When US Assistant Secretary of State for African Affairs, Johnnie Carson, visited Ghana after the Mills administration assumed power, he had a round-table discussion with representatives of foreign oil and gas companies operating in Ghana, about the advantages and the risks of doing business in our country.
For a fly-on-the-wall view of what took place on that occasion, I am posting the leaked diplomatic cable of the meeting, which I have culled from the Wikileaks website.
It makes for very interesting reading - as one rarely gets to listen-in on such plain-speaking from high-ranking executives of foreign corporate entities operating here.
Alas, mere mortals like us, only get fed with the usual bland and non- controversial corporate-speak, sanitised for public consumption, from their corporate affairs departments - whenever they are obliged to comment on industry or national issues. Please read on:
"10ACCRA157, OIL IN GHANA - THE GOOD, THE BAD AND THE UGLY
10ACCRA157
2010-02-24 18:18
2011-08-30 01:44
CONFIDENTIAL
Embassy Accra
VZCZCXRO2329
RR RUEHPA
DE RUEHAR #0157/01 0551818
ZNY CCCCC ZZH
R 241818Z FEB 10
FM AMEMBASSY ACCRA
TO RUEHC/SECSTATE WASHDC 8915
INFO RUEHZK/ECOWAS COLLECTIVE
RUEAIIA/CIA WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/USDOC WASHDC 0737
RHEHAAA/WHITE HOUSE WASHDC
C O N F I D E N T I A L SECTION 01 OF 03 ACCRA 000157
SIPDIS
WHITE HOUSE FOR USTR LAURIE-ANN AGAMA
USDOC FOR MAC/ITA
DEPT OF TREASURY FOR ADAM BARCAN
DEPARTMENT FOR EEB/CBA SUE SARNIO
DEPARTMENT FOR EEB/OIA BRADLEY STILWELL
DEPARTMENT FOR AF/EPS
DEPARTMENT FOR AF/W NOLE GAREY
E.O. 12958: DECL: 02/23/2020
TAGS: EPET ENRG EINV ECON GH
SUBJECT: OIL IN GHANA - THE GOOD, THE BAD AND THE UGLY
Classified By: Economic Chief Phil Cummings for reasons
1.4 (b) and (d).
PLEASE CLOSELY PROTECT ALL CORPORATE SOURCES.
¶1. (C) SUMMARY. During a business roundtable with AF
Assistant Secretary Johnnie Carson, oil and gas companies
discussed both the advantages and the risks of doing business
in the energy sector in Ghana. The country stands at a fork
in the road regarding the use of Ghana's modest future oil
and gas revenues: they could enhance the development of
Ghana, or oil money could lead to increased corruption,
violence, and environmental degradation. Companies praised
the competence of the labor force and government, and a
favorable security situation in Ghana as reasons to operate
here. They also raised numerous concerns with a politicized
bureaucracy, energy companies thrust into the center of the
national sport of political football, and unrealistic goals
set by the public and government. Worryingly, there is
growing uncertainty over whether the GOG will honor contract
sanctity after political transitions. END SUMMARY.
¶2. (C) During his visit to Accra, Assistant Secretary Carson
met with representatives from oil and gas companies for a
roundtable discussion on their experiences operating in
Ghana. He opened the meeting by saying that the discovery of
oil presents a choice for Ghana. The government can use the
oil revenues to provide economic growth, hope and
opportunity; or the oil can provoke the country to violence,
chaos, environmental destruction and corruption. He said
that the USG promotes U.S. investment in Ghana's oil sector
and the use of Ghana's natural resources to benefit its
people, not a corrupt elite.
-----------------------------
THE GOOD: SAFETY AND SECURITY
-----------------------------
¶3. (C) Many company representatives spoke of Ghana being a
preferred country in Africa. Technip and Tullow spoke
specifically about safety and security in Ghana. Tullow
explained that in many countries, even those with prior
experience developing oil fields, it can take 5-7 years to
move from oil discovery to production. In Ghana, it will
take only four, which speaks highly of the government and
labor base. Schlumberger's Transportation Management Center
for Africa is headquartered in Ghana, and they are
transferring regional staff from Lagos to Ghana because of
the favorable environment.
--------------------------------------------- ---------
THE BAD: POLITICIZATION OF THE BUREAUCRACY, POLITICAL
FOOTBALL WITH PETROLEUM AGREEMENTS, UNREALISTIC GOALS
--------------------------------------------- ---------
¶4. (C) The oil company representatives described red flags
they had seen in other countries when countries began to
misuse oil sector revenues. Anadarko said they believed the
warning sign was politicization of the bureaucracy. They
said that since the NDC has come to power, there has been
"radical change" in implementation of the Petroleum
Agreements signed under the previous administration.
