10 Years Into Oil Production: Ghana Still Struggles to Translate Oil Wealth Into Dev’t Gains

FPSO Kwame Nkrumah

Accra, Ghana//-Ghana is celebrating 10 years of commercial oil production on a low key as it is still struggling to translate its oil wealth into development gains.

The numerous socio-economic challenges as well as the infrastructural and energy challenges that were faced by the citizens preceding the oil production are yet to be solved.

It was President Professor John Evans Atta Mills, of blessed memory who turned the valve on an offshore platform to signify Ghana’s commercial production of oil and gas in the Jubilee field of Cape Three Points in the Western Region on 15th December 2010.

The field which was discovered by the consortium in 2007 was named Jubilee field, because Ghana was celebrating its 50th anniversary at that time.

It was hoping to produce 55,000 barrels of oil per day (bpd), increasing to 120,000 bpd in six months. It currently produces over 189.09 thousand bpd.

It was envisioned that the country would generate revenues from its petroleum resources to turn the fortunes of the citizens around.

They had thought that their economic woes were over, as their precarious cost of living and doing business in the country were going to be improved.

After apart from receiving some paltry oil money through taxes, royalties, surface rents, among others, Ghana is yet to smell the sweet scent of oil resources, 10 years on.

Ghana has produced 453.89 million barrels of crude oil from three fields namely, Jubilee, Tweneboa, Enyenra, Ntomme (TEN) and Sankofa Gye Nyame (SGN) since 2010, according to Dr Theo Acheampong, a UK-based Ghanaian Petroleum Economist and Political Risk Analyst.

“A total of 452.09 million barrels (99.71%) have been lifted (that is sold) by all partners out of the 453.89 million barrels produced.

Of the 452.09 million barrels lifted, Ghana’s share has been 78.85 million barrels – this is 17.44% of the total barrels lifted. Ghana’s share comprises mostly royalties, carried and participating interest (CAPI), corporate income tax (CIT), and to a lesser extent, surface rentals”.

In terms of value, $31.62 billion has been generated from the sale of all the liftings since 2010 using yearly average achieved crude prices, which is very close to Brent prices. All of Ghana’s crude trade at close parity to Brent so this is a reasonable assumption based on norm traded values.

“The estimated proceeds from liftings by Ghana Group is $6.55 billion (20.71% of the total value generated). This is close to its 17.44% production share. The cumulative investment made into all three fields will be in the region of $12-US$14 billion”, Dr Acheampong said.

Revenue in arrears

The Public Interest and Accountability Committee (PIAC) 2020 annual report revealed that surface rental payments to the government by companies in the petroleum sector in 2020 remain in arrears to the tune of $2.1 million.

The 2020 arrears according to the report represent a 34.71 percent increase over the 2019 arrears of $1.57 million.

The non-payment of the surface rentals denied the country’s Petroleum Holding Fund (PHF) of the needed revenues for development projects.

Surface Rent means a rent payable to the government for every year for the surface area allotted to a quarrying permit holder or a lessee under these rules at such rates not exceeding the land tax assessable on the land by the government from time to time.

Thin-spread of petroleum revenue for projects

Nasir Alfa Mohammed, Policy Advocacy Officer at the Natural Resource Governance Institute (NRGI), expressed concern about the thin-spread of petroleum revenues for projects, resulting in paltry allocations.

The inadequate funding made it difficult to appreciate any meaningful impact associated with the expenditure, according to him.

Touching on the management and utilisation of the Annual Budget Funding Amount (ABFA) mechanism over the years, he noted that present and successive governments had been consistent in selecting the four priority areas as per the law.

But Mr Mohammed, who is also a member and Chairman of the Legal Sub-Committee of PIAC, worried that the actual expenditure normally stretches beyond the 12 listed priority thresholds.

The non-utilisation of and accounting, for the full ABFA allocation even though the budgetary amount is disbursed to the ABFA account, he stated.

Difficult conditions

With the surge in oil production activities in Ghana, the twin-city of Sekondi-Takoradi has become one of the most preferred settlements in the country.

This is because the western regional capital city, which is about 225km from the nation’s capital, Accra is the epicentre of the oil production activities.

Many people including foreigners have migrated to the city and surrounding communities with the hope that when the country’s 1.5 billion oil reserve bubble finally bursts, they would tap in on the abundant moneys stashed in this ‘black gold’.

Since oil was discovered here in 2007 and its subsequent production in 2010, the social and economic statuses of the region especially the Sekondi-Takoradi metropolis has completely changed. There are several economic and social impacts”.

Additionally, some residents of the oil city told African Eye Report that the oil production has aggravated their living conditions to a point that they could no longer bear.

Although poverty statistics are hard to come by, the prevalence of poverty in the region and the country at large is noticeable to even first-time visitors.

Papa Kwaku Anim, a retiree who turned to taxi cab plying to eke out a living, fumed that; “the oil city tag is just a name. We are not benefiting from the oil”.

“Before the commercial production of the oil, we were thinking that our children would get jobs from the multinational oil firms such Tullow, Kosmos,  others, but they are yet to be employed”, he told African Eye Report who was in the region to assess the impact of oil on the lives of the people there.

“Life in the city used to be ‘sweet’. But with the arrival of oil, prices of basic commodities are astronomically high which most residents cannot afford”, he lamented.

A former assembly member of the Sekondi -Takoradi Metropolitan Assembly (STMA), Sampson Nimako Darko added: “The oil find has made life more unbearable for the people of Sekondi-Takoradi residents from rent to prices of goods and services”.

Residents in the major cities in the region, including Takoradi and Sekondi are now experiencing heavy traffic congestions since the commercial production of oil began. This is caused by the influx people who trooped to the region in search of oil jobs, he explained.

As, Mr Darko put it: “Commuting in the region is more frustrating than in Accra”. “It was not like this at all”.

He added that the number of oil firms and other businesses which opened offices in the two cities mentioned above because of the oil resource could not be counted.

“These oil firms in particular use heavy duty vehicles on the roads in the region to transport goods including oil waste within the region.

While other businesses which engaged in light work also share the limited roads in the region with other motorists thereby causing damage to the roads”.

This further aggravated the road infrastructure situation in the metropolis and the region as a whole, which depends largely on the central government funds to undertake development projects.

Furthermore, rental accommodation has shot up to the level that many residents, especially the young graduates can no long bear. As a result of this, most young people in the oil city are being accommodated by their relatives and friends”, Mr Darko said.

Some young graduates disclosed: “Several house owners have reallocated their houses to expatriates working at the oil fields and other related oil companies at highly exorbitant fees that locals cannot afford”.

Also, some of house owners have their facilities re-constructed as offices for potential occupants, many of whom are expatriates and other local consultants or workers of the oil field and its related businesses.

Hakim Ibrahim, who lives around the Takoradi Zongo area, noted that since the oil production, some tenants have thrown out their homes by greedy landlords and landladies.

Helpful?

Besides,  the budding oil and gas sector has been a major contributor to the country’s gross domestic product (GDP). It also created a number of jobs for the youth in the upstream, midstream and downstream.

These oil companies also through their corporate social responsibility activities have built schools, health facilities, and potable water, among others for communities in the West Region.

By Masahudu Ankiilu Kunateh, African Eye Report

Email: mk68008@gmail.com