Implication of Oil and Gas Investment in Ghana

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Last updated: October 7, 2019

1. O INTRODUCTION The purpose of this chapter is to give an introduction to the motive for selecting the implications and importance of oil and gas investment as the main subject of this project work. The background and history of this project are followed by the subject, providing an introduction to the main theme of this work.

The problems for discussion are further presented in order to illustrate the main problems of this study. This chapter was completed by illustrating the structure of this study by presenting a model giving the reader an introduction to the main stages of this project. 1. 1BACKGROUND OF THE STUDYIt is undeniable that oil, christened “black gold”, fuels the global economy. Oil converted into gas, petrol and diesel fuels our various modes of transportation that allows for the movement of goods and people around the globe. Due to the enormous financial resources that can accrue from this industry, the discovery of oil in any location, particularly developing countries, is greeted with great optimism. Such was the case in the golden jubilee year of Ghana’s independence when oil was discovered in commercial quantities in the Western Region of Ghana, the same region noted historically for rubber, forestry and minerals of various kinds.

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In the golden jubilee fields alone, it is estimated that by 2011, oil production per day would hit 120,000 barrels and the revenue from the oil and gas exploration is estimated to hit an accumulated value of US$20 billion between 2012 and 2030 (Gary 2009). Ghana’s president at the time, J. A. Kufuor noted with great optimism: ‘oil is money and we need money to do the schools, the roads, the hospitals. Even without oil we are doing so well already.

Now, with oil as a shot in the arm, we’re going to fly’ (Gary 2009:5).The international community also shares in the optimism generated by the discovery and exploration of oil in developing nations. A World Development Report of the United Nations Conference on Trade and Development (UNCTAD) (2007:95) for example states that: Extractive activities [including oil exploration] can also have profound social and political impacts. They can have a positive effect on development by creating jobs, encouraging business and providing vital infrastructure for remote communities such as roads, electricity, education and health.However, the presence of substantial amounts of oil and gas reserves has been identified by many authors as a potentially mixed blessing for oil producing countries (World Bank 2006).

Hence the discovery of oil creates a sense of hope and expectation that the revenue would lead to the development of local communities and countries as a whole. 1. 2 STATEMENT OF THE PROBLEM The subject chosen for this project is “implications and importance of oil and gas investment”. The main problems that have resulted in the need to research into this topic are; 1.Huge uncertainty on potential carbon legislative frameworks, timing and exposure.

2. Scarce availability of skilled labour and shortages of sector specific machinery and equipment. 3. Changes in tax and regulatory regimes and risk of nationalization makes returns on new investment in the oil sector more uncertain. 4.

Costs and inflation: The level of investment and operating costs are other factors representing uncertainty in investing in oil and gas. High oil price levels results in high activity in the industry. High demand for skilled labour and petroleum related services drives up the cost level in the industry.The level of costs influences the profitability of projects. 5. Technology: As time goes by, exploration will discover extractable petroleum reserves in new and old areas. Existing and future technology makes it possible to undertake projects in unknown areas with more difficult conditions. Examples include petroleum production in arctic areas, at deeper sea levels and more complex development concepts.

Technology represents an uncertain factor in pioneer projects where new technology and new concepts play important roles.Investments in technology and the possibility of failure and delay make technology an uncertain factor. 6.

Oil price 7. Environmental and livelihood implications of oil and gas investment The study seeks to find out how investors in oil and gas have been able to confront the above problems and also suggest possible recommendations. 1. 3 RESEARCH OBJECTIVES Broad Aim: The broad aim of the study is to: To assess the implications and importance of oil and gas investment in Ghana. The specific objectives to be achieved are to: • Undertake a comprehensive review and analysis of the oil and gas situation in Ghana.

Analyze Ghana’s most recent oil and gas performance and highlight the specific challenges and constraints. • To ensure transparency in oil and gas exploitation and resource wealth management in Ghana. 1. 4 SIGNIFICANCE OF THE STUDY Since independence it has been part of every government’s policy to explore Ghana’s hydrocarbon deposits. Historically, exploration for oil and gas reserves in Ghana had been very limited due to the high risk nature of its terrain and low oil price environment in 2004 when the Kosmos /E. O group made initial contact with GNPC.

