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Breaking the Oil Curse: will Ghana cause a miracle?

 Spotlight on mistakes in the oil-rich Niger Delta as vital lessons for Ghana

“Niger Delta is like Florida but we are far behind”, said Barr. G. Pereomongu, General Manager of DAAR Communications PLC, a television (AIT) and radio station (Raypower) that report on operations of oil companies in the Niger Delta adding that “Niger Delta has great fantastic prospects, but what we lack is visionary leadership”.

It has been proven that large wealth generated from oil and gas in developing countries has paradoxically undermined economic growth, worsened poverty and engendered conflict. Niger Delta is a typical case of this paradox. It was clear the costs of oil have been devastating. Covering an area of 70,000 km2 and being the largest river delta in Africa, the Niger Delta region which straddles three states [Bayelsa, Rivers and Delta] is overwhelmingly poverty-stricken. Since 1960, Nigerian oil exports have generated staggering wealth, estimated at over $600 billion with the Niger Delta accounting for more than 75 per cent of earnings. Petrodollars have however failed to transform the lives of the people. Evident in the Niger Delta are extreme poverty, poor and non-existing basic infrastructure, inequality, entrenched marks of conflicts and environmental damages.

It is partly the reality that Africa holds overwhelming evidence of the oil curse. Nigeria is not the only struggling oil-rich economy. Gabon, sub-Saharan Africa’s fourth biggest oil producer still has more than 1.5 million living below the poverty line. Equatorial Guinea is one of the fastest growing economies in the world and has an estimated annual per capita income of $11,000, but majority people are battling to live on less than a dollar a day. Angola raked in vast oil revenues comparable to total amount of international aid given to the world’s sixty poorest countries. But Angola in 2008 was ranked 162nd out of the 177 countries in the United Nation’s Human Development Index (HDI).

Ghana’s Oil Discovery

New discoveries of oil in Ghana’s Jubilee Field have increased the emotional outpouring of Ghanaians than was first witnessed in June 2007 when oil was first discovered in commercial quantities. The discovery of oil in Ghana resurrected the hopes that revenues could be the panacea to all problems linked with poverty. Ghana’s former president, John A. Kufuor, said that the country’s new “black gold” will be the boost that Ghana needs to become an “African tiger”. He again said: “Oil is money, and we need money to do the schools, the roads, the hospitals. If you find oil, you manage it well, can you complain about that? Even without oil, we are doing so well, already. Now, with oil as a shot in the arm, we’re going to fly” (BBC News, “UK’s Tullow uncovers oil in Ghana” on June 18, 2008).

Ghana has proven large oil reserves. The International Monetary Fund (IMF) projects that revenues from Ghana’s oil production will reach $1.3 billion per year by 2013 and remain at or slightly above that level until 2022. Can the country with enormous petrodollars transform the livelihoods of the poor and the economy?

Ghana must not jump into jubilation. The path to oil success looks tricky. The failures of several oil-rich African countries are only a caution against the hurdles ahead. Ghana’s oil discovery could take notes from the mistakes that were committed in the Niger Delta. Though Niger Delta and Ghana look different in the context of the type of oil extraction [onshore for Nigeria and offshore for Ghana] and governing legal regimes, there are as well significant issues that could be applicable to Ghana’s oil and gas industry.

The Mission to the Niger Delta

I had doubts prior to the visit to the Niger Delta whether the phenomenon of the oil curse really existed. Oil curse was indeed real. I got to know why many countries rich in natural resources are poorer and more miserable. A three-day investigative visit unraveled the impressive mysteries behind the curse of oil in the Niger Delta. The visit was part of the first media oversight training programme for 14 Ghanaian and Ugandan journalists organized by the Revenue Watch Institute, a New York based non-governmental organization that advocates for transparent and prudent revenue management in the extractives, with partnership from Thomson Reuters Foundation.

How would this mission benefit Ghana, I quizzed myself upon arrival at Port Harcourt Airport in the Bayelsa State on May 17, 2011. It was perilous. "Why are they here? Are they here to protect executives of oil companies?" These curious questions were hurled at drivers who picked us up to our hotel. Fully armed soldiers with machine guns mounted surveillance just at the entrance of the fence around the Port Harcourt Airport. “They are here every day”, the answer came surprisingly. Immediately, a voice whispered to me welcome to the zone of the real oil curse. That the Niger Delta is a backward region could not be disputed. In a visit to DAAR Communications PLC on May 18, 2011 to understand the roles the media play in the Niger Delta, Mr. Pereomongu advised “don’t allow this Niger Delta experience to happen in Ghana. It is horrible for any economy”.

