Ghana's New Oil: Cause for Jubilation or Prelude to the Resource Curse?

Abstract

Ghana is a small West African nation of 23 million people. In 2007, the largest oil and gas discovery in Africa in the last decade was made by the US-based oil and gas company, Kosmos Energy, 75 miles offshore Ghana. The discovery was named the Jubilee Field and it is estimated to contain recoverable reserves of 1.8 billion barrels of oil and 800 billion cubic feet of natural gas. The phase one production rate is currently planned at 120,000 barrels of oil per day and 160,000 cubic feet of gas per day. In 2008, Ghana consumed 56,000 barrels of oil per day and only produced 7,400 barrels per day domestically, making it a net exporter of 48,600 barrels of oil daily that year. When first oil is reached with the Jubilee Field in late 2010, overnight, Ghana will become a net exporter of oil by approximately 64,000 barrels of oil daily.

This transition from oil importer to oil and gas exporter will fundamentally change all facets of the economy and society within Ghana. The pending influx of Petrodollars into the government’s coffers is estimated to be $1 billion annually from the Jubilee Field alone and up to $3 billion annually when additional offshore fields begin producing between 2011 through 2015. While this drastic increase in government revenue has caused a significant amount of jubilation throughout Ghana and the petroleum industry, such a rapid flood of Petrodollars into a developing nation with weak political and economic institutions in place to manage a burgeoning mineral industry can wreak more havoc on a nation than good. Many developing nations with vast mineral wealth – as Ghana now has – have experienced declining or negative economic growth, increasingly authoritarian regimes and general social and civil strife compared to many other nations with little or no mineral wealth. This phenomenon is called the “Resource Curse” and Ghana could potentially find itself as another cautionary tale of the resource curse in West Africa. The best means of preventing the resource curse is by the transfer of mineral ownership from the state to domestic private entities through the privatization of Ghana’s national oil company, the Ghana National Petroleum Corporation.