Between 1898 to the late nineties an estimated hundred exploration wells had been drilled in Ghana with no significant discovery except for the Saltpond oil find in 1970. Our expert opinion on the recent oil discovery in Ghana is that it should be seen as a blessing that should serve as a catalyst to drive investment to the country. The study will provide assistance to other researchers who may want to undertake a proposal on a topic that relates to this study in future and will as well help educate students, investors and the general public on the implications and importance of oil and gas investment.The study will provide insight on oil and gas investment (its implications and importance) to potential investors who may want to invest in the oil industry. Basically, the study is an essential requirement which will serve in partial fulfillment of the condition(s) for the award of associate member of the Chartered Institute of Financial and investment Analyst, Ghana. The study will also introduce the researcher to new ideas and improve upon the knowledge base of the researcher. 1.

5 SCOPE OF THE STUDYSince the Ghana’s oil find is in Western region with most of the offices of the oil companies in Accra, the researcher has chosen to conduct the research within the Greater Accra metropolitan using Tullow oil company and Kosmos Energy as a case study due to time constraints and the cost that goes into conducting a national research. The study was undertaken visiting the various offices of the sampled oil companies to know the operations of these companies. 1. 6 LIMITATION OF THE STUDYThis section of the study is to draw readers’ attention to the problems encountered by the researcher while going about the research work.

The researcher sees the study as being too tedious and time demanding and therefore questions the time frame within which he is required to complete the research work. Due to the tedious nature of the research, the researcher discovered that a research of this nature should have involved a number of researchers rather than the usual academic pattern of a researcher to a research topic or a research problem identified.The researcher also faced financial constrains as a result of transportation cost, typing and printing cost, photocopying, internet cost etc.

1. 7 ORGANIZATION OF CHAPTERS This research project is structured into five chapters; the first chapter is an introductory chapter that deals with the Background of the Study, Statement of the problem, Research Objectives, Significance of the Study, scope of the study, research hypothesis, Limitations of the Study, and Organization of Chapters.Chapter two (2) which is the Review of Literature deliberates on writings of recognized experts and previous writings relating to the problem under study. The third chapter deals with the Method used in gathering the data. It consist of a brief introduction, population of the study, area of study, sampling Procedure, sample frame and sample size, data collection method, data collection problems encountered and finally, data analysis and presentation. The fourth chapter presents analysis and the discussion of data collected.

That is the data collected is subjected to the type of analysis identified in chapter three (3). This chapter will be presented in tabular forms, graphical forms, and in writing to give concrete and reliable information to readers. The fifth chapter contains a summary, conclusions and recommendation (i. e. what the researcher thinks should be done to correct or rectify the problem).

References showing list of sources used in the research will be provided at the end of the project and also Appendices showing charts and pictures. CHAPTER TWO LITERATURE REVIEW 2. 0 INTRODUCTIONAn overview of the potential for Ghanaian oil and gas investors Introduction with the discovery in 2007 of a major untapped oil and gas field off the coast in Ghana, the die was cast for the future of the West African country. Since then a revolution has taken place to begin the process of farming the huge amount of natural resources present and transforming Ghana. Oil has been mined in Ghana in a small way since the late nineteenth century, but the discovery of a commercial level field in 2007 has brought Ghana into the realms of becoming a major producing nation.

The three blocks of crude oil deposits uncovered 65km off the coast of Ghana have been grouped together and named Jubilee field, and already the field has reaped millions of barrels of oil. “The financial benefits alone are immense, with the Ghanaian government estimating a yield of some $400 million dollars this year, a figure expected to rise to some $1 billion dollars a year once drilling is at full capacity. ” And further explorations around Ghana have revealed two more major fields, Enyenra and Tweneboa, both of which possess potential for huge amounts of oil and gas for years to come.Today, progress is well under way. In November 2010 history was made when UK-based Tullow Oil began drilling on the Jubilee field, and already the pumps are producing around 120,000 barrels of oil a day.

The financial benefits alone are immense, with the Ghanaian government estimating a yield of some $400 million dollars this year, a figure expected to rise to some $1 billion dollars a year once drilling is at full capacity. What is happening in Ghana today? With the historic first phase of drilling underway, the government and investors are looking to progress rapidly.The impact of Ghana’s new oil and gas industry are already being felt across the nation and employment is booming. In towns like Takoradi, the closest port to the Jubilee field, thousands of new jobs have been created and the flood of new workers has brought an instant turnaround in the fortunes of a town that had been in a state of decline. To prepare for the new oil and gas age, the Ghanaian government has fast-tracked a programme to set in place a legislative and regulatory framework fit to cope with the challenges and maximise the opportunities ahead.

