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By Adrian Fussell                                                                           


Thursday, October 14, 2010.



ACCRA, Ghana - Nine hours out to sea in the calm waters off the Ghanaian coast, the Jubilee oil field is nearly ready for commercial drilling. For the first time the nation’s refineries will pump its own crude, a milestone now only months away.


Though Ghana discovered oil only three years ago, and has yet to join the cadre of oil producing nations, the development has already fouled in the wake of secret agreements, broken contracts, and policy conflict among the industry’s top actors.


At stake is hundreds of millions of dollars in annual revenue, leaving the government trapped between the expectations of a public hungry for tangible results, and the realities of the nearly $1.9bn budget deficit it is attempting to cut.


“As a government we have a big problem. It has been touted out there as though once we have discovered oil, all our problems are solved,” said Information Minister John Akologu.


The discovery of a 600 million barrel reserve has petrol station manager Kofi Ofori, 42, under no such illusions. “If you have oil, the expectations are high that there will be money, jobs, and industry,” he said, as he sat in his station’s windowless office on Accra’s beachfront highway, Labadi Road.


“I am at the bottom of the line. I get oil and I sell it. The resource doesn’t do any harm on its own. It’s who manages it, and how they manage it.”


The primary production group was to include Dallas-based Kosmos Energy, London’s Tullow Oil, and the Ghana National Petroleum Corporation, but the companies split on June 29 when it emerged that Kosmos had secretly agreed to sell its shares to Exxon Mobil.


“Our petroleum agreement says if you want to sell your shares, you give first notice to your partners. Kosmos breached our laws and we took a very strong stand against it,” said Adjei Appiah, director of petroleum at the Ministry of Energy.


Weeks later, an internal GNPC document leaked to the Ghanaian media revealed the corporation’s break with the nation’s chief executive, President John Atta Mills.


The president had held talks with Exxon Mobil officials over a possible partnership, to find if the company sought “the utmost interest of Ghanaians, should it be given the opportunity to acquire shares of Kosmos Energy in the Jubilee Field,” the report states.


The document shows that the GNPC instead wants a partnership with the Chinese government, who would provide funding, and a major international “blue-chip drilling operator” to pump the oil once Kosmos has been bought out. Both Shell and Statoil had contacted the GNPC, who now must table a bid exceeding Exxon’s price for the Kosmos shares.


The growing impasse over the financial and operational future of the Jubilee field development jeopardizes a small fortune in revenue for the Ghanaian government. Experts say that production could peak at 120,000 barrels per year, delivering between $500 and $700 million annually to a government spending twice as much as it has available.


“Total public spending is about 12bn GHc, (Ghana Cedi) but total revenue is only about 6bn GHc annually,” said Sampson Akligoh, a Senior Research Analyst at Databank, in central Accra. “The real challenge we have is the quality of spending. The money that we get, we need to use wisely.”


“What will the impact be for the people who don’t understand the financial side, and only understand that the black gold is here?” Akligoh said.


Deep in debt, the government needs the foreign investment to support public spending efforts like affordable housing and other visible infrastructure projects. Ghanaian youth face an unemployment rate of more than 15percent among 15 to 24 year olds, and many are demanding economic justice in newspaper editorials. 


 “Sometimes the tendency is for the area immediately surrounding the location to be neglected because the oil is taken to the national level center and then distributed without regards to the contribution of the source of the product,” Akologu said.


The neglect is especially apparent in Ghana’s industrial cities.


Tema is a magnet to the transport ships and oil tankers that dot the azure waters surrounding its deep, artificial harbor. Just outside the city’s oil refinery, dilapidated tanker trucks lumber wearily through potholed streets, lining up for their cargo of regionally imported petroleum. Crude oil pipelines run straight through the city’s slums, from the bulkheads of the docked ships to the walls of the refinery’s modern compound.


Ghana’s light sweet crude is so fine that the Tema refinery could not immediately switch from its heavy crude refining. “It gets the most money on the market but it’s more expensive to refine,”Appiah said, “but I believe the Tema Oil Refinery can develop that capacity within six months.”


The speed of the production has some officials looking at problem areas for foreign oil producers. The Nigerian case is the nearest and most hazardous example, but equally worrisome for many is the BP spill at the Deepwater Horizon site in the Gulf of Mexico.


“Our offshore environment is like a highway for these tankers. Historically, oil spills of a magnitude that would be of a concern are mainly from the oil tankers that carry the crude,” said Wilson Tamakloe, a senior officer at the Environmental Protection Agency.


“We are all keeping a close eye at what is happening in the U.S. and we want to find out what went wrong so that we can prevent it from happening here,” Tamakloe said.


In eastern Accra, Kofi Ofuri stands in the doorway of his petrol station shop, watching the minibuses zoom down the stretch of crowded highway.


“If the U.S. of all places can have oil problems and it’s because of technology, then you can imagine the problems a third world country can have. In Africa it is not just about technology, it is about management and corruption,” said Ofuri.


“We will have to wait and see if the Ghanaian is different from all the other Africans.”


Adrian Fussell is a journalism student at New York University.


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