Furthermore, they said that Anadarko and other companies have
been caught up in the "political football game" in the press,
despite their best intentions to stay politically neutral.
They added that there were a number of non-governmental
advisors complicating the bureaucratic process, with which
Qadvisors complicating the bureaucratic process, with which
Schlumberger's representative agreed.
¶5. (C) Several company representatives also described
unrealistic expectations of how the oil sector can bring
wealth and employment in Ghana. Anadarko cautioned that oil
production is capital intensive, not labor intensive, so
there will not be a big need for Ghanaian labor.
Furthermore, they said that many companies, including
Technip, would have to bring equipment and contractors from
outside of Ghana to operate effectively. Anadarko expressed
concern that in the next election oil companies will become a
target when the Ghanaian people are frustrated with their
unmet expectations. NOTE: Post is now only beginning to see
signs of the Ghana National Petroleum Corporation and Energy
ACCRA 00000157 002 OF 003
Minister attempting to dampen public expectations. END NOTE.
¶6. (C) Anadarko said that the Energy Ministry has drafted a
local content policy document that mandates that the oil
companies hire 90 percent of their employees locally within
10 years. COMMENT: Although the GOG is not currently
enshrining this exhortative policy in law, this policy,
currently receiving public comment, has triggered serious
concern among oil companies in Ghana. END COMMENT. Tullow
has about 80 percent Ghanaian employees, including 50 percent
of management. Tullow also said that the GOG is considering
a policy that would require oil companies to use 90 percent
local content over time, a figure that is essentially
impossible. He noted that in Trinidad, a country Ghana often
uses as a model, oil companies use about 10 percent local
content.
------------------------------------------
THE UGLY: CONCERNS ABOUT CONTRACT SANCTITY
------------------------------------------
¶7. (C) The primary concerns of many of the representatives
were contract sanctity and rule of law. Tullow said the
government is "turning a blind eye to what the contracts
actually say," a threat to the investment climate in Ghana.
He said it was important to feel confident that contracts
will remain in place over different administrations, and they
do not have confidence in that level of consistency in Ghana.
Tullow said that in their experience, unfavorable laws that
are consistent are preferrable to inconsistently applied
favorable laws.
¶8. (C) Kosmos agreed and said that the Mills Administration
had "systematically interfered" with the sale of its asset.
They said that sanctity of contracts is "out the window" in
Ghana, and the government is trying to "shake us down."
Kosmos said that this interference by the GOG was a
deliberate attempt to lower their reputation, and thereby
drive down the value of their asset. They described their
experience as a "pattern of government misbehavior" and said
Ghana could not be called a democracy in spite of their
elections because of their behavior between elections. The
Assistant Secretary disagreed with this assessment of
democracy, but agreed that sanctity of contracts is crucial.
Schlumberger attributed the GOG's interference in the sale of
Kosmos's asset to political concerns. They said that because
Kosmos's financial partners are linked to the opposition
party, the current administration is unwilling to let them
sell their asset out of fear that it will provide their
political rivals with funding.
¶9. (C) Anadarko's representative also expressed concerns
about their contract. In Ghana, as in many countries, he
said that the government must approve the sale of an asset in
the oil sector. However, he believes that in Ghana the GOG
will insist on the right to buy the asset being sold, even
though that is not specified in the contracts. Tullow echoed
this sentiment. Anadarko added their concern that contracts
from the previous administration will not be considered valid
in this administration.
¶10. (C) Tullow brought up Norwegian company Akers SA, which
was granted a Petroleum Agreement and shot about 2,500 km of
3D seismic images, a very expensive endeavor. Recently, the
Q3D seismic images, a very expensive endeavor. Recently, the
Minister of Energy announced that he wanted to re-negotiate
the license over a seemingly minor issue, and Akers is now
suing. The Assistant Secretary said that these problems are
very damaging to the reputation of Ghana, and will be
problematic both for U.S. companies and for the economic
growth of Ghana.
¶11. (C) In his closing remarks, the Ambassador asked
companies to keep the Embassy in the loop. He assured them
we would be discreet if they need us to be, but said that it
would help in the way we interact with the GOG if we know
about their experiences.
¶12. (C) Roundtable Participants (PLEASE PROTECT):
Assistant Secretary Johnnie Carson
Ambassador Don Teitelbaum
Economic Chief Phil Cummings
ACCRA 00000157 003 OF 003
Rob Scott, Anadarko Petroleum Corp.
Sam Eshun, Schlumberger Technical Services Inc.
Ted Harrigan, Tullow Oil
Kevin Black, Kosmos Energy
Boniface Plahar, Balkan Energy
Stephane Sole, Technip
Kofi Tornam Afenu, Vanco
¶13. (C) This cable has been cleared by Assistant Secretary
Carson.
TEITELBAUM". Culled from the Wikileaks website.
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