Discovering oil changes lives, alters national trajectories and profoundly complicates the world around those with access to “black gold.” Texas oil barons are the stuff of movies and books, many over-the-top characters and lots of violence. Look at the U.S. “billionaires” of their day as companies like Standard Oil reshaped Wall Street and our entire financial world: Standard’s John D. Rockefeller being the most famous such individual. Picture desert nomads with gold-plated Bentleys and ultra-high-rise buildings, traveling to the most expensive hotels on earth, taking entire floors for their retinue, and handing out gold Rolexes as tips. Envision the weapons oil has purchased. Brazil went from a place with huge slums, great beaches and a banana republic “inflationary” reputation to a mega-wealthy, energy-independent lead member of the BRIC reference (the high-growth economies of the 21st century – Brazil, Russia – note both are huge oil exporters – India and China). Wars have been fought in the name of oil, borders re-calculated, whole groups of peoples disenfranchised in the name of progress with violence and corruption flowing with each new producing well.
When my son spent some time in Ghana in 2009, working to establish a village-level micro-lending program to spur local growth, he returned with and explained the on-coming big blessing with perhaps a much bigger curse. In 2007, Dallas-based Kosmos Energy LLC struck coastal oil: the Jubilee field 40 miles off the coast and almost 45 thousand feet below. Ghana’s international credit rating began to rise, but the prospect of growth in this peaceful democracy was tempered with thoughts of violence and corruption that so impacted the governmental operations of neighboring and nearby African oil producing nations.
As theDeal.com (October 1st) notes, things looked good, at least economically last year: “One year ago, the future looked even brighter when Exxon Mobil Corp. agreed to buy Kosmos' 23.5% stake in the Jubilee field for around $4.5 billion. The deal, struck in October 2009, would have allowed the sponsors to extract a more than 300% gain on the $1 billion they had sunk in the company… But in August [2010], it fell apart after Ghana's newly elected government pressured Exxon to back out of the agreement, in favor of a sale to state-owned Ghana National Petroleum Corp., sources say.” It’s been this way throughout the oil-producing regions: foreign oil companies find the oil and begin extraction, paying the local government less than what national pride would suggest is fair. The Arabian American Oil Company (ARAMCO), launched under the “seven sisters” oil consortium in Saudi Arabia, was founded in 1933, but starting in 1973, the Saudi government began taking an ever-increasing stake in the company until by 1980, it was fully controlled by the government.
Political winds blew change into Ghana’s sails long before outsiders would even have a chance to generate revenues from their find. “Ghana's political leadership shifted left in January 2009 when President John Atta Mills of the National Democratic Congress party replaced John Kofi Agyekum Kufuor, of the center-right New Patriotic Party… Meanwhile, in yet another twist to the political entanglement that kept Kosmos from exiting its Jubilee interest, Ghana has alleged that its petroleum laws were breached during the sale process. Its energy minister, Joe Oteng-Adjei, claims that Exxon improperly obtained access to private data without the consent of GNPC, according to a copy of a Feb. 19 letter from the minister to ExxonMobil Upstream Ventures president Robert Franklin.” theDeal.com
The global financial community has begun reverse pressure, starting with S&P’s downgrading of Ghana’s B+ rating down to a B. The stories of economic instability pressed on: “With first oil production expected to begin in the fourth quarter, hopes of a new revenue source are high for Ghanaians, who have long relied on cocoa and gold as their main export commodities. Despite having benefited from the Multilateral Debt Relief Initiative, a program designed for countries that are both impoverished and heavily indebted, Ghana has one of the highest government debt levels of all the sovereigns S&P rates in sub-Saharan Africa, says S&P analyst Christian Esters…The ratings agency worries that Ghana's public debt could reach more than 60% of gross domestic product by the end of this year.
“Ghana's GDP, which has been growing at an average rate of 6%, appears poised for a substantial boost from its deepwater petroleum. But there are concerns that behind the apparent blessing lurks the dreaded ‘oil curse,’ which in lieu of wealth has been known to bring violence and corruption. Ghanaians don't have to look very far to find the militant attacks carried out on oil-related activity in Nigeria, where the discovery of black gold has failed to lift the majority of its population from poverty… As for Ghana, its own development and capacity to pay down debt will depend in part on how much of its oil revenue flows into Ghana's budget or stays with the majors, says Esters… And then there's always Ghana's national election in 2012. ” TheDeal.com
This is a much bigger story than it might seem, since we live in world with clearly scarcer resources where oil still directs global policy, we are still mired in a recession (or something that sure looks, feels and smells like a recession) and the battle between traditional “have” nations versus “have nots” is escalating into a clash of civilizations… with corruption often diverting the wealth. Will oil spoil or save this coastal West African nation… or a bit of both?
I’m Peter Dekom, and all these little events add up to the chaos we call contemporary global politics.
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