Fortune and fantasy on Africa's oil frontier
IS LOCAL CONTENT A PIPEDREAM? from Channel Two Communications on Vimeo.
There’s been a flurry of excited news coming out of Ghana the past few weeks. Ghana’s growth rate hits 16%. Ghana signs the first $1 billion of its $3 billion loan agreement with China. An additional $6 billion Chinese loan is in the works. The $1.2 billion gas plant project will soon move into high gear. Vice President John Dramani Mahama says Ghana will rake in $1 billion from gas annually and that will allow Ghana to pay off the $3 billion loan ahead of schedule. He predicts the gas industry will create hundreds of thousands of jobs. (Check out Ghana Oil Watch for articles on all this and more.)
Wow! All sounds amazing, but is it too good to be true?
I am not a naysayer, nor am I a pessimist. I just prefer realism and wonder if some of the recent news isn’t a bit too optimistic — at least for the short term.
The gas project, for example. Although it will soon move full speed ahead and Chinese crews will likely get things done as quickly as possible, it seems that it will still be a number of years before it’s fully operational and pumping the quantities of gas that will make those big earnings possible. I have no idea where gas prices are going in the coming years, but at the moment, they’re moving down. So, is it realistic to talk about $1 billion per year profit and an early loan reimbursement?
I was happy to see some people who know much more about finance and economics than I take up the question.
IMANI, a Ghanaian think tank, has issued a statement challenging the official figures on the gas industry:
IMANI has taken note of recent publications in the local and international financial press which appear to suggest that Ghana is poised to earn approximately $1 billion per annum from natural gas production once the ongoing gas harvesting and processing facilities come on stream.
We do not believe that this is very plausible in the short to medium term of between three to five years. Per our calculations, production from the Jubilee field would have to increase by at least four times before the quoted sum of $1 billion can begin to sound realistic.
Read the complete statement here.
I also wonder about the Vice President’s promise of “hundreds of thousands” of gas industry jobs. In how many years? No one has provided any details. But again, how long will it take to fully develop the industry and the ancillary activities around it that will lead to all these jobs? Like the downstream oil sector, the gas industry can and hopefully will provide many, many jobs. But this will certainly take a number of years. When the Ministry of Energy announced that Ghana’s oil would create at least 10,000 jobs (an announcement made before commercial production began), that created high expectations, which have led to major disappointment.
When you’re on the ground in Sekondi-Takoradi, you hear a lot complaints about the lack of jobs, lack of opportunities, too many expat workers, etc. Rumors circulate as well about why oil production is lower than it should be and why the gas plant has been relocated. People aren’t getting enough good information, i.e. information that is clear, understandable and realistic.
On one hand there’s talk of local content (although not many specifics on that). On the other hand there’s the Chinese loan deal that stipulates 60% of contracted work (at least) must go to Chinese firms. Then there’s the reality that, for now, there simply aren’t that many oil jobs. The Sekondi-Takoradi port expansion, the new trade zone, the growing oil and gas sectors will transform the region and the country. There’s little doubt about that.
In the meantime, however, people — and especially the region’s young people — want work and are growing increasingly frustrated. It may not be in anyone’s interest to overstate employments opportunities in the short term.
I was happy to see the Channel Two video on local content (posted above). This is the kind of reporting that serves the public interest.
Christiane Badgley has been producing and editing documentary films for the past twenty years, with much of her work focused on the U.S. criminal justice system and post-colonial African politics and history.