Akin to a region recuperating from a damaging war, several oil communities had poor or no basic infrastructure. As we traveled to different oil communities in the Niger Delta, one thing was common and easily seen. Military surveillance posts sited close to oil facilities while soldiers frequently patrolled poverty-stricken communities. Communities that were visited including Oruma, Etieama and Rumuekpe all displayed a unique perspective of the effects of oil curse.

In Ogoniland, however, oil activities have been put on hold for nearly two decades. In 1993, Shell was compelled to stop oil production in Ogoni, when the Movement for the Survival of the Ogoni People (MOSOP), led by the later writer and activist Ken Saro-Wiwa, mobilised 300,000 people in a peaceful protest for environmental and social justice. Ogoni people are prepared to live in poverty while oil remains underground. The region is believed to hold immense, untapped natural gas reserves of several trillion cubic feet. The people owe their inspirations to the efforts of Ken Saro-Wiwa, who was hanged on November 15, 1995. Celestine Akpobari of Social Action, a vibrant non-governmental organization, is one of the many risking his life for justice to prevail in Ogoniland. He supports the stance that oil should remain untapped. “We will not allow oil extraction here”, Mr. Akpobari asserted in an interaction on Thursday May 19 concerning the roles of civil society toward ensuring justice at the Niger Delta. Social Action through community demonstrations is fighting against injustices perpetrated by multinational oil companies.

The 2011 Environmental Assessment Report by the United Nations Environment Programme (UNEP) into the ecological impact of oil spills in Ogoni found that Shell has fallen below its operating standards and covered up the full extent of its pollution. UNEP recommended an initial fund of $1 billion to start the clean up process in Ogoni.

Shell has again admitted responsibility to 2 major oil spills in Bodo after a lawsuit was filed against the oil giant in the High Court in London. Shell now faces a compensation claim of $410 million and could be forced to clean up extensive environmental damage. The justice hard fought for is apparently creeping up to the people in Ogoni.

Oruma

ORUMA is a unique oil community in the Niger Delta. It was historic meeting chiefs of a community that first dragged Shell to the International Criminal Court at The Hague accusing Shell of massive oil spills that destroyed hectares of agriculture lands. The chiefs of Oruma, Joseph Efanga and Ishmael Jacob Emeni advised “leaders in oil communities in Ghana should be sincere and not betray their followers”. “Oil companies promise and if you don’t hold them well, they do not implement what they say”, said Chief Efanga.

The chiefs asserted “oil companies think of what they take from you and not what they will give”. He alleged oil companies train the youth in the communities and refuse to employ them in the company. “Involve local communities in decision making and give the youth jobs”, Chief Efanga said in a final note of his advice to politicians and oil companies in Ghana.

Etieama

Going through the thick creeks of the Niger Delta in a 45 minute journey in a speedboat, we finally made it to Etieama. Infrastructure was in deplorable state and poverty could easily be spotted with the eye. It was baffling what keeps the youth active in such a place. Etieama was inactive but was home to several oil pipelines. According to the people since oil production started in 1971 in Etieama there has not been any significant improvement in their livelihoods. It was the glaring truth right from what you see.

The Chief of Etiema, Howels Idibo Ebifate lamented “we are dying; the oil companies left us like that”. “Many of our children died as a result of a destructive oil explosion”, the chief and community leaders revealed. The leaders said the oil companies gave promises that were never fulfilled. “They used their mouth to make us happy”, Chief Idibo Ebifate explained. To appease the community of the deaths of some youths, Agip [Italian oil giant] promised to give the people of an amount of ₦5 million. But according to the chief, for over 10 years they have not been given the money. The oil company said the bank where the money was deposited was on strike. “For over 10 years, the bank has been on strike” the chief retorted disappointingly. Agip built an uncompleted primary school and it took the efforts of the local community to complete the structure for themselves.  “The oil companies have not set foot at the community since 1971”, the leaders lamented.

Etiema declared its readiness to file a suit in court against Agip over what they claim was completely an unfair dealing. “We are not financially strong enough to fight this oil company [Agip] in court”, the chief said and insisted they will pursue the action if they receive support from international non-governmental organizations and agencies. The court action will be in pursuit of justice over the deaths of about 20 young people as a result of oil explosion and the broken promise of ₦5 million.