Managing the huge surge of investment that has come into the country has been one of the key challenges, and keeping the balance between attracting backers from outside while continuing to reap the rewards within Ghana is a key priority. Also vital to the government of Ghana is to ensure that the whole industry remains transparent and accountable from top to bottom. And it has set in place ambitious targets to use the major new revenue to reduce poverty by 2015 throughout Ghana. “… growth in the economy surged to 23 % in the first quarter of 2011, compared with 9. % in the last quarter of 2010 when drilling began.

” Further exploration has been green-lighted and has been taken up in earnest by oil companies both international and domestic. One of the key players, the Ghana National Petroleum, which has already drilled 79 separate wells, has secured some ? 550 million dollars of foreign investment to date, and is continuing with major exploration and production operations in four of the major sedimentary basins, Cote d’Ivoire-Tano Basin, Central Basin, the Accra/Keta Basin and the Inland Voltaian Basin.Already the boost has been felt. In June the Ghanaian government revealed that growth in the economy had surged to 23 % in the first quarter of 2011, compared with 9. 5 % in the last quarter of 2010 when drilling began. The world is looking in at Ghana as the potential for major investment remains exceptionally high.

International oil companies and suppliers are already benefiting from early investments made in 2007 and 2008, and as more discoveries are made this trend is set to continue. Opportunities for investment The opportunities that exist in Ghana are immeasurable.Gas and oil production is nowhere near capacity and as more natural resources are discovered this potential continues to grow.

“With low crime and a stable political landscape Ghana is a safe and secure country for investment” Described by the UK Department for Trade and Investment as a “peaceful and politically stable country”, Ghana is by no means solely dependent on its new found natural resources. Already a major producer of cocoa and gold, it is estimated will account for only 6% of the national economy, compared with neighbouring Nigeria where oil and gas make up 92% of GDP.With low crime and a stable political landscape Ghana is a safe and secure country for investment.

“Ghana offers oil and gas investors the highest returns of any country in Africa… a massive 18 to 20 % yield” So much so in fact, that Ghana offers oil and gas investors the highest returns of any country in Africa. Compared with an average yield for foreign investors of between seven and ten per cent, the Ghanaian oil and gas industry brings a massive 18 to 20 % yield, and has been describe as one of the best investments currently in the world .

1 Global Energy Resource Profile: Oil and Gas in Perspective World proven crude oil reserves1 at the end of 2006 were estimated at 1,208. 2 billion barrels. Global oil reserves are unequally distributed as the data on regional composition of proven reserves in Table 2.

1 demonstrates. The Middle East region is the dominant region, accounting for 61. 5 percent of estimated world proven oil reserves. Europe and Eurasia come in a distant second, with 12. 0 percent; while Africa ranks a close third, with 9.

percent of global reserves. The geographical distribution has remained relatively unchanged in the past three decades. The OECD region, which includes the major oil-and gas-consuming countries in the world, accounts for less than 6. 6 percent of global reserves. In contrast, OPEC holds 75. 7 percent of global reserves. From a longer-term perspective, world oil reserves grew at an annual rate of 1. 7 percent between 1980 and 2006.

Reserves growth in Africa was double the global rate, at 3. 2 percent; while OPEC reserves grew 1. percent. The upward trend in proven reserves is attributable to two main factors: rising oil prices and technological progress. It is widely recognized that the upward trend in demand and crude oil prices have provided a very attractive environment for exploration and for a subsequent increase in proven and probable oil and gas reserves. Technological progress has boosted average recovery rates and also enabled economically attractive production from what was previously regarded as marginal and infra-marginal oil fields.The lopsided distribution of oil wealth has generated concerns about global access, oil geopolitics, and energy security.

In fact, the concentration of proved reserves in a few countries has been a contentious factor in the evolving state of global energy markets in past decades. 2. 1.

