource and the funds it will deliver requires more participation by civil society. "The public has a right to know the details of oil contracts," he says. "Such agreements should be placed in the public domain."

Gary's interviews with representatives in government ministries and civil society organizations indicate there has been little opportunity for public input. A "national forum" on oil in February included few local civil society representatives, and subsequent regional consultations managed by the Ghanaian government were dominated by local and regional government officials according to groups that met with Gary.

Steve Manteaw, director of the Integrated Social Development Center in Ghana, agrees that Ghana's citizens need to be part of the master plan. "If we were to have transparency and if we were to get citizen groups to also participate in the way natural resources are managed, we can have little waste in the sector and channel more of the revenues into development projects," he says.

In addition to opening up the master planning process to more participation, Gary and Manteaw are also recommending that all oil contracts be placed in the public domain and that all payments from companies to the government should be fully disclosed in line with the government's commitments under the international Extractive Industries Transparency Initiative.

"There is enough interest in how the oil industry will operate in Ghana for the state oil company to move from a secret process of negotiated deals to an open bidding round process," Gary says.

Increased transparency will help Ghana avoid some of the problems other countries in the region have faced, but planning for this must happen quickly. On a recent trip to the coast, Manteaw says that he saw the potential for conflict: "In some western districts, youth are forming militant groups to lay claim to any future benefits that will come out of oil production. I think it is important to make these communities see that the oil discovery belongs to all Ghanaians. And we need to have a formula addressing how the resource revenues will be shared in a way that is fair and just to all of the communities that will be affected."