Ghana's "First Oil" Ceremony Turns Political

The small coastal nation of has Ghana joined the league of African oil producers just 3 years after the Jubilee deepwater oil field was first discovered by the Texas-based oil exploration company Kosmos Energy.
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The small coastal nation of has Ghana joined the league of African oil producers just 3 years after the Jubilee deepwater oil field was first discovered by the Texas-based oil exploration company Kosmos Energy. Ghana marked the official starting date for oil production earlier this week with a 5-hour ceremony full of pomp and traditional dance in which President John Atta Mills and other dignitaries thanked God for the "blessing of oil." While the tone of the occasion was celebratory, chiefs from the Western Region, the area closest to the deepwater oil field, continued to put pressure government to commit a percentage of oil revenues for developing the poor state.

In an event that was televised across the nation President John Atta Mills flew out to the Kwame Nkrumah Floating Production and Storage and Offloading (FPSO) unit where he pressed a computer key that sent oil flowing from the Jubilee field. Mills was met with applause and a fanfare upon his return to the Takoradi airport, the main transit point to the oil field, where the ceremony was held. However, as the event continued regional chiefs and dignitaries made speeches that took on a decidedly political tone.

Western Region calls for percentage of oil revenues

Western Regional Minister Paul Evans Aidoo expressed concerns about water and air pollution and the impact of the security zone around the FPSO on the local fishing industry. Aidoo also spoke of rising rental rates in Takoradi and the lack of development within the region. His sentiments were echoed by the President of the Western Regional House Awulae Attibrusku III and applauded by the region's chiefs and queen mothers in attendance. The call for the development of the Western Region came a month after local chiefs sent a petition to parliament demanding that 10 percent of all oil revenues be spent on local development. But the Joint Parliamentary Select Committee on Finance and Energy rejected the call, citing a need for national unity and cohesion.

In recent months, the notion of the "resource curse" and the conflict and economic deprivation of communities in neighboring Nigeria's oil rich Niger Delta have been referred to by parliamentarians and civil society groups within Ghana to advance arguments about how the resource should best be managed.

Ghana to become a 'prosperous industrial nation'

In Mills' closing speech he said the government would ensure the region would benefit from oil revenues and that local development projects would begin in the coming months. Mills also set forth his ambition for Ghana to move beyond its economic dependence on raw materials and become a "prosperous industrial nation" with a diversified economy through building infrastructure and creating jobs.

A blessing or a curse?

The occasion was often referred to as a historical moment that would shape the future of the nation, with some even comparing it to Ghana's independence day 50 years earlier. However, Mills and other dignitaries emphasized that government management and spending would determine whether the resource became a "blessing or a curse."

Many analysts predict that Ghana's citizens will benefit from the oil find because the nation's solid democratic institutions and commitment to revenue transparency, demonstrated by its compliance with the Extractive Industries Transparency Initiative (EITI). However, in recent months civil society groups and academics have criticized the government for rushing into oil production.

Alex Vines, head of the Africa program at Chatham House in London, stated in a paper he recently wrote that he was concerned Ghana was not ready to begin petroleum production because it did not have a legislative framework in place.

Three key pieces of legislation that will outline rules and regulations for the industry, the management of oil revenues and requirements for local participation in the industry are yet to be passed by parliament. The legislation currently governing the industry is a petroleum production act dating back to 1984.

Civil society groups are also concerned that a recent decision by parliament to allow the government to use oil revenues as collateral has opened the door for excessive government spending.

Ghana begins spending on development projects

The day before the "first oil" celebrations the government signed a $1.5 billion deal with Korean construction firm STX to build 30,000 housing units. The deal is part of a broader $10 billion project the government has developed to deal with the nation's housing shortage that will see the construction of 200,000 housing units over the next 5 years. The government also signed a $13 billion loan deal with China's Export-Import bank for infrastructural and agricultural projects and the development of oil refineries.

Investments are being made in anticipation of future oil revenues and the World Bank has estimated that the Ghanaian government will be earning $1 billion per year from the oilfield.

However, according to a policy paper titled the Ghana Shared Growth and Development Agenda (GSGDA) 2010-2013 released in September by the National Development Commission of Ghana (NDCG), 60 percent of the nation's GDP is being used to pay off debt in spite of the Highly Indebted Poor Countries write-off in 2005 and the Gleneagles Debt Initiative. The NDCG paper said the nation's debt was "approaching an unsustainable level."

The Jubilee oil field is a joint venture owned by Ghana's National Petroleum Company, Kosmos Energy, Andarko WCTP and British company Tullow Oil has an estimated 1.6 billion barrels in reserves that will bear oil for the next 20-30 years. Further oil exploration off the nation's coast is ongoing. Ghana will begin exporting oil next month and is expected to produce 120,000 barrels of oil per day by the fist quarter of 2011, making it the seventh largest oil producer in Africa.

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