1 Evolution of World Energy Markets The evolution of world energy markets in the post-1970 period has been dramatic and its impact on the world economy and on politics profound.This is illustrated by the worldwide economic ripple effects caused by the volatility and occasional spectacular spikes in the prices of dominant global energy resources such as oil and gas. Another major trend with significant impact has been the fundamental changes in the structure, conduct, and performance of the oil and gas sector— including considerable improvements in oil and gas technology, unprecedented consolidation among multi-national oil companies, increasing global price transparency implicit in oil trade, new market fundamentals, and environmental considerations.The transition from a seller’s market environment (in the early 1970s), first controlled and managed by multinational oil companies and subsequently by major net oil-exporting countries (OPEC), to a buyer’s market illustrates the pro-found changes that occurred in the oil industry during the period spanning the 1970s to the late 1990s. These issues are further explored in the following section, which focuses on oil prices and on post-1990 events in particular. 2. 1. 2 Trends in Prices of Crude Oil and Petroleum ProductsCrude oil prices exhibit wide swings in times of shortage or excess supply.

The crude oil price cycle may extend over several years, even decades, responding to changes in overall geopolitical developments and to demand and supply trends. Understanding and distinguishing among the factors affecting short-and long-term behavior has been the subject of much discussion since the 1970s. The stylized facts about global energy have been widely documented; however, the scope of this publication does not allow further elaboration on the debate.This report briefly examines the recent dynamics in the industry, as highlighted by price changes and industry structure, conduct, and performance. It also draws some emerging lessons from these developments. The dramatic rise in crude oil prices in 1973–74 marked a new era in the industry. The rise in oil prices was triggered in part by the supply shortage associated with the oil embargo imposed on some major oil-consuming countries—as a result of the Middle East crisis—and the transfer of oil property rights from multi-national oil companies to oil-producing countries.

It is worth noting that oil price increases in 1973–74 and 1979–80 signaled the end of the era of inexpensive energy in general. The nominal price of oil, which was below $2 per barrel in 1970, rose to over $40 in 1981, to just over $147 in July 2008 and to about $42 per barrel in February 2009. Indeed, since the beginning of this decade, and over the past two years in particular, world oil and gas prices have risen to new historic heights. Predictably, the prices of petroleum products have also sky-rocketed, triggered partly by the development in crude oil prices.

The prices of natural gas imports, which averaged less than $2 per thousand cubic feet in the 1990s, jumped to $4 in 2001, and doubled to an annual average of $8 in 2005. Overall, large increases in gas prices in the past decade ushered in a new era with considerably higher energy prices. However, because natural gas does not have the same political profile as crude oil, its market development has been less contentious. Natural gas prices, like oil prices, have also experienced volatility since 1990. For example, the price of U. S.

natural gas |[pi|[pic] | c] | | World proven gas reserves in January 2007 were estimated to be 181. 46 trillion cubic meters. However, although the distribution of global gas resources is unequal, similar to that of crude oil, its regional imbalance is less pronounced. Of the world’s proved reserves, the Middle East region ranks first with a 40. 5 percent share (Table 2. 2); Europe, including gas reserves in Russia and the former Soviet Republics, follows closely with 35. 3 percent; while Africa ranks fourth, with 7. 8 percent.

2. 2 Patterns of Global Energy Production and ConsumptionTo understand recent energy market developments, it is necessary to examine the long-term trends and patterns of world primary energy supply and demand. The analysis is based only on commercial and conventional energy sources due to lack of data. Table 2. 3 shows that world primary energy supply rose from 288 quadrillion BTU (British Thermal Units) in 1980 to 443 quadrillion BTU in 2004. Primary energy supply almost doubled in Africa. The regional composition of global energy consumption reveals a wide disparity in global access to reliable and adequate commercial energy.Although Africa (Sub-Saharan Africa and North Africa) accounts for about 15 percent of the world’s population, it consumes only |[pi|[pic] | |c] | | [pic][pic] 2.

3 Global Perspective and Status of Oil and Gas Resources in Africa Energy is an indispensable input for economic growth and social development. Two-thirds of global energy requirements are met with oil and gas supplies. Conventional wisdom holds that energy consumption per capita is strongly correlated with the level of economic and social progress.Remarkably, the three non-renewable fossil fuels, oil, natural gas, and coal, constitute almost 90 percent of commercial energy consumed globally. The regional composition of global energy consumption reveals a wide disparity in global use and access to commercial energy. Although Africa has about 15 percent of the world’s population, it consumes only 3 percent of global commercial energy. The paradox is that Africa’s share in global energy production is about 12 percent, and trending upwards.

