The Oil and the Glory
Africa’s resource curse: Ghana edition
In the past few years, it’s become clear that one of the most promising nascent oil giants in Africa is Ghana. In 2007, the small American exploration company Kosmos Energy found a gargantuan offshore oilfield, called Jubilee, that is estimated to contain as much as 1.8 billion barrels of oil (it’s expected to start producing ...
In the past few years, it’s become clear that one of the most promising nascent oil giants in Africa is Ghana. In 2007, the small American exploration company Kosmos Energy found a gargantuan offshore oilfield, called Jubilee, that is estimated to contain as much as 1.8 billion barrels of oil (it’s expected to start producing 120,000 barrels a day later this year). Last week another company, Tullow Oil, announced the discovery of a second offshore field containing an estimated 1.4 billion barrels of crude. These aren’t Nigeria-sized numbers — that country has an estimated 37.2 billion barrels of proven reserves — but it’s still enough to transform the country. The question, though, is whether it will transform Ghana for better or for worse.
Over the last year, tensions have risen between the state-owned Ghana National Petroleum Company (GNPC) and Kosmos, over Kosmos’s 23.5 percent stake in the Jubilee oilfield. When Kosmos signed an agreement last year to sell its share in the field to ExxonMobil for $4 billion, the GNPC cried foul, blocking the deal in June. The state oil company claims that Kosmos violated regulations by sharing extensive data on the field with potential buyers without running it by the GNPC first.
A few weeks ago William Wallis covered the unfolding of this dispute in the Financial Times, as Ghanaian president John Atta Mills formed a committee to resolve it. But as the fight has dragged on, it’s become more apparent that what Ghana is really doing is trying to increase its own leverage over its oil reserves. The GNPC has been trying to acquire the Kosmos stake for itself, which it would then sell off to another foreign oil firm for development. On Monday, the Ghanaian newspaper Public Agenda reported that the government would consider selling the stake to a consortium of Norway’s Statoil and China’s CNOOC. Ghana would get refining facilities and more equity in the oilfield for its national oil company out of the deal.
But the Jubilee dispute has also brought domestic political divisions into Ghana’s oil policy. In January, the FT’s William Wallis and Martin Arnold reported that the Mills government launched an investigation into the Ghanaian company EO, which acted as a go-between from Kosmos to government officials. EO faces allegations that it secured overly generous terms for Kosmos and itself thanks to the company’s political connections to former Ghanaian president John Kufuor, a member of the opposition party. Predictably, EO sees the probe as overtly partisan.
If the dispute escalates, it could make Ghana’s oil industry a political football, with one party using revenues to get an edge on the other. This would be a tragic development for a country that President Obama praised last year as a model African democracy. Politicized oil industries have not exactly been a good thing for other African countries. (See: Nigeria.)
But Accra isn’t Abuja quite yet. The government has already "taken a number of steps in the right direction," Monica Enfield, an analyst at PFC Energy who specializes in African oil, told me. A series of bills that would create a separate oil regulatory agency, to mandate a greater role for local contractors, to increase the transparency of the state’s oil revenues, and to update the country’s oil regulations for deepwater drilling environments is currently making its way through Parliament. President Mills came to power on an anti-corruption platform, and his investigations into EO and the Kosmos stake may be signs that the government is committed to asserting its authority over the country’s reserves, rather than deferring to smaller native companies with ties to foreign firms. "Now that offshore Ghana is a proven oil province," says Holly Pattenden at Business Monitor International, "it’s likely that future contracts are likely to be much more weighted in the state’s favor."