Experiencing the Saudi oil wealth: lessons for Ghana

“Developing countries do want to develop and become modern. This requires the economic wherewithal. Oil becomes a major provider of wealth that is capable of transforming a backward underdeveloped country into a modern country and society. Several developing countries in and outside Africa have lately been entering the oil industry. But the evidence is clear that new oil wealth has been improperly applied in many oil producing developing countries. A possible explanation for this is that when a lot of wealth appears rather suddenly, much of it goes waste. Much money may have gone to waste in Saudi Arabia, but much also has been properly applied to the development of the country.”
Prof Stephen Addae


Who would have thought that Saudi Arabia reputed to own twenty percent of the world’s oil reserves could once be described as “wretchedly poor”? And yet these are the precise words of Prof Stephen Addae, author of a book that shares his ten year experience of the Saudi oil wealth on the heels of the discovery and commercial exploration of oil in Ghana.

In Addae’s words, until first oil in 1939, Saudi Arabia constituted a largely arid and nomadic country where agriculture was primordial. In a short 10-15 years however, what amounts to a miracle began to happen spurred by the massive wealth and judicious application of the country’s oil trove.

To all these, people-centered leadership appears to be the common theme that explains the transformation of the country reflecting in massive roads, schools and hospital infrastructure coupled with expanded opportunities for girl child education. King Faisal ibn Abdul Aziz ibn Saud, described as a man with “spiritual reserves underlying an inner calm”, balanced judgment and first class negotiation skills, would stand tall with a careful plan for development on a massive scale.

Leadership accounted for the massive infrastructural development that guaranteed the continuous production of the oil from around 20, 000 barrels daily pre 1944 through 500, 000 barrels daily within five years, jumping astronomically to 8.2 million barrels daily by 1974. Throughout all these, the key involvement of multiple foreign oil companies notwithstanding, the Saudi government’s deliberate effort to increase meaningful local content and participation were unmistakable, culminating initially in the appointment of Saudi officials to various Board of Director positions.

Convinced in the philosophy that “petroleum resources, no matter how large, were not infinite”, Saudi’s determined themselves best placed to exploit the oil reserves maximally thus leading to the formation of an indigenous autonomous Saudi oil company Petromin. Formed 23 years after first oil through a partnership of the Saudi government with the Italians and others, Petromin was used to prospect for new oil offshore along the Red Sea Coast. Beyond oil exploration, Petromin further built its own capacity to execute “aeromagnetic, geodetic and seismic surveys for local and foreign companies.” Within five years of its formation, Petromin significantly increased its stakes in the Saudi oil industry by assuming control of the original foreign consortium’s entire marketing network “for the distribution and sale of refined products” which it then expanded. This they would follow by asserting further control through the formation of a subsidiary petroleum tankers and shipping company to ferry crude oil from the off shore sites to the refineries.
It would thus appear that through deliberate policy and planning, the Saudi government over time consciously increased its stakes in both core and allied aspects of its oil and petrochemical industry. Indeed by 1980, 18 years after the formation of Petromin, negotiations had been concluded, leading to 100 percent ownership of the original Aramco company by the Saudi people. Agreements had been so structured as to allow continued American expertise under Saudi management while the latter continued to build their capacity.

Today, Saudi Aramco has all its management positions, 77 percent of its supervisory posts and almost half of its professional posts held by Saudis and has further expanded the base of its operations into overseas refining, distribution and marketing of oil products.

For a country that produces over two million barrels of crude oil a day, a country that has certain reserves on which it has placed moratorium on refining processes pending and subsequent to world demand to exceed the two million mark, the acute awareness of the finite nature of its natural resources is astonishing. For this reason, the Kingdom appears to have spared no effort to fully maximize technology, the oil reserves and its byproducts with the development of a so-called master-gas-gathering system which allows it to use almost all the gas associated with the onshore production of oil.

Prof Addae’s book provides useful insights on the many uses of the harvested gas; reinjection into the fields to maintain the pressure necessary for extracting oil, desalination of sea water, production of electricity, exportation of sulphuric acid manufactured from most of its 4000 tonnes a day of sulphur produced, separation into methane, used in the production of urea and methanol which may be further processed into liquefied petroleum gas and into methyl tertiary butyl ether (MTBE), an octane enhancer for unleaded petrol.

The policy interventions derived from their master plan and leading to social transformation have been nothing short of phenomenal: free education at all levels and refocusing on technical and professional education in areas in which the kingdom felt itself deficient, with King Faisal at one point declaring, “This country in this particular stage of its development, is in greater need of adopting the vocational trend, because the implementation and carrying out of projects require manpower, and that manpower should be drawn from the country’s own sons.”

This was followed by massive investments into a number of technical, vocational and professional institutions including the King Fahd University of Petroleum and Minerals which offered graduate and post graduate (Master and PhDs) in engineering, the sciences and in industrial management. This formed one of seven Universities in addition to numerous technical and vocational institutes built as part of the accelerated education plan.

Health witnessed the proliferation of health centres in the smallest human habitations run by general practitioners mostly from India, Pakistan, Sri Lanka, Sudan and Egypt with nurses also from these countries to honor the government’s pledge of free health service. This was followed by massive constructions of well-planned modern general hospitals, tertiary hospitals and special hospitals at Military Bases offering medical care that could rival that offered anywhere.

Throughout this sobering and revealing account, Addae’s lucid writing shines through with turns of phrases that are nothing short of inspirational. Typically, while reflecting on King Faisal, he would write thus, “From log cabin to White House” was a phrase coined by an American author to epitomize the life of Abraham Lincoln. From desert obscurity to world status is no less a shift of fortune, and perhaps the more remarkable of the two in that it sums up the career not of one man –the late King Faisal of Saudi Arabia –but of a whole nation.”

Prof Stephen Addae’s book on oil and gas does well to capture the circumstances of his relocation to
Saudi for over ten years in a vivid personal narrative that on occasion reads like a novel. Quite unforgettable are his efforts as Ghana’s first physiologist in establishing a first class Department of Physiology at the University of Ghana Medical School coupled with his profound feelings of betrayal by some young doctors he had trained and mentored to take over the running of the department but who subsequently fled the country.

On 24th April, 2012, Professor Stephen Kojo Addae, holder also of PhD in history simultaneously launches 12 books including his autobiography, ‘Total Academic’, the history of Western Medicine in Ghana, a five volume compendium on the history of Ghana’s Military encompassing the Ghana Armed Forces, the Air Force and Navy at 400pm at the British Council, Accra.

Sodzi Sodzi-Tettey
Sodzi_tettey@hotmail.com
www.sodzisodzi.com
19th April, 2012