The evolution of world energy markets in the post-1970 period has been dramatic and its impact on the world economy and politics profound.This is illustrated by the worldwide economic ripple effects caused by price volatility and occasional spectacular spikes in the prices of the dominant global energy resources—oil and gas. World oil prices have trended ever higher since 2000, and natural gas prices have tracked along. Some of the reasons for the rise in oil prices include rising demand in emerging economies, especially in China and India, declining spare capacity in major producing countries, peaking of production in several important oil-producing areas, and lack of expansion in refinery capacity.Driven by continued high demand in the Western world, coupled with significant and accelerating new demand from emerging economies, such as China, India, and Brazil, global energy consumption is expected to grow by more than 50 percent in the first quarter of this century. Oil and natural gas are expected to be in particularly high demand by 2025, with global oil consumption (demand) projected to rise by 57 percent.

It is very unlikely, even taking into account the massive investments in the energy sector around the world, that the oil and gas industry will be able to produce and deliver sufficient energy to meet global demand.By some projections, the “peak oil” production has already been reached, or will be reached in a few years. The ensuing shortages, coupled with concomitant rising energy prices, will place significant pressure on net oil-importing societies in Africa if not addressed strategically and aggressively. Africa is endowed with vast quantities of both fossil and renewable energy resources.

Furthermore, it is the main continent in the world with frequent and substantial new findings of oil and gas: In the past 20 years, oil reserves in Africa grew by over 25 percent, while gas grew by over 100 percent.Africa’s rich oil fields and the prospects for more discoveries have transformed it into an important player and a key “target” in global oil production and resource extraction. Oil production in the continent is expected to continue to rise at an average rate of 6 percent per year for the foreseeable future. The majority of oil reserves (and production) in Africa comes from Libya, Nigeria, Algeria, Angola, and Sudan, which together produce more than 90 percent of the continent’s reserves. Proved natural gas reserves in Africa are mainly concentrated in four countries— Algeria, Egypt, Libya, and Nigeria—which possess 91. percent of the continent’s proved reserves. In particular, Nigeria’s undeveloped natural gas reserves are a logical target of the international giants in the sector.

2. 3. 1 Africa’s Oil and Gas Resources Africa is well endowed with minerals, including fossil fuels and gas resources. However, knowledge about the quantities of these resources is limited and a comprehensive, country-based assessment still remains a challenge. New discoveries of oil and gas resources on the continent continue to emerge and present unique economic opportunities.However, the exploration and exploitation of these resources are yet to benefit the populations.

Nigeria, for instance, has been exploiting oil resources for the last 50 years and is now the world’s fourth largest oil exporter. Yet, its human and physical capital development is assessed to be 400 percent lower than it would have been if the oil revenues had flown into public funds, and if such funds had been utilized in the public interest to generate economic opportunities for all (African Development Report, 2007: 108–11).Issues of concern include technical limitations, inefficient con-tract negotiations, inadequate auctioning of extraction rights, inefficient taxation, and, most importantly, poor public expenditure prioritization and (lack of) transparency in the use of revenues. The continent’s poor management of its natural resources has been a recurring theme in recent debates and need not be repeated in detail here. While there is mple evidence of countries that have managed their natural resources (gold and diamonds, for example) in ways that have benefited their populations (Botswana, Namibia, South Africa), the continent has yet to see success stories in the case of oil and gas. However, with the ever-increasing discoveries of new oil and gas (for example, in Ghana, Tanzania, Mozambique and Uganda) and prospected fields in many countries (Sierra Leone, Mali, Kenya), the oil and gas sector still offers a unique opportunity that can be harnessed.

It is critical for the continent to learn from the failures of the past in designing strategies that fully maximize the benefits of the new oil and gas discoveries. 2. 4 Key areas for investment 2. 4. 0 Exploration A series of new discoveries (see above) has opened the floodgates for major new exploration and development opportunities. Some 23,000 sq km of untapped coastal basins rich with oil are awaiting companies ready to seize the initiative and experts both within the government and from outside predict that many more thousands of kilometres of oil deposits probably exist offshore and onshore.These opportunities are in offshore deep water, offshore shallow water and onshore basins. 2.

