FRONTIERS-Ghana bids to break Africa’s oil curse

(Reuters journalists have produced a special multimedia package
on frontier markets including stories, video reports, pictures,
research and graphics. To see the full package click on
http://frontiermarkets.thomsonreuters.com)

* Oil could transform Ghana in a decade

* Escaping “resource curse” top challenge

* Transparency lacking but modest reserves may prove boon

* Discipline lures stock investors, but liquidity tight

By Mark John and Kwasi Kpodo

ACCRA, May 26 (BestGrowthStock) – As Ghana awaits the first riches
from one of Africa’s top oil finds of the decade, expectations
on the street are high and rising.

“I believe in the oil,” said grocery vendor Grace Asantewaa
from behind her meagre stall of tomatoes and chilli peppers at
the Agbogbloshie market in the capital Accra.

“We are sure everything will change in the name of Jesus,”
predicted the 36-year-old mother-of-two, echoing widespread
dreams of a more comfortable life once production from the
Jubilee offshore field gets going in December this year.

With reserves of 800 million barrels of high-quality oil and
potential for at least one billion more, the offshore Jubilee
field could make Ghana the fifth largest oil nation in
sub-Saharan Africa after Nigeria, Angola, Sudan and Gabon.

But first it must avoid the mistakes of others in the Gulf
of Guinea, which the U.S. National Intelligence Council expects
to provide a quarter of American oil by 2015 and which this year
is already shipping record numbers of oil cargoes to Asia.

The International Monetary Fund predicts that if Ghana uses
the windfall from the 2007 discovery wisely, it could reach the
status of a middle-income country within a decade.

That would lift it from its World Bank rank of poor state
alongside Haiti and Liberia to the more comfortable league of
the likes of Morocco and Thailand — a game-changer in a country
where a third of the 25 million population are in poverty and
foreign aid accounts for nearly 10 percent of national income.

“How do we lift it, transport it, consume it, and finance
it?” U.S. emerging markets broker Jonathan Auerbach said on a
trip to Ghana, of the questions oil raises.

“Accept it,” he said. “This is the great game for Ghana.”

TOXIC OIL

Mention Nigeria to Ghanaians and there is an instant recoil
at their own possible fate: oil-fueled civil strife, rampant
political corruption and the paradoxical outcome of declining
living standards that they have seen for millions of Nigerians.

Congo Republic and Angola have suffered internal conflicts
partly fueled by jostling over oil. Aid watchdogs say Chad,
whose oil is exported through the gulf, broke pledges to use
energy revenues to ease poverty and bought arms instead.

Tiny Gabon and Equatorial Guinea have been more peaceful,
but their petrodollars have bypassed the people to fund their
elites’ luxury real estate and sports cars, according to
evidence for a French anti-graft hearing last year (the trial
was blocked on a technicality).

Ghanaians fear the “resource curse” — when a find becomes
an albatross round the neck of a country as other industries are
crowded out, its leaders become corrupt and its public finances
fluctuate at the whim of volatile energy markets.

“Country after country make big promises and then go on to
make the same mistakes,” said independent consultant Antony
Goldman, who has studied oil’s effect on Nigeria and others.

“It would be wrong to underestimate how potentially toxic
oil can be to a fairly simple economy,” he cautioned.

With Jubilee’s first oil due to start pumping in December,
Ghana still has much to do to ensure it not only avoids its
curse but also reaps the full blessing.

Rare in a region where coups, civil wars, disputed elections
and strong-arm rulers are the norm, Ghana has distinguished
itself this decade with two peaceful transfers of power from one
political camp to another through the ballot box.

It has also moved ahead of most African states in fighting
corruption, outdoing countries such as Senegal, Zambia and
Tanzania on a World Bank scale of anti-graft efforts.

That reputation allowed Ghana to launch a $750 million
Eurobond (374422AA1=RRPS: ) in 2007 and won it the accolade of
hosting Barack Obama for his first African trip as U.S.
president last year.

FROM NORWAY TO TRINIDAD…

But as the petrodollars come closer, so do questions about
how successfully Ghana will manage them.

President John Atta Mills’ centre-left government has taken
advice from oil states including Norway and Trinidad and Tobago
on how to handle the cash inflows, but has yet to present
detailed plans to parliament.

Opposition lawmakers complain there is little time for
proper debate on the complex oversight arrangements for the oil
accounts and how the money should be spent. They fear the
government will ultimately rush through weak legislation.

“We are not hurrying — that is the unfortunate thing,” said
opposition leader Osei Kyei-Mensah-Bonsu, adding he had seen no
sign by end-April of a draft oil revenue and management bill.

Keith Myers of UK-based consultancy Richmond Energy Partners
said Ghana should be careful to avoid the fate of other African
states which have struggled with regulatory shortfalls and the
lack of home-grown expertise.

He noted concerns about the role to be played by state-owned
Ghanaian National Petroleum Corporation.

“In Ghana’s case, this means that GNPC at the moment has the
role of both regulator and operator,” he said.

Investors were rattled by government moves last year that
pointed to a trend for one government to overrule deals struck
under its predecessors.

For instance, the current government has said it wants to
“re-engage” with British mobile operator Vodafone Group (VOD.L: )
over its 2008 purchase of a majority in Ghana
Telecommunications, notably over control of a strategically
important fibre-optic network.

Ghana has also defended its resistance to what sources close
to the deal said was a $4 billion accord for U.S. giant Exxon
Mobil (XOM.N: ) to acquire stakes in Jubilee from privately held
Kosmos Energy, insisting on its right to first refusal.

“The resource belongs to the people of Ghana … and we
decide how we want that resource to be used,” Vice President
John Dramani Mahama said in an April 27 interview.

Mahama rejected suggestions the Kosmos and Vodafone affairs
have tarnished Ghana’s pro-investment image, saying the
government hoped by end-May to wrap up talks with Kosmos over
the future of the stake.

Officials say options include the sale of all or some of the
stake to Ghana, which could need to draw on third-party finance.

“A ‘winner takes all’ electoral topography has emerged,”
said IHS Global Insight Nana Adu Ampofo, noting that Vodafone’s
purchase and Kosmos’ entry into in Jubilee had both taken place
under Mills’ predecessor, John Kufuor.

“Measures to improve transparency … are vital, even more
so in light of impending oil rents,” Ampofo warned.

Stock Report

FRONTIERS-Ghana bids to break Africa’s oil curse