Dec. 15, 2010 marked a great day in the lives of many Ghanaians because Ghana joined the list of countries producing oil on a commercial basis. The question on most people’s minds is: How does this benefit us (Ghanaians)?
His Excellency John Atta Mills, President of Ghana, was in Sekondi-Takoradi, where he was flown offshore to the FPSO Kwame Nkrumah to open the valves to make way for the flow of first oil. Jubilee Partners, which include Tullow Oil plc (34.7 percent), Anadarko Petroleum Corp (23.49 percent), Kosmos Energy (23.49 percent), Ghana National Petroleum Corporation (GNPC) (13.75 percent), Sabre Oil and Gas (2.81 percent) and E.O. Group (1.75 percent) participated in a formal celebration to commemorate the first oil, hosted by the president at the Takoradi Air force base.
The first phase of production at the Jubilee oilfield has begun, ramping up to 55,000 barrels of oil per day (BOPD) this month and 120,000 BOPD during the first half of 2011 as additional wells are completed. This marks the beginning of Ghana’s first significant commercial oil production and will allow the country to join the ranks of sizable West African oil exporters.
Estimates on the quantum of Ghana’s oil wealth vary hugely. The common starting point is that Jubilee will produce about 120,000 barrels per day and some $1.2 billion in government revenue a year for 20 years.
The adjacent Tweneboa field is reckoned to be as big as Jubilee’s, but industry experts forecast the biggest finds will be onshore in the Keta basin. With companies like Exxon Mobil, BP, ENI and Sinopec vying to buy equity in the Jubilee field, the assumption is that Ghana has several billion barrels of reserves.
David Throup of Online Africa Policy Forums Blog points out that:
Ghana urgently needs to improve its infrastructure: it needs new sewers and water pipes and ring-roads in Accra, a revamped electricity grid, improved generating facilities at Akosombo, improved rail-links from Accra to Kumasi and Tamale and on to Burkina Faso, and a renewed and extended network of secondary and tertiary feeder roads through the rural hinterland. Others will argue for improving educational and health facilities. Such development spending would generate employment in construction and ancillary services, and hopefully promote sustained economic activity and growth. In a society where 60-70 percent of the population depends on smallholder agriculture for their livelihoods and 90 percent of the population in urban areas depends on the informal sector, such job-generating spending could be beneficial. But the money must be spent wisely and over a number of years if it is not to exacerbate inflation and exceed Ghana’s capacity to absorb the spending.
TAKORADI, Ghana, December 15 – Ghana joined the ranks of Africa’s oil exporters on Wednesday, pledging to work to ensure lucrative new revenues further bolster one of the continent’s rising star economies.
John Atta Mills, the president of Ghana, wearing safety gear and blue overalls, opened the valves in a televised ceremony at the 330-metre-long floating platform some 40 miles (60 km) off the west African country’s Atlantic coast.
Initial production of around 120,000 barrels per day will rank Ghana as sub-Saharan Africa’s seventh largest producer, with output set to double within three years.
The start of commercial production came just three years after discovery of oil at the field, named Jubilee to mark the timing of the find 50 years after independence in 1957.
“After a long wait, the day has come,” Mr Mills said.
“But … it means that we are assuming a very serious responsibility. And especially for those who are in leadership positions, we must ensure that it becomes a blessing not a curse,” he warned.
Aside from state-owned Ghana National Petroleum Corporation (GNPC), top players in Jubilee include UK-listed operator Tullow Oil, US producer Anadarko Petroleum and privately held US energy firm Kosmos.
The event underlines the importance of the Gulf of Guinea as a growing source of energy to consumers such as the US, where some see it supplying a quarter of US oil by 2015.
The region already counts Nigeria, Equatorial Guinea, Gabon and Congo Republic as exporters and others such as Liberia and Sierra Leone are hopeful of joining the club.
Ghana has taken advice in how to manage its oil sector from countries including Norway, and is anxious to avoid the strife and corruption which nearby Nigeria’s oil has brought.
“It will be a blessing because we are all jobless and poor,” said Brian Salmon, a 17-year-old small-holder in the western region coastal town of Takoradi.
“Normally when oil comes everybody is fighting to get their daily bread, but we Ghanaians have an understanding and will avoid conflict,” he added.
Ghana is the world’s second largest cocoa producer after neighbouring Ivory Coast and Africa’s number two gold miner. It has a $750m eurobond currently yielding about 6.4 per cent.