Rumuekpe

Rumuekpe was torn apart by a protracted civil war that took place between 2005 and 2008. Rumuekpe in the Rivers State consisting of 8 villages hosts the eastern operations of Shell. It is estimated that at least 60 people, including women and children, were killed by the inter-communal conflict. It is reported in Platform report titled “Counting the costs: corporations and human rights abuses in the Niger Delta” that armed gangs waged pitched battles over access to oil contracts and payments, which Shell allegedly distributed to whichever gang controlled access to its infrastructure.”

The military patrolled every nook and cranny of Rumuekpe. Not to protect the people from the curse of oil. Soldiers provided security to pipelines and installments of oil companies. Are they against their own people, I surprisingly asked a companion who works with Friend of the Earth – Nigeria. The mission to Rumuekpe, a rural community just recovering from oil war, was life-threatening. Rumuekpe had less than 200 people at the time of visit on May 19, 2011. Creeping weeds and unwanted trees had taken over houses after 3 years of fighting for a fair share of petrodollars.

Oil dollars have not benefitted the land since 1956 when Shell began oil extraction. Rumuekpe former combatants and warlords, who are now inactive and unemployed, succinctly advised Ghanaian counterparts, beware of your leaders!

They said since oil production started in their community in 1956, they’ve not had electricity, schools, good drinking water and other basic infrastructure. The community leaders, who are ex-combatants, accused their chiefs of awarding scholarships from the oil companies to their relatives and siting boreholes in their compounds to the neglect of the deserving majority people. They use our leaders to fight us” said community leaders in Rumuekpe.

According to the 2011 report by Platform titled “Counting the costs: corporations and human rights abuses in the Niger Delta”, one cause of the crisis was that a festering land dispute had pitted local residents against Shell for over a decade. And that Youth leader and Shell Community Liaison Officer Friday Edu sided with Shell to further polarise the community. Shell is accused of engaging in divide-and-rule tactics that destroyed Rumuekpe.

Rethinking Ghana’s oil with failures in the Niger Delta

On December 15, 2010, President Mills turned on the valve for the official commercialization of oil from the Jubilee field. Ghana has joined the league of oil-rich countries in sub-Saharan Africa poised to quench the overwhelming thirst of oil of developed economies. The impasse over the sale of Kosmos Energy’s share to ExxonMobil in 2010 is an indication that the potentials of the Jubilee Field are attracting huge interests from powerful multinational oil companies.

Ghana has a great deal of lessons to learn from the failures in the Niger Delta. Two issues were common in the commentaries of chiefs and leaders in the Niger Delta. They included leadership problems and divisive tactics employed by oil companies. Chiefs and leaders cited the problem of leadership. Leaders betrayed the people when they negotiated with oil companies and federal and central governments. Self-centered community leaders sold the rights of their own people. Termed “divide-and-rule”, oil companies used community chiefs, leaders and vibrant youths to fight their own people. The leaders are influenced by money and secured scholarships for their children to study abroad while the people languished in poverty.

It is however gratifying that Ghana has in place vital laws to regulate the oil and gas industry. Parliament passed the Ghana Petroleum Revenue Management Act (GPRM) to guide the oil revenue generation and utilization. The Public Interest and Accountability Committee (PIAC), charged with oversight role in the utilization oil revenues, has been constituted as specified by the GPRM Act. It is however worrying that in the midst of increased oil production and exports, the Petroleum [Exploration and Production] Bill, at time of writing, is pending parliamentary approval.

The increasing contributions of the civil society toward putting in place adequate regulatory frameworks have placed the country to the pedestal of oil success.

Transparency regardless of the shortfalls has been propagated by civil society organizations including the Civil Society Platform on Oil and Gas in the country. Integrated Social Development Centre (ISODEC), a civil society organization on August 5, 2011 accused the National Democratic Congress (NDC) government of engaging in fraudulent deals. ISODEC in a news conference accused government of carving out a 2 percent interest in a contract it entered into with AFREN [Oil Company] in a recent acreage assignment. ISODEC revealed again that government’s oil contract with New York-based HESS Petroleum has offered a lower royalty rate of four percent as against five percent granted the Jubilee partners.

