Petro Policy Under Trial (final) Ghana's energy sector never ceases to fascinate

• Continued from Yesterday
The credit checking capacity of such distributors will be more formidable. They will find it easier to weed out dabblers and time-wasters in the sector than TOR ever shall. The general improvement in the health of the sector will attract funds into now crippled institutions like TOR and BOST. TOR is small because it is poor, and poor because it is small (http://www.africanliberty.org/node/685 ). It has zero economies of scale. Its equipment are far from state of the art.

Forced to accept crude even when the quality is questionable, because of an over-dependence on concessionary trading, the outmoded equipment is being further subjected to additional stress from unsuitable feed. Sometimes it has to depend on the unreliable pipe-borne network for part of its cooling needs.

Overstaffed, under-capitalised, and plagued with an unacceptable turnover rate for its most qualified employees, the refinery is in a dire need of regeneration.

In the current half-regulated, half-deregulated, regime, with its Platts-based price-control regime, TOR wont attract bird-droppings even if it went into poultry management.

Deregulation will bring money. Money will make the sector more specialised, more integrated, more sophisticated, more competitive, and therefore more efficient. Fully deregulate we must.

Petroleum Revenue Management We will only touch very briefly on this subject as we shall be treating it in great detail in the future, building on a recent article by our colleague.

The most worthwhile point to make is that not all petroleum funds are the same.

Dating back to the 70s, our Nigerian friends have experimented with a couple.

They have had the Petroleum Technology Development Fund, the Petroleum Equalisation Fund, the Petroleum Trust Fund etc. etc. The origin of financial flows into these funds are also usually different.

Whichever type of fund(s) Ghana establishes, we may decide to capitalise them with income from royalties, carried interest, lease rents, taxation of on commercial operations, bloc and concession sales etc. etc. A specific strategy may undergird the choice of fund, and the particular income stream.

That is why in Norway, for instance, both main funds are managed by private sector specialists in fund management. In Ghana, we have the SAS, DataBank, EDF, etc. etc. They may be asked to bid to manage the fund.

In Nigeria, some of the greatest controversies have erupted over bureaucrat-managed funds. In fact, one of the most titanic clashes in the erstwhile administration, between the President and his Vice, was over deductions from one such bureaucrat-managed fund, ostensibly for completely irrelevant expenditure.

The point is: the only reason why one may set up a special fund for petroleum income receipts, rather than lump everything into the consolidated fund, is because one has "investment" in mind.

Investment does not succeed by providence. A fund must have a sophisticatedly deduced investment strategy. Certain Norweigian funds invest a fixed proportion of inflows overseas in a bid to diversify risk. Will our fund(s) invest in our stock exchange? What will be the criteria for selection of interests?

Some funds, such as those prominent in Russia, are stabilisation funds, more so than growth funds.

They exist to smooth out fluctuations in national earnings due to erratic international trading prices for the commodity. In places like Abu Dhabi, the main funds are essentially transitional hedges, anticipating a time when national reserves will shrink or disappear. In Dubai, diversification has been the strategy.

Even here, stark differences can emerge as to the focus of diversification. The idea may be simplly that petrodollars boost venture and private equity reserves, which in turn are used to grow new lines of businesses well outside the petroleum mainstream (consider Dubai's real estate and logistics emphases).

But it could also aim at sprouting branches from the root petroleum sector. Oil production can facilitate ICT by creating a major need for imaging, seismography, and modelling capacities.

It frequently leads to a boost in transport infrastructure, freight insurance and environmental risk engineering. An oil fund may well be geared towards facilitating such spin-offs and outgrowths. It is doubtful though that a single fund can be as multi-strategic as one would in theory wish. Focus is a brutal necessity. That is why it is not enough for government to announce a revenue management bill and leave it at that. The legal and legislative imperatives are only as important as the financial and engineering concerns, and cannot therefore take undue priority. Government needs to publish serious forward-looking documents on these various issues, and should afterwards revel in the spectacle of civil society tearing these documents into shreds. The National Petroleum Authority and the Energy Commission are the primary instruments of research in the sector, and should be given much more clout than they currently possess in the policy formulation process. Even more than that, they are also regulators. We are worried, for instance, that contrary to stipulation the Energy Commission doesn't appear to be as involved in gas infrastructure policy (eg. Jubilee-to-Aboadze) in this country as it is mandated to be.

There ought to be greater institutional maturity in the way we manage the energy sector in this country, and transparency will aid that greatly (news.bbc.co.uk/2/hi/business/8323261.stm). We on our part, as civil society, wont vacate our vigilance role anytime soon. IMANI Center for Policy & Education