Oil & Gas Conference

On Friday I attended a conference on the theme of “Building Consensus between Civil Society and Members of Parliament on Ghana’s Oil and Gas Governance.” This is a topic that I am quite interested in, as my blog readers (all seven of them) can likely tell. 

The purpose of the two-day conference was for members of civil society (NGOs, academics, activists, community leaders etc.) to discus a few key oil and gas bills with members of parliament to ensure that these bills address “the people’s” concerns. 

The conference was quite enlightening, particularly a presentation made by Dr. Steve Manteaw, an active member of several organizations that advocate for responsible oil and gas exploration such as ISODEC, Public Agenda and Publish What You Pay. Dr. Steve (as he was nicknamed) opened the conference with a rather sobering presentation on the lessons learned from Ghana’s mining industry. Ghana, like many other developing countries, is a mineral-rich country with financially-poor results. Ghana is the second largest producer of gold in Africa after South Africa and has a history of managing its own gold mining for over 100 years. “And yet,” Dr. Steve asks,  “What do we have to show for it?” The attendees in the room scuffed and uttered “nothing.”

Ghana encountered the same challenges with its mining industries as other resource-rich but economically-poor countries. This is the mistake of incentivizing foreign direct investment to such a degree that the country barely reaps any benefit. In fact, the country often suffers further because it cannot make enough money to offset the huge socioeconomic and health costs the mining industry brings about.

It should be noted that the responsibility for the creation of these debilitating financial incentives does not fall solely on the poor countries. On the contrary, the responsibility for many of these disastrous incentives falls equally (if not more) on the multi-national corporations that set inhumane levels of competition for their investment. It is this type of corporate greed that leads to the creation of sweatshops and child labour (the latter of which has an unfortunate presence in some of Ghana’s mining towns). Poor countries become so desperate for foreign capital that they offer competitive prices and tax incentives that result in little profit and a dependency on the foreign corporations operating on their land. Often this disastrous example of free market competition is a result of the IMF's Structural Adjustment Program which demands its loaner countries to encourage foreign investment at any cost. 

One specific example of an unsustainable and harmful incentive that Ghana has offered foreign corporations is when the nation offered mining companies the opportunity to operate in Ghana tax-free for 15 years! When Dr. Steve stated this, I got to hear my FAVOURITE Ghanaian reaction in surround sound throughout the room. It’s a quick “a-ow!” that comes with a twisted face and a cocking of the neck reserved for times when someone has said something offensive, embarrassing, surprising (but in a negative way) or downright disappointing. I absolutely love this reaction and it never ceases to make me laugh. Sometimes people even do it at the punchline of a nasty joke. I think I subconsciously find ways of provoking this reaction in people. The “a-ow!” will most definitely be coming back to Canada with me. 

The rest of the conference was equally as interesting, though there was noticeable lack of discussion around the wellbieing and livelihoods of people in the oil and gas communities. Many of those on the “civil society” end of things broached the subject, but sadly it seemed many of the MPs in attendance were unengaged and, as many people complained, uninterested.

A Load of Hot Air: My Semi-Coherent Recap of Recent Oil and Gas News

Stretched across the front page of The Daily Graphic (Ghana’s leading national newspaper) yesterday was the headline “Ghana Joins Oil Giants in December.”

Yesterday, Vice-President John Dramani Mahama announced at the Daily Graphic Business Roundtable that commercial production of oil will commence as soon as November. The article wasn’t clear as to what is scheduled to happen in December, the month in highlighted in the article's title. That aside, the (other) question on many people’s minds is: is Ghana ready?

Remarks made by the VP seemed to address the catalogue of concerns that have arisen from the public over the years. But personally, I am not entirely sure whether this was an example of well-researched political lip service or genuine effective planning. Has Ghana really listened to its citizens?

Well, let’s give Mr. Dramani Mahama his due diligence for now and recap some of the problem-solving strategies Ghana plans to implement.

Concern #1: There has been much anticipation of a huge influx of employment opportunities with the oil and gas industry. Will Ghanaians be the ones to benefit from the supposed mass job creation?

Solution #1: Ghana promises that it will adhere to what it calls a “local content” policy. This means that it promises that 90% (this is the latest figure I’ve heard in the news but should be fact checked) of the jobs created will be held by Ghanaians.

Criticism of Solution #1: At the meeting I attended at NETRIGHT on oil and gas, a discussion was held on the local content promise. The general consensus seemed to be that this is a big step in the right direction but it is so lofty a promise that it deserves to be met with suspicion. Can this goal realistically be achieved? Skeptics are sure to answer "no." Partly because that is what skeptics do, you know, being skeptical and all... they say no. But also because they believe that Ghanaians are unlikely to be qualified enough to occupy many of the jobs created by oil, especially the well-paying jobs (non-labour intensive jobs).

