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General News of Wednesday, 15 December 2010

Source: FT.com

Ghana enters new era with oil field launch

Ghana joined the ranks of Africa’s oil exporters on Wednesday, pledging to work to ensure lucrative new revenues further bolster one of the continent’s rising star economies.

John Atta Mills, the president of Ghana, wearing safety gear and blue overalls, opened the valves in a televised ceremony at the 330-metre-long floating platform some 40 miles (60 km) off the west African country’s Atlantic coast.

Initial production of around 120,000 barrels per day will rank Ghana as sub-Saharan Africa’s seventh largest producer, with output set to double within three years.

The start of commercial production came just three years after discovery of oil at the field, named Jubilee to mark the timing of the find 50 years after independence in 1957.

“After a long wait, the day has come,” Mr Mills said.

“But ... it means that we are assuming a very serious responsibility. And especially for those who are in leadership positions, we must ensure that it becomes a blessing not a curse,” he warned.

Aside from state-owned Ghana National Petroleum Corporation (GNPC), top players in Jubilee include UK-listed operator Tullow Oil, US producer Anadarko Petroleum and privately held US energy firm Kosmos.

The event underlines the importance of the Gulf of Guinea as a growing source of energy to consumers such as the US, where some see it supplying a quarter of US oil by 2015.

The region already counts Nigeria, Equatorial Guinea, Gabon and Congo Republic as exporters and others such as Liberia and Sierra Leone are hopeful of joining the club.

Ghana has taken advice in how to manage its oil sector from countries including Norway, and is anxious to avoid the strife and corruption which nearby Nigeria’s oil has brought.

“It will be a blessing because we are all jobless and poor,” said Brian Salmon, a 17-year-old small-holder in the western region coastal town of Takoradi.

“Normally when oil comes everybody is fighting to get their daily bread, but we Ghanaians have an understanding and will avoid conflict,” he added.

Ghana is the world’s second largest cocoa producer after neighbouring Ivory Coast and Africa’s number two gold miner. It has a $750m eurobond currently yielding about 6.4 per cent.

Ghana expects Jubilee’s oil and gas to help double its growth rate to more than 12 per cent next year, funding projects to boost infrastructure and laying the foundation for new industrial sectors. New data on Wednesday showed inflation running at 18-year lows.

Analysts say that while two decades of multi-party politics have led to a level of governance others in the volatile region can only dream of, Accra has dragged its heels on drafting the legal framework needed to manage the oil revenues.

Total revenue from oil into the 2011 budget is put at only 1.9 per cent of GDP. Although this is due to rise over the years, the initial impact on the economy is seen as modest.

Many are concerned a complex petroleum revenue management bill has yet to be voted by parliament and note the current draft allows 70 per cent of revenues to be used as collateral against loans, a possible incitement to excess borrowing.

“As a country we have a fairly terrible track record of hedging our commodities,” said Emmanuel Gyimah-Boadi of Ghana’s Centre for Democratic Development.

Ghana failed to tuck away proceeds from its assets in time to cushion it from a price slump in 2000, forcing it to seek $3.7bn debt relief two years later. Its budget deficit is set to finish 2010 just under 10 per cent of national output.

In a saga that unnerved some potential investors, Kosmos in August called off what sources close to the deal said was a $4bn pact to sell its stake to ExxonMobil after resistance from GNPC, which wants to raise its own holding.

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