Ghana's Oil Readiness Report
11 April 2011
Oxfam America / Civil Society Platform on Oil and Gas - Ghana
As Americans remember the tragic events of the BP oil spill one year ago, international humanitarian organization Oxfam America urges Africa's newest oil producer to avoid the same mistakes other oil producing countries have made. A new report by the Civil Society Platform on Oil and Gas, a coalition of more than 100 non-governmental groups in Ghana supported by Oxfam, calls on the international community to take further steps to prevent the West African nation from falling victim to the resource curse.
Ghana could earn more than $1 billion a year in early years of production from the "Jubilee" offshore oil field -called one of the largest recent oil finds in Africa. The increase in revenues could, if spent wisely, put Ghana on a path to meet the Millennium Development Goals, a set of human development benchmarks, by 2015.
"While Ghana is considered one of the most peaceful and relatively prosperous countries in West Africa, the onset of oil production, if not properly managed, carries the risk of it tipping in the opposite direction," said Richard Hato-Kuevor, extractive industries program officer for Oxfam America in Ghana. "With all eyes on Ghana to get it right, it's extremely important the oil boom doesn't undermine the important gains that have been made."
According to the report - Ghana's Oil Boom: A Readiness Report Card -government agencies, donor partners, oil and gas companies and civil society have made some gains since the Jubilee discovery in 2007, but significant challenges remain for the country. For example, on a scale of A to E (A standing for Excellent and E for Fail), each institution receives an overall grade of C (Fair). The grades are measured against recommendations made in a communique from a "citizens summit on oil and gas" held last June and Ghana's Big Test: Oil's Challenge to Democratic Development -- a 2009 report by the Integrated Social Development Centre (ISODEC) and Oxfam America.
The report also notes that Ghana's donor partners, such as the World Bank Group, the International Monetary Fund and the United States, as well as oil companies themselves, could do more to encourage oil revenue transparency and accountability before investing hundreds of millions dollars to develop the Jubilee field. This was the case when the World Bank's private sector arm, the International Finance Corporation (IFC), approved $215 million in financing to oil companies for investing in the project, pre-empting local environmental approval processes.
While the IFC did enforce its policy on transparency of payments from oil, gas and mining companies to host governments, UK-based Tullow is the only oil company to disclose some early payments to the government and signal willingness to disclose contracts if the government agrees. Other oil companies operating in Ghana, such as Texas-based Anadarko and Kosmos, have not made similar moves.
"The track record shows that Ghana's development partners have provided some useful support, but major transparency gaps remain," said Mohammed Amin Adam, convener of the Oil and Gas Civil Society Platform. "In the Jubilee area, communities are growing suspicious of the good intentions made by companies to make social investments, respond to livelihood concerns and share use of the sea. Without transparency, competition and conflict could erupt, eroding Ghana's enviable track record of economic, social and democratic development over the last 20 years."
A new US law will help promote transparency in Ghana, according to Oxfam. As part of the Wall Street Reform Act of 2010, all oil, gas and mining companies reporting to the US Securities and Exchange Commission are now required to publish annually how much they pay foreign governments for extracting oil, gas, and minerals. Anadarko, Hess, and several mining companies in Ghana will in fact be covered by the law.
While this law will help increase the capacity of Ghana's government and civil society groups to check abuses, oil consuming countries in Europe and elsewhere, can play their part to promote the wise use of oil revenues in Ghana and other resource-rich countries by passing similar legislation. So far, the United Kingdom, France and Germany have signaled their support for a European Commission regulation in line with the US law.
"The only way to hold government accountable is to arm citizens, not with weapons, but with information," said Ian Gary, senior policy manager for extractive industries with Oxfam America in Washington, D.C. "Strong transparency laws in Ghana, as well as oil consuming countries will send the right diplomatic signals to oil, gas and mining companies and help prevent the same tragedy of squandered oil wealth seen in countries such as Nigeria and Chad."
* Ghana started production of significant quantities of oil in December 2010. By June, Ghana is expected to produce 120,000 barrels per day from the Jubilee field. The Jubilee field is owned by a consortium of companies including Tullow Oil, Anadarko Petroleum (US) and Kosmos Energy. The World Bank's International Finance Corporation provided $215 million to Tullow and Kosmos to develop the field. Further discoveries in 2010 and 2011 have raised expectations of further production, with Tullow estimating that Ghana could produce 250,000 barrels per day by 2014.
* The Civil Society Platform on Oil and Gas in Ghana is a coalition formed in 2010 comprising over 110 civil society groups, individuals and academics. The platform is a forum for civil society to share knowledge about oil and gas exploitation and governance, strengthen civil society voices and forge a common strategy for engaging with other stakeholders, such as the government of Ghana, petroleum companies and frontline oil communities. The Platform receives support from Oxfam America, IBIS Denmark, Revenue Watch Institute and the World Bank.