I wish to share with you, my second essay on the developmental benefits of Ghana’s oil find. Enjoy!
The recent discovery of offshore oil is an opportunity for us to overcome persisting structural weaknesses in the country’s economy and thus raise Ghana’s prospects of becoming a frontrunner in African development. It is my conviction that our entry into the petroleum industry will alleviate pressure on the country’s current account, generate revenue for the fiscal account and bring a reversal of fortunes for the Cedi. A gradual transformation of Ghana’s economy lies ahead with both the fiscal deficit and the current account deficit set to be wiped out.
Ghana’s oil and gas, though new in the industry, has been noted to have great potential to boost several areas of our economic and social development agenda. The Jubilee Field in the Western Region of Ghana is estimated to hold as much as 1.8 billion barrels of oil, and output could hit 150,000 barrels per day within months of the start-up. It is our expectation that income from oil exports will significantly boost our economy.
Petroleum has numerous uses in transportation, power generation, road construction and the manufacturing industry. Petroleum is used in the form of diesel fuel, fuel oils, petrol (gasoline), Liquefied Petroleum Gas (LPG) and natural gas in transportation, power generation and in homes as domestic fuels. In the industry, petroleum products are used in some chemical processes to produce plastics. Sulphuric acid, which is a by-product of sulphur removed from crude oil is a useful industrial chemical. Petrochemical feed stocks can be used in the manufacture of rubber fibre and lubricants. Tar, another petroleum product, has many uses including as paint additive and seal for roofing and ship hulls. From the aforementioned, it is by all means very motivating that petroleum production in our economy will bring along numerous industries with its benefits to the nation.
Designing a rule that allocates oil revenues to both productivity-enhancing investments and an oil fund is crucial to achieving shared growth and macroeconomic stability. With projected oil production of 100,000 barrels per day (bpd) earning Ghana an average of US$1.6bn a year, the State stands to gain its revenue from the levies on production through the Royalty, Carried Interest, Paying Interest, oil entitlements, Petroleum Income Tax and the Annual Surface Rental. It is my expectation that the oil revenue will be used to improve the poor infrastructure situation in the country. Rehabilitating and expanding the transportation networks, that is, roads, river, air, rail which will go a long way to improve the standards of living of Ghanaians through facilitating smooth movement of goods and people. Increasing investment in water and electricity supplies, educational facilities, extending the national power grid and a massive investment in industrial programmes would lead to huge gains in the economic output of the nation.
Aside the macroeconomic benefits we stand to gain from the oil and gas industry through revenues accruing to the State from the fiscal arrangements in the Petroleum Agreement, stimulated demand for local goods and services and jobs will be created as well. Some of the business services to be created include
- Supply chain services to manage supplies to the oil fields and to the entire west African sub-region
- Expansion and rehabilitation of the Takoradi airport
- Helicopter and fixed wing aircraft transportation
- Supply boats, anchor handling boats, diving vessels, et al
- Telecommunications, weather forecasting, search and rescue
- Real Estate-housing of numerous expatriate staff of oil companies
- Banking and Insurance services
- Construction opportunities
ü Construction, installation and commissioning of offshore structures
ü Assembling of knocked-down structures
ü Welding and Joinery
ü Pipeline manufacturing from steel
Ghana is poised to witness a distinct improvement in its macroeconomic fundamentals following the onset of domestic oil production from December, 2010. We believe that by 2011, real GDP growth could exceed 10.0% and deficits on the current account and fiscal account will have narrowed markedly. The oil and gas industry will help to cushion Ghana’s economy but traditional sources of revenue from cocoa, tourism, and other mineral resources should still be given more attention for the sustainability of the economy. The development of our oil fields has the potential to bring substantial benefits including a reliable and affordable power generation, foreign exchange income, and creation of jobs in the numerous industries. The oil discovery, to me, is thus a good thing for Ghana.