Economic

EFFECTIVE MANAGEMENT OF THE IMERGING OIL AND GAS INDUSTRY IN GHANA(CAN GHANA AVOID A RESOURSE CURSE)

Whether or not Ghana’s current institutional framework will be capable of meeting the challenges posed by oil exploitation, and will be able to use this opportunity to bring greater prosperity and stability to the country, is a difficult question. In this paper, the reasons why other oil producers have failed to make a success of this industry will be examined. Having made this analysis, recommendations will be given for how Ghana can channel its new mineral wealth into strong economic growth and an improvement in living standards across the country. Contents 1. Introduction 1.1 West African Oil Production 1.2 Western Interests 1.3 Advantages of West African Oil 1.4 The ‘Resource Curse’ 1.5 Ghana 1.6 Oil Exploitation in Ghana 1.7 Drilling Begins 1.8 Chinese Interest 2. Literature Review 2.1 Ghana’s Success 2.2 Kosmos-Exxon Mobil Contract 2.3 Warnings of a Resource Curse 2.4 The Beginnings of Insurgency 2.5 Excessive Borrowing 2.6 The Nigerian Experience 3. Methodology 3.1 Choice of Subject 3.2 Data Collection and Analysis 4. Recommendations 4.1 Democracy 4.2 Transparency and Accountability 4.3 Investor Confidence 4.4 Role of Foreign Oil Companies and Governments 4.5 Revenue Management 4.6 A Diverse Economy 5. Conclusion Bibliography Figures Fig.1. Sources of U.S. Oil Imports, 2007 Fig.2. Ghana’s offshore oil fields. Fig.3. … line from landlocked Chad to coastal Cameroon, and new explorations for potential oil fields on the Atlantic coast were signs that the region was becoming one of the West’s major oil suppliers. There is a general consensus that the proven reserves of West Africa are greater than those of either North American or Eastern Europe and Russia, and current major suppliers are Nigeria, Angola, Congo (Brazzaville), Gabon and Cameroon. Indeed, Nigeria is the world’s sixth largest provider of oil, and Angola will probably prove to have more oil than Kuwait. In response to increased Western demand for oil, it is expected that Nigeria and Angola, the region’s two biggest producers, will double or even triple their output in the course of the next decade. 1.2 Western Interests During the Cold War, the United States in particularly was heavily engaged in Africa in a strategic and military capacity, as part of its fight against global communism. Its administrations were determined that the Soviet Union would be able to find extensive allies in the region. Economic assistance was offered through the World Bank and the International Monetary Fund (IMF), both of which are heavily influenced by the United States government. United States engagement also the form of military intervention, in regions where Communist insurgencies threatened capitalist governments, regardless of whether or not the latter were setting an example of good governance. In Angola, for example, the United States launched covert and overt CIA and special forces operations, in collusion with several different groups, and was concerned above all that Communist forces in the country should not gain control over the oil reserves. This often involved supporting unrepresentative governments in Luanda or the

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