4. 1 Refining Currently Ghana’s only refinery, the Tema Oil Refinery, is in the process of being upgraded to meet the increased demand. A major project which will more than triple the refinery’s capacity, outside private investment is being sought. Export-orientated refining An initiative by the Ghanaian government, the Export-Orientated Refinery Project, has been set up to attract global investors to the huge potential for exports.Some 70 % of the oil and gas produced in Ghana will be sold for export, and investors are being invited to establish private refineries in the Free Zone Enclaves of Ghana.

2. 4. 2 Technology The government is seeking private companies to offer a huge range of technologies to provide solutions to the many logistical challenges currently being handled. Technology providers will find countless opportunities for investment in all aspects of petroleum operations throughout the Ghanaian oil industry. Education With the creation of thousands of new jobs the need for skilled labour is exponentially growing.Outside companies that can provide education and training solutions at this crucial time will reap a great many short and long term rewards.

Looking ahead a national framework in Ghana for continuing education and training for generations needs to be established and the opportunities to capitalize on this great demand still exist in abundance. 2. 4. 3 Sustainability As a fledgling oil and gas producing nation, Ghana is highly conscious of the need to bring in sustainable technologies to prevent today’s drilling and refining being the seed for major environmental damage of the future.

An initiative by the government is already underway to attract private companies with expertise in green technologies to come forward and be involved in research and development. 2. 5 Oil and its links to forced resettlements Forced resettlements were also identified as associated with the development of extractive industries. The April 3, 2009 edition of the Sudan Tribune reported for example that in Sudan, thousands were forcefully evicted to make way for a low-sulphur crude oil venture in south-central Sudan.Through this forced eviction, the people of this community lost venerated ancestral homes, died from contamination and saw livelihoods jeopardized. Agriculture is the mainstay of a substantial number of African families and as has been documented in the works of authors such as Baanante et al (1999) and Whitehead (1999), the agricultural systems in Africa depend as much on the efforts of women as they do on the efforts of men. However, men are more likely to be cash crop farmers and food crop farmers are usually the poorest in our societies (Darkwah 2005).

Forced resettlements which jeopardise the livelihoods of women food crop farmers put undue strain on them and their families as they struggle to develop alternative livelihood practices to fend for their already cash-strapped families. 2. 6 The impacts of oil exploration on the health of citizens Another problem common in sites near oil reserves is the relatively poorer health of community members. The bulk of the literature on the impact of oil discovery and exploration in developing countries indicates the dwindling ealth status of the people in communities near oil reserves (Bloomfield 2008; Bisina 2004 and US Non-Governmental Report 1999).

A UNEP (2009) report indicates for example that the exploration of natural resources has the tendency to engender health risks and that this health risk is more acute in developing countries. For example, a report by a US Non-Governmental Delegation (1999) that visited the Niger Delta indicated that in the local communities there, diseases such as respiratory diseases, skin rashes, coughing up blood, tumours, gastrointestinal problems, different kinds of cancers and malnourishment were not uncommon.Hurtig and Sebastian (2005) also state that the incidence of haematopoietic diseases tends to increase the closer one resides to oil fields and the overall incidence of cancer is significantly higher in both men and women in the countries where oil exploitation had been going on for over 20 years. In Ecuador, for example, they note that cancer was also observed in the population under 10 years in both males and females exposed to oil exploration.

Since it is well known that women bear the brunt of the responsibility of providing care to sick loved ones, an increase in the ill-health of citizens in an oil-producing community simply increases the work burdens of already heavily-burdened women. The health risk in oil producing communities can be fatal. In Sudan, according to the April 3, 2009 report of the Sudan Tribune, 27 adults and three children have died since 2006 because of their consumption of contaminated water from the oil fields.

