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Ghana becomes an oil nation, seeks to avoid 'curse'

Ghana, oil
“This should be a blessing and not an oil curse,” Atta-Mills said, with production set to result in revenue that has been estimated at as much as one billion dollars per year. – Reuters Photo

TAKORADI: Ghana began production on Wednesday from one of the largest recent oil discoveries in West Africa, transforming it into a significant oil producer, but raising fears over the associated risks.

President John Atta-Mills flew by helicopter to an oil-processing vessel located at the offshore field and symbolically opened a valve signifying the start of production.

“This should be a blessing and not an oil curse,” Atta-Mills said, with production set to result in revenue that has been estimated at as much as one billion dollars per year.

A video of Atta-Mills performing the ceremonial opening was screened to dignitaries gathered at the nearby town of Takoradi, where drumming greeted the start of production.

The occasion was called historic by local officials and the oil field's main operator, Tullow.

“It's a great day for Ghana,” former Ghana president John Kufuor told AFP at the ceremony. “It's expected to make such a transformational impact for us.” But while the country, seen as a model of democracy in the region, has been counting its blessings because of the riches the oil will bring, it need only look to nearby Nigeria to understand the potential dangers.

In Nigeria and other countries, major oil production and the money that flows with it have been accompanied by widespread corruption and the neglect of other industries.

The oil curse, some say, could well take hold in Ghana, reversing development and political gains highlighted when US President Barack Obama visited last year.

But other observers argue that if anybody can handle it in the region, Ghana can, precisely because of the development that has taken place. The country is already a major producer of cocoa and gold.

It has produced oil in the past, but only in very small quantities by industry standards. The recent find has set off intense interest from investors, including from China.

“Ghana has the potential to avoid it, but still has a lot to do to avoid the oil curse,” said Emmanuel Kuyole, Africa regional coordinator for Revenue Watch Institute, referring to dangers posed by the sudden wealth.

There is concern that the country has not adapted its legislation quickly enough to cope with the windfall.

Commercial production comes just three years after the discovery of the oil -- and with proposed laws to regulate the industry still under debate in parliament.

“We ought to have been better prepared,” said Bright Simons, researcher with the IMANI Center for Policy and Education, a Ghanaian think tank.

“The whole programme seems to have been rushed. The rush does not benefit anybody.”Critics also argue that Ghana does not yet have the infrastructure to tap the gas that comes with crude production.

That means gas flaring will inevitably take place, observers say, despite Atta-Mills' government having declared a policy of zero tolerance on the practice, which is widely viewed as damaging to the environment.

The Jubilee field was discovered in 2007 by US firm Kosmos and is estimated to contain some 1.8 billion barrels, one of the largest finds in West Africa in recent years.

Anglo-Irish firm Tullow says it will produce about 55,000 barrels a day within the first few months before more than doubling output to 120,000 bpd.

While considerable, the amount is only a fraction of Nigeria's two million barrels per day.

Ghana will be keen to avoid the unrest that has plagued Nigeria's main oil-producing region, the Niger Delta, where scores of attacks and kidnappings have occurred in recent years. An illegal oil industry has also thrived there.

Traditional chiefs in Ghana are already calling for 10 percent of oil wealth, in keeping with the royalty tradition in the mining sector in Ghana.

Investment in villages close to the oil field is crucial for Ghana to avoid a situation like the one in the Niger Delta, warned Kuyole. – AFP

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