Another troubling aspect of the local content promise: what exactly is meant by "local"? Folks at the NETRIGHT meeting stressed that most of the jobs would likely go to the educated class from the big cities such as Accra and Kumasi. Great for these cities, yes, but bad once again for the rural poor. Particularly the rural poor in the cities where oil and gas is being extracted. Why them in particular? Because their economy is driven mostly by agriculture and fishing - two industries that have a history of being destroyed by the environmental impact of oil extraction. Their fears of their livelihoods collapsing has thus far been appeased by the excitement around job creation. But will they be the beneficiaries of the new jobs?

Which brings me to...

Concern #2: What about the agriculatural and fishing industries? 

Solution #2: The VP insisted that these sectors will continue to receive the funding allotted to them and will remain unaffected by oil spending.

Criticism #2: But will that be enough? As mentioned above, oil exploration often comes at the detriment of the agricultural and fishing industries in the affected area. Now this doesn't just affect the fisherman and the farmers. It affects the chain-of-command, so to speak, of people who make their living delivering these goods to local and national markets. So will a maintenance of the current funding for agriculture and fishing really be enough? Keep in mind Agriculture and Fishing makes up an estimated 60% of Ghana's GDP.

Segue in to...

Concern #3: But what about the environmental impact of oil and gas extraction??

Solution #3: To quote from the article: "Mr Mahama said the government prioritised the importance of safety and environmental protection, citing the lessons of the Gulf of Mexico oil spill as “a signal to us that we must put in place a mechanism to closely monitor safety environmental issues"

So in other words: don't worry, the government will take care of it... one step closer to the most important concern:

Concern #4: Will the government really take care of it? Like REALLY REALLY take care of things? Cause history ain't in our favour. Governments in most oil producing countries have often turned corrupt - YES the GDP rises in oil producing countries, YES the industry booms BUT the standard of living for the majority of the population is known to deteriorate - everything from poorer health and security to ruined livelihoods to civil unrest to depletion of other precious resources. So how serious is the government in being responsible, accountable and transparent with its petroldollars?

Solution #4: Have we mentioned that the IMF and the WB have indicated that current oil reserves could account for 7% of the GDP? And that oil and gas extraction would greatly help the country become self-sufficient in electricity generation? You like electricity right?

Concern #4: That's all fine and dandy, but answer the question.

[side note: yes I have decided to turn this article into a play]. 

Solution #4: Well, Ghana will be setting up an Ghana Petroleum Account which will be used as a "single destination collection account for all petroleum revenues due and collected on behalf of the state." This will be treated as a savings fund with only part of the value being used and some of it collecting interest.

Ideally this account will be subject to scrutiny and ensure monitoring of petroldollars going out and coming in.

To ensure the utmost transparency, the government has committed itself to extending the transparency act it currently adheres to for its mining activities called the Extractive Industries Transparency Initiative (EITI), to include the oil and gas sector. According to the Daily Graphic, "The EITI, which is currently being applied in the mining industry, encourages the publication of revenues received by stakeholders, such as the government, the communities and mining companies."

Criticism #4: Well you better behave...

End of Scene.

(should the Daily Graphic read this blog I'm sure they are writing my name on a "never hire this person to write a real article" list).

Okay this blog post had high hopes in the beginning but low blood sugar, the heat and my fear of plagiarizing the entire Daily Graphic article is preventing me from continuing. But to end on an optimistic note: There are in fact SOME countries that have handled their oil successfully. Mr. Dramani Mahama cited a few popular examples: Trinidad and Tobago and Norway... Don't Scandinavians have it all??? Wealth, oil, effective social services, art, free university, blonde hair, height... Geeze. 

If played well, the oil and gas extraction can obviously adhere to the proverbial "let it be a blessing rather than a curse." But many precautions must be taken to avert disaster.

Link to the REAL article: http://www.graphic.com.gh/dailygraphic/page.php?news=9045

The Black Gold: The Mixed Blessing of Oil and Gas in Ghana

In 2007, UK's Tullow Oil discovered about 600 million barrels of light oil off Ghana's shores. Since then, Ghanaians have been teetering between optimism and fear - cautiously awaiting what will result from the extraction of this much sought-after resource.

Yesterday, I attended a meeting at NETRIGHT (a member-based umbrella organization of women's organizations in Ghana) on "Gender Issues in Oil and Gas Exploration." NETRIGHT has organized a committee to address issues that have emerged from the oil and gas extraction from a gender-based perspective. This committee, comprised of a small number of national & local NGOs including ABANTU, is seeking to establish itself as a lobbying group and a mouthpiece for those communities most affected by the oil and gas extraction - communities whose voices are often neglected.

Much of the media buzz on Ghana's oil has remained optimistic. Many are anticipating widespread job creation and a hefty new revenue stream that will help fund all sorts of national programmes in health and education and ideally improve infrastructure. However, amidst the widespread giddiness over the potential boost to the economy, apprehension and fear are just as strong as many are all too familiar with oil's nasty reputation for destruction. Ghanaians need not look any further but to their (almost) neighbour Nigeria - a country where the oil industry has caused one nightmare after another.