Explosions from pipelines have also resulted in injuries and in some cases deaths of people in the local communities. According to a UNCTAD (2007) report, because the products of the oil industry are mostly combustibles and explosives, accidents such as fires and explosion can have serious effects. In October 1998, for example, a pipeline leak led to an oil flood near the village of Jesse in the Niger Delta and ultimately resulted in an explosion in which over 700 people, mostly women and children, were reported to have died (US Non-Governmental Delegation to the Niger Delta 1999 report).Although in some instances explosions resulting in injuries and fatalities have been caused by defective pipelines, in other instances, they have been caused by attempts by the local people to siphon some oil. Attempts to siphon oil from pipelines, criminal as they may be, are what Marxist criminologists such as Quinney (1974) define as crimes of accommodation as the poor people of the local communities in response to the destruction of their livelihood attempt to siphon oil to sell in order to eke out a living.In addition to the health risk for the local communities from environmental pollution and accidents as a result of oil explorations, the influx of migrant populations also brings health problems to the local population through the introduction of new diseases. New settlers and migrant workers in some instances become vectors through which new diseases hitherto absent, are introduced into the local communities. The UNCTAD (2007) report cites the case of the Ecuadorian Amazon where the new settlers and migrant workers of ChevronTexaco introduced various diseases to the local population.

Oil exploration increases the risks and dangers associated with women undertaking their reproductive roles. These risks and dangers arise as a result of the predisposition to peculiar diseases in communities where oil exploration takes place. This coupled with poor antenatal care and malnutrition make the lives of pregnant women in these communities particularly precarious.

Research shows that pregnant women living close to oil reserves have a higher mortality risk for both themselves and that of their unborn children.According to Hurtig and Sebastian (2005), women living in communities near oil fields are at a 2. 5 higher risk of spontaneous abortion than other women. The proximity to oil reserves also predisposes pregnant women to a higher incidence of delivering children with defects. In the Ecuadorian Amazon, oil exploration by ChevronTexaco has resulted in a number of birth defects in communities close to the oil reserves (UNCTAD 2007). 2.

7 Environmental and livelihood implications of oil explorationThe oil industry, especially the exploration of oil, has destructive environmental impacts or what Watts (2001) refers to as engendering ecological violence. Oil extraction involves several environmental pollution processes (Sebastian et al 2001). A UNCTAD (2007) report indicates that oil and gas exploration impact on the environment in many negative ways by exposing it to oil leakages and spills, gas flaring, and deforestation as a result of the creation of access routes to new areas.Gas flaring without temperature or emissions control pollutes the air (Hurtig and Sebastian 2002) and releases unacceptably high levels of carbon dioxide into the atmosphere (US Non-Governmental Delegation to the Niger Delta 1999).

In Ogoniland for example, two independent studies have revealed that total petroleum hydrocarbons in the streams located there are between 360 and 680 times the European Community permissible levels (Watts 2001: 196). Oil spillages are also quite frequent in oil fields in the global south.According to the UNCTAD (2007) report, between 2000 and 2004, there were as many as 5,400 officially recorded oil spillages in the Niger Delta alone. Further studies show that these spills are far more frequent in the global south than in the global north.

Between 1982 and 1992, for example, 37% of Shell’s spills worldwide occurred in the Niger Delta (Watts 2001: 196). The environmental pollution associated with oil exploration has serious implications for the survival of species in communities near oil reserves.Oil spillage massively pollutes water bodies thereby threatening fisheries and reducing tourism, harming bird life and severely affecting ecological ocean life (UNCTAD 2007). The environmental pollution caused by oil drilling also results in a destruction of livelihoods in local communities making it difficult for the present and future generations to make a living off of their land.

Farming and fishing activities, the mainstay of these economies, literally grind to a halt with the exploration of oil.A member of the Escravos Women Coalition in describing the impact of the activities of Chevron on their community notes, “Our farms are all gone, due to Chevron’s pollution of our water. We used to farm cassava, okro, pepper and others. Now all the places we’ve farmed are sinking, we cannot farm.

We cannot kill fishes and crayfish. ” (Turner and Brownhill 2005: 172). Likewise, according to Dadiowei (2003), the ten kilometer construction of the Gbaran Deep Oil Field led to the destruction of seasonal creeks, lakes, swamp pools and other water bodies which hitherto had being relied on by fisherwomen from he Gbaran field communities for fish, shrimps and lobster. This dislodged the economic base of the women in the Gbaran communities in Nigeria leaving them with one less option for earning a living.

Gas flaring has also made it impossible for the fisherwomen of Uzere in the Delta State of Nigeria to continue to fish (Ikelegbe 2005). Likewise, the women of Ogoniland, Nigeria who earn their living as farmers can testify to the ways in which the execution of oil projects compromises their livelihoods. In late April 1993, for example, farmlands close to the Ogoni pipeline were bulldozed with no regard for the crop growing on the land.When one woman, Karololo Kogbara, attempted to salvage what little crop was left on her farmland, Nigerian soldiers safeguarding the operations of the oil company shot her in her arm. That arm was later amputated.

