The World Bank says it believes Ghana can avoid the “Dutch disease” on account of established and well-managed mining and cocoa sectors as commercial oil production began on December 15, 2010.
According to the Country Director of the World Bank for Ghana, Ishac Diwan, “It’s a bit of oil, not a whole lot, so it’s not enough to give you the Dutch disease and a curse.”
Cocoa and gold accounts for about 75 per cent of foreign exchange earnings for the country.
The current qood prices of both commodities on the international market have been a reprieve for the economic managers.
Ghana is yet to join the world oil cartel, the Organisation of Oil Producing Countries (OPEC), following the first flow of oil from the Jubilee field on December 15, 2010.
Ghana is expected to produce 120,000 barrels of oil per day after full swing oil operations of the Jubilee oil in the first quarter of 2011.
Presently, at the initial drilling, Ghana is expecting on average of 55,000 barrels of oil per day until about April 2011.
Analysts say unlike many other oil-producing African nations whose oil sectors dominate the economy, making them central to conflict and corruption, Ghana’s oil will be dwarfed by the established cocoa and mining industries and be managed by one of the region’s most stable governments.
“Oil is not so big that it could just shift this country into a different political path. It’s not a tsunami,” Diwan was quoted as saying.
In an interview with Reuters, the World Bank Country Director referred to a Dutch discovery of gas in the 1960s and said that boosted the currency and undermined other exports.
Ghana expects to produce an average 120,000 barrels per day (bpd) from its off-shore Jubilee field with reserves estimated at 1.5 billion barrels.
Production is expected to increase to 250,000 bpd after three years , about an eighth of what nearby Nigeria produces now.
Ghana is keen to avoid the problems oil has brought to Nigeria, where rebels in motorboats have repeatedly attacked pipelines and platforms in the Niger Delta over the years,, saying they against the theft of the counrty’s oil wealth.
In November, traditional chiefs of towns from Western Region demanded a 10 per cent share of oil revenues when crude starts flowing just offshore from thier homeland – a demand that was vehemently rejected by Parliament.
Mr Diwan said a militant insurgency was unlikely given Ghana’s record for negotiation to reduce tensions.
“If a warrior emerges, I don’t think this person would have a following because there are reasonable chiefs that have managed to voice reasonable demands,” he said.
“Institutions in Ghana are quite evolved and civil society is very vibrant and aware of the dangers,” Diwan said.
“I just cannot see big corruption happening. Hidden bank accounts in Switzerland and lots of money disappearing, this is not Ghana. I’m broadly optimistic.”
Parliament ratified the Petroleum Revenue Management Bill on Monday which is aimed at ensuring the sector benefits ordinary Ghanaians over the long term and at providing a strong regulatory framework as firms explore other blocks off Ghana’s coast.
In its 2011 budget, Ghana forecast the estimated $586 million of oil proceeds next year would account for only six per cent of all domestic government revenues.
He said government had a good system of checks and balances and that the private sector had reached an important critical mass.
However, the need to shift from subsistence to commercial agriculture in Ghana is acute as the oil industry has the potential to trigger inflation, making local products uncompetitive witn imports.
There is a lot of potential in agriculture with future prices expecting to rise and a lot of land here and the fear that agriculture can be hurt by the exchange rate appreciation due to oil,” he said.
The government is investing heavily in cocoa, aiming to produce over a million tons per year by 2012 up from 632,000 tonnes in 2009, a level that would allow it to challenge neighbouring Ivory Coast for the title of the world’s top producer.
The Jubilee Partners, Tullow Oil, Ghana National Petroleum Corporation (GNPC), Kosmos, Anadarko, Sabre Oil and EO Group told journalists at a press conference prior to the official launch on December 15, 2010 that they were excited about the prospects of Ghana’s oil find.
However, the caution is that expectations need to be managed.
President Mills in his speech at the official launch reiterated the government’s commitment to use the resources for the benefit of the people.
However, opposition political parties have criticised the passage of the oil petroleum management bill which gives government the opportunity to collateralise the oil revenue.
They point to the government’s own cabinet bill presented to Parliament in which under clause 5, the government had stated emphatically that oil resources would not be used for
Many analysts cite the nearly botched STX deal, a US$10 billion agreement between the government and the Korean Multinational firm, which will see the construction of about 200,000 housing units in the country, as the main reason for the government to amend its own clause 5 of the Petroleum Management Bill to pave way for the project.
Subsequently, the STX agreement was signed immediately Parliament passed the bill.
That, analysts say, is to enable the government to use the oil resources as collateral to ensure that the arrangers of the facility will be able to source the needed funds for the project.
Again, the growing Chinese interest in Ghana, with the Chinese throwing “freebies” to the current government with an estimated US$ 10 billion loan facility, which experts say, it is too tempting for the government which has had its hands burnt in accessing IMF funds.
However, many also point at the increasing interest of the Chinese as a threat to the country’s development, citing the Chinese non-regard for environmental and human rights abuses.
The Sudan is one example of such Chinese interest which has been accused of aggravating the conflict in that country.