Environmental degradation, the illegal usurping of land and subsequent destruction of farmers and fishermans' livelihoods have plagued Nigerians surrounding the oil regions. In addition to these issues, Nigerians have witnessed widespread human rights abuses, terrible corruption and an increase in violence (including the murder of Nigerian activist Ken Saro-Wiwa) all due to the oil industry in the country. Needless to say, the majority of Nigerians have yet to see the benefits of their country's valuable natural resource. For more information on oil issues in Nigeria, take a look at this link: http://www.globalissues.org/article/86/nigeria-and-oil.

The purpose of yesterday's meeting was to brief committee members on the socioeconomic issues that we can anticipate from the oil extraction in Ghana, using countries like Nigeria and Equatorial Guinea as examples. Through awareness campaigns, activism and lobbying, members of this committee hope to get policies in place that will prevent oil's destructive patterns.

Dr. Akosua, one of the committee members, initiated the meeting with a thorough literature review on the impacts of oil and gas on local communities. She also reviewed a recent study conducted by Dr. Rudith Kings on the impact of oil on the livelihood of citizens in Ghana. It was a fascinating albeit frightening introduction to the issues that we can anticipate in the communities where oil and gas extraction will occur. In some cases, we can already see the impacts taking place on local environments and economies. I'd like to summarize some of the key issues that Dr. Akosua touched upon.

For many African countries, Dr. Akosua reminded us, natural resources are a curse rather than a blessing. Take, for example, the mining of gold or diamonds. History has shown us a solid link between countries rich in resources and conflict - particularly with oil. Dr. Akosua sited a UNEP 2009 study that reported "since 1990, 18 violent conflicts around the world were fuelled by exploration of natural resources." Conflicts arise for a number of reasons - control over the resource itself, the depleted economy that results from the destruction of land, the displacement of indigenous people, the lack of transparency in government spending, human rights abuses, child labour, exploitation... am I depressing anyone yet?

Whereas one would expect that a country lucky enough to house such valuable natural resource would be just as lucky as to reap the rewards of said resource, unfortunately this is rarely the case - even for countries outside of Africa. As it turns out, most oil producing countries see a decline in their living standards even as their GDP sky rockets. What is more, countries sitting on oil rarely see a decline in their country's oil and gas based products like fuel for cars and cooking. This is because these countries often do not have the technological or financial capacity to refine the oil themselves in which case they must outsource this job to foreign corporation. Once the oil is refined by a third party, it is subject to the prices set by the global market.

Unfortunately the financial rewards of oil and other commodities are usually seen only by corrupt government officials and the foreign corporations contracted to extract the oil. Rarely does the general population see the oft-promised increase in spending on health and education or the influx of jobs on the labour market.

One of the tenets of oil optimists here in Ghana that Dr. Akosua was quick to refute was that of mass job creation. Sure a ton of jobs will open up, but who exactly will be filling these positions? If other African countries are any example, many of the jobs created will be filled by foreigners as they will be the only ones with the necessary qualifications and credentials.

Okay, so Ghanaians may not get the higher-paying positions and may not get as many jobs as initially thought - but what about the surrounding economy in the oil and gas towns? Surely the local markets, restaurants and other enterprises will benefit from an influx of foreigners and newly-employed Ghanaians? Well, perhaps. But Dr. Akosua warns that the influx of foreigners (particularly western foreigners) often leads to gentrification of the area. European expats, homesick for their creature comforts, tend to forgo the wooden stand at the side of the road for a drive to the nearest western-style grocery store where they can load up on overpriced imports from home (I found a box of Corn Flakes the other day for 8$ Can.!!). When the demand for these shopping centres becomes high enough, a savvy entrepreneur will eventually takes the leap and open a "Shoprite" or "Max Mart" in the mining or oil town whose economy was once fuelled solely by agriculture.

Dr. Akosua also reminded us that the jobs created are almost exclusively filled by men, thus turning oil towns into a haven for lonely single men (or married men who left their families to take up a job). This often leads to an increase in commercial sex work, rape and violence against women which then leads to increased rates of HIV/AIDS and other diseases.

The list of potential problems that oil can bring is quite numerous and daunting. Too numerous to go through all of them here. The committee at NETRIGHT was adamant about educating and preparing the communities that will be the most impacted by the extraction of oil for the potential problems coming their way. Many of these communities are already quite poor with low levels of education and poorer health as compared to the rest of Ghana. Their livelihoods are inextricably linked to the land and sea - many of them are farmers and fisherman. Oil and gas extraction will have grave consequences on the ecosystem in these areas if the government does not do everything in its power to perform the extraction carefully.

The meeting left us with a better sense of what Ghana will have to deal with, and there are definitely many likeminded groups lobbying the government to do this oil thing right. However, upon leaving the meeting, my supervisor gave voice to what I believe was the general consensus in the room: "I wish they would just leave that stuff in the ground."