Ghana expects Jubilee’s oil and gas to help double its growth rate to more than 12 per cent next year, funding projects to boost infrastructure and laying the foundation for new industrial sectors. New data on Wednesday showed inflation running at 18-year lows.
Analysts say that while two decades of multi-party politics have led to a level of governance others in the volatile region can only dream of, Accra has dragged its heels on drafting the legal framework needed to manage the oil revenues.
Total revenue from oil into the 2011 budget is put at only 1.9 per cent of GDP. Although this is due to rise over the years, the initial impact on the economy is seen as modest.
Many are concerned a complex petroleum revenue management bill has yet to be voted by parliament and note the current draft allows 70 per cent of revenues to be used as collateral against loans, a possible incitement to excess borrowing.
“As a country we have a fairly terrible track record of hedging our commodities,” said Emmanuel Gyimah-Boadi of Ghana’s Centre for Democratic Development.
Ghana failed to tuck away proceeds from its assets in time to cushion it from a price slump in 2000, forcing it to seek $3.7bn debt relief two years later. Its budget deficit is set to finish 2010 just under 10 per cent of national output.
In a saga that unnerved some potential investors, Kosmos in August called off what sources close to the deal said was a $4bn pact to sell its stake to ExxonMobil after resistance from GNPC, which wants to raise its own holding.
History was recorded yesterday in the Western Region when President Atta-Mills turned the valve on the FPSO Kwame Nkrumah to signify the beginning of the production of crude oil in commercial quantities in the Jubilee oil field.
It was a memorable occasion for all Ghanaians many who stayed glued to their TVs at home and work places to watch the programme live. The function itself took place at the Takoradi Air Force base and was graced by two former Presidents, Jerry John Rawlings and John Agyekum Kufuor as well as Ministers of State, members of the diplomatic corps, Members of Parliament, Chiefs and Ghanaians from all walks of life.
Also present were the jubilee partners; Tullow Oil plc, Anadarko, EO Group, Cosmos, Sabre and GNPC who are the shareholders of the Jubilee field.
At about 10 am, President Mills arrived on the FPSO in a helicopter and went through the safety briefing before being led by a Tullow official to the pipeline where he turned open the valve to open the pipes for the crude oil to gush through.
Ghana’s oil is the light sweet crude kind that is much sought after in the international market. The Jubilee Field will produce an initial 55,000 barrels of oil per day, but with the development of more wells, production is expected to hit 120,000 barrels per day.
The first export of oil will be in the first week of January 2011 to the United States of America and other European countries with the rest being used for domestic purposes. President John Evans Attah Mills, after turning open the valve, went ahead to interact with some Ghanaian engineers and doctors working in the vessel. Dr. Claudia Donkor and trainee engineers Emmanuel Kojo Dei and Francis Antwi were part of those the President interacted with. They expressed their joy at being part of the historic occasion.
Addressing a large gathering at the Takoradi Air Force base later on, President Mills paid glowing tributes to Former Presidents Rawlings and Kufuor for their immense contribution towards the production of crude oil in commercial quantities in Ghana.
He said former president Rawlings “clearly laid a massive foundation for what we are witnessing today. President John Agyekum Kufour continued from where President Rawlings left off. He also devoted attention to the oil.”
President Mills also paid special homage to Former GNPC boss, Tsatsu Tsikata under whose watch great strides were made towards the discovery of crude oil in commercial quantities in Ghana.
The President also applauded the efforts of the Jubilee partners in concluding Ghana’s odyssey to crude oil production in commercial quantities but reminded them on the need to respect all the agreements signed especially the fact that local content in the production process must be a priority.
Touching on the concerns raised by Chiefs in the Western Region about the need to use 10% of the oil revenue to develop the region, the President assured them that the region would be given priority.
“The Western Region where the oil and gas is located will be given the pride of place as far as development is concerned. Indeed there will be a massive development within the Western Region in the next few months,” he said.
With production beginning, Ghanaians are hoping that the under development that has been the lot of the country for years would soon be a thing of the past.
I spoke with Ghana. Everyone was watching on tv and feeling some pride. We are all watching with hope and trepidation in our hearts. In all too many cases we are watching with greed in our hearts as well. May we protect ourselves from the ill effects of our own greed and the immense greed from outside Ghana’s borders. And may all Ghanaians share and enjoy the benefits and positive opportunities the oil offers.