30.04.2010 Feature Article

Guarding the misguided expectations for Ghana's oil wealth

Guarding the misguided expectations for Ghana's oil wealth
30.04.2010 LISTEN

“Oil companies and Government have to get their act together, but also manage expectations to gain people's trust” - Mr. Willy Olsen, Former Advisor to the President and CEO of Statoil & Senior Advisor to INSTOK.

The vast natural resource wealth alongside poverty has been the subject of debates and extensive commentaries. This tragic paradox has as such captured the attention of international donors, governments and the global civil society for a considerable period of time. Significantly, the heightened expectations of Ghanaians toward the discovery of oil and gas provide grounds for rethinking. These expectations which turn out to be normal occurrences in the oil industry can exact a heavy toll on the country's development dreams if they go unchecked. As much as the discovery of oil and gas can herald an enormous economic opportunities, the same oil and gas can trigger both economic and socio-political disaster to a promising economy.

Nonetheless, the fact that the rapid transformation of United Arab Emirates from a backward desert region to one with a booming economy was made possible by revenues from petroleum production is enough to justify these expectations in Ghana's hydrocarbon sector. Petrodollars have the propensity to create an incentive that could transform an unsavoury reputation of an economy to that of growth and prosperity devoid of poverty.

There is every good reason for Ghana to manage these expectations because it takes time for economic opportunities to filter through to people at the local level. This article reveals the grim experience of Papua New Guinea (PNG) in its oil and gas sector concerning expectations for LNG project that has caused tribal tensions. Again, the article seeks to reveal the urgent need for applying the basic tenets of transparency in managing these wild expectations in Ghana.

Catering for Misguided Expectations
In Papua New Guinea, a multi-billion dollar liquefied natural gas (LNG) project by ExxonMobil is spurring inter-village war between traditionally non-violent tribal groups. On January 25, 2010, the PNG Post-Courier newspaper reported that 11 villagers were supposedly killed in a tribal fight over a land claim linked to the LNG project. These tensions between the tribal groups near the capital Port Moresby are largely attributed to the unmanaged expectations concerning ExxonMobil's LNG project. According to PNG's National newspaper reports, the fight was linked to ongoing tensions regarding land ownership and LNG leases.

The tensions never arose until ExxonMobil decided on the liquefied natural gas project and road infrastructure. A lot of lessons exist for Ghana to learn from this case especially as the country prepares to expand downstream infrastructure including refineries and gas projects in coastal areas of Western Region.

Apart from the fact that education constitutes an important element in managing expectations, the issues bordering on transparency remains resounding in breaking the resource curse. Unequivocally, transparency is the most important tool to control and manage the upsurge of expectations. Expectations are clearly evident among the emboldened youth who are awaiting their job offers and local companies carefully studying the local content policy.

In the quest to manage these growing expectations, promoting full transparency for all activities in the upstream, midstream and downstream phase is a step in the right direction. The local people should be made to know what really pertains in the oil sector and what they stand to gain. Ideally, local peoples may form inaccurate beliefs about the distribution of oil revenues, provisions in legal and regulatory frameworks and available opportunities in the downstream sector. It is significant the people are made aware of the fact that oil benefits are not immediate. When there is lack of accurate information, the people can be made to believe any information made available to them; whether true or otherwise.

In Aceh, Indonesia, the rebel movement fostered the widespread belief that if the region became independent, citizens would be 20 times richer – a wild exaggeration, but one that worked well for the rebel group (Source: Escaping the Resource Curse by M. Humphreys, J.D Sachs and J.E Stiglitz). This would have been prevented if the revenue figures were open to the people. This setting in Aceh is not to mean that there would be a possible secession but to measure the extent to which false propaganda, in the absence to and secrecy of vital information, can be a heavy burden.

Ghana may not experience secession, but the youths in particular could be well susceptible to the propaganda of fighting for lion's share of oil revenues. Transparency improves the confidence of the people for their leaders and solidifies trust. It is against this backdrop that Ghana has to take comprehensive transparency in all aspects of the oil sector very serious especially when infrastructure expansions begin. Which communities or towns would benefit from the infrastructure? The ethnic and tribal lines in the Western Region are well known and alienated. It, therefore, behoves on the government, civil society organizations and individuals to critically consider managing expectations on the foundations of transparency.

Even more important is information about what the government receives for oil or other natural resources and how the government uses the funds it receives from the sale of natural resources. The people should clearly, without any doubt, know what they stand to get since right policies can allow benefits to trickle down to the ordinary person in the street. Revenues received should be heavily invested in other sectors of the economy including the health, agriculture, energy sectors, general improved infrastructure and extensive research into new models of development for the economy.

The government should as a matter of urgency move to resolve issues bordering on land ownership and leases in communities in the coast of Western Region. A clear land administration procedure would nip the situation in PNG in the bud. The factor of land cannot be ignored. It also applies to clamping down on reported unscrupulous sales of lands due to the discovery of oil.

It has come to the conclusion that a key ingredient for harnessing oil for the benefits of ordinary citizens is a well-informed society. Indeed, limited access to information creates confusion and mistrust resulting in unnecessary grievances. The country should not underestimate what uncontrolled wild expectations and grievances can offer an oil-producing country.

The country better not hope for any security breach which remains the most delicate in the myriads of strands of the resource curse. The experience of current oil producing countries especially Papua New Guinea should raise important warnings. These traditionally non-violent tribes hitherto lived peacefully before the LNG project sparked the unexpected. Again, on the onset the country should endeavour to gain the trust of the people. The country stands safe considering her commitment to democracy and lasting peace. Contrary to that the country notwithstanding her increasing revenues could sadly witness majority of its people in tattered penury. Proactively, the government and the oil companies in a joint strategy should help in managing these but misguided expectations of the majority people using transparency as a vital tool. Ghana can do it right!

By: Stephen Yeboah [[email protected]]

ModernGhana Links