These issues among others have to be addressed. In the first place, the government must adopt open competitive bidding and disclose investment contracts with multinational oil companies. The significance of the Extractive Industries Transparency Initiative (EITI) must be realized. With the US and Australia now embracing the EITI as a tool to shed the light on natural resource revenues, the ordinary people in a resource-rich region will have the capacity to see the revenues their governments receive and how they are utilized. With the mounting calls for openness in the extractive industry, Ghana is better positioned to maximize her oil revenues. The Dodd-Frank Wall Street Reform and Consumer Protection Act, mandating country-by-country and project-by-project reporting on natural resource projects for companies registered with the US Securities and Exchange Commission (SEC) gives a boost to transparency and accountability in the country’s fledging oil and gas industry.

Secondly, tax structures embedded in a stringent law must be strong for proper taxation of resource rents. The exact royalties need to be negotiated and improved upon to reflect market changes. Porous tax regime leads to enormous lose of revenues through price fixing and transfer mispricing.

The last strategy is that the revenues that accrue to the state must be invested domestically into priority sectors while provisions are made for future generations through hedge funds. It is crucial government invests the oil revenues into the education and health sectors of the economy to unearth new generation of leaders that would engender a new sense of hope in the governance of the country.

The country ought to drive the oil and gas industry on the tenets of transparency and prudent economic management to create a level playing field for optimum gain of oil revenues. The greatest expectation is for the country to transform its economy with the oil revenues. 

Grievances over Domunli Gas Project in Bonyere

Estimated to cost about $1.2 billion, the gas processing facility to be built in Bonyere in the Jomoro District in Western Region is expected to produce 300 million cubic feet of gas per day. The gas will be used to feed a nearby Combined Cycle Gas Turbine, the Osagyefo Barge and Aboadze thermal plant to generate electricity.

The people of Bonyere have raised concerns over the project. The people of Bonyere, farming and fishing community living next to the Jubilee field, have questioned steps by the government to acquire land for the gas processing plant. They fear the multi-billion gas processing facility to be established by the government would threaten their means of livelihoods. These were revealed in a meeting with community leaders in Bonyere in the Western region in June, 2011.

The people complained that the demarcated land making up the project enclave and buffer zone is too large. “The buffer zone is too large and this will limit the local people’s access to land for farming,” S.T Awuah of the Concerned Citizens Association – Jomoro said. “Bonyere has to get excess land for our future generation”, J.S.A Tophey, one of the older members of the community added. The people have however indicated they are not against the establishment of the gas project. “We are not enemies to the gas project,” Hon. Joseph Nyamikeh, an assembly member in Bonyere assured government but admitted that the right thing should be done.

The local community leaders criticized the government for not respecting the importance of free, prior and informed consent before setting foot on the land. The government, according to the people, started surveying the land without first informing the people of Bonyere of such a project. “They (Government, Ministry of Energy and GNPC) came and just entered the land to demarcate without telling us,” said S.T Awuah.

The Ministry of Energy when contacted could not confirm or deny whether government has completely taken over the land for the gas processing facility. In a telephone interview in June 2011, the Public Relations Officer of the Ministry of Energy, Mr. Kodua Edjekumhene, said “when the land is acquired the necessary compensation will be paid to the affected people” adding that he cannot confirm or deny that government has completely taken over the land for the project. He stated that the Ministry of Energy has had adequate consultations with the chiefs and the local people in the affected communities. “Adequate consultations with the communities have been done to sensitize them”, he said stating that this was done through various road shows organized in the communities. He assured that if there are concerns from other groups, the Ministry of Energy will look into them.

Conclusion

Being a newest Petro-State, Ghana faces the daunting challenge of confronting the risks associated with oil. Ghana could be on the cusp of making incredible strides in development and growth. When managed well, petrodollars could accelerate development efforts. With oil production going on unabatedly, it is critical government establishes the right legal framework to engender efficient oil exploration and prudent and transparent revenue management.

The scattered examples of pervasive corruption, devastated environments and civil wars in the Niger Delta must have real meaning for Ghana’s oil and gas sector. Niger Delta offers vital lessons for Ghana. The basic step to avoiding the oil curse is to build a transparent economy that sheds light on every activity. Sentiments, grievances and land disputes taken for granted in the Niger Delta degenerated into chaos, wars and human rights abuses. It is crucial government resolves the grievances of the people of Bonyere. The country’s oil and gas must not follow the pathway of the Niger Delta. The fact however is that Ghana has the capacity of breaking the oil curse considering the increasing roles of civil society organizations in advancing transparency and holding government in check.

The author, Stephen Yeboah is a freelance journalist. He is also a Research Assistant at Centre for Social Impact Studies, a research and advocacy non-governmental organization in Ghana. He can be reached at [stephenyeboah110@yahoo.com]

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