Sixteen years later, Karololo is one of the plaintiffs in the legal case against Shell that was heard on May 26th 2009 in a courtroom in New York. (www. shellguilty.

com accessed May 25th 2009). The situation is no different in Cameroon where the construction of the Chad-Cameroon oil pipeline by ExxonMobil, Petronas and Chevron have had serious survival implications for the Bagyeli (UNCTAD 2007).This is because the pipeline project left a 30 meter wide gap through the forest, where the Bagyeli hunted, gathered and cultivated crops. The effect of this is the loss of land and access to resources upon which Bagyeli livelihoods have traditionally been based (Nelson 2002). In the Philippines as well, the World Rainforest Movement bulletin (2009) also reports that oil exploration is affecting the fish population as some local fishes are disappearing threatening the livelihood of over 200,000 fisherfolk.Although the local traditional occupations are no longer sustainable due to the destruction of the environment through oil explorations, the vulnerability and powerlessness of the local people, particularly women, further disadvantage them on two counts. First, whatever pittances are paid as compensation claims are usually paid to the mostly male traditional rulers and local elites who are seen as the owners of the land and water resources (Ikelegbe 2005). Second, no significant efforts are made to develop alternative means of livelihood for them.

The young men and women of communities near oil reserves therefore remain unemployed. According to Bloomfield (2008), jobs in the oil industry mostly go to well-paid expatriates and Nigerians from less marginalized parts of the country while the most that residents closest to the oil fields get are casual jobs which come when there is the need to clean oil spills or pipeline bursts. Women, as Ikelegbe (2005: 2004) notes, are the least likely to gain employment in these oil companies even on these occasions.The case of the Bagyeli of Cameroon is similar. Although the Bagyeli lost their traditional livelihood as a result of the pipeline project, only 5% of them were employed by the project (UNCTAD 2007). Although the UNCTAD (2007) report does not give us any sense of how many men/women constituted the 5% of the Bagyeli who got jobs from the oil project, Dadiowei (2003) makes it clear to us that women were the last to benefit from any ‘left over’ trickling down effect of oil exploration in the Gbaran community.Ross (2008) has argued that oil producing economies in general have a poor record of incorporating women into the formal labour force. Besides the fact that women can lose livelihoods as a result of the execution of oil projects without necessarily being integrated into the formal sector, the environmental degradation, particularly the destruction of forest cover that often accompanies oil projects has serious implications for the availability of energy sources with which food can be cooked and lighting sources provided.

In many African communities such as the Gbaran in Nigeria, Dadiowei (2003) indicates that the traditional division of labour places on rural women, the responsibility for providing and managing natural energy sources required for the sustenance of the household. Bina Agarwal (1989) has long noted how village commons and forests inrural communities house a variety of resources that are crucial to the survival of rural households, particularly poor households. These include food, medicinal herbs, fodder, fibre and fuelwood.Therefore, environmental degradation in an effort to mine oil places an extra burden on women, who have to continue to provide these energy sources inspite of the loss or the scarcity of these energy resources. Perhaps because women bear the brunt of the negative impact of oil discoveries and explorations, they are at the forefront of the efforts to change the ways oil companies operate in these communities. As Ikelegbe (2005: 242) puts it, the marginality that women in oil producing communities face serves as a basis for gendered movements.In the Niger Delta for example, between July 2002 and February 2003, a few thousand women resorted to stripping in front of oil company male leaders, the most extreme traditional form of social protest which gained international recognition and led to its adoption across the world to protest not only oil activities but also the War on Iraq. A major complaint of these women was the loss of livelihoods that their children suffered and its concomitant effect on them.

As Queen Uwara, the deputy chairperson of the Escravos Women Coalition put it, A mother gets old someday, she becomes weak; the same with the father. It is your son and daughter who will be feeding you. If our children are not given work then the mothers cannot survive. They employ other tribes to work here, this time we cannot allow this kind of situation.

.. If Chevron wants to kill us, we are no longer afraid. We women have taken over the yard. But we are not afraid because Chevron is on our land. All we want is for Chevron to leave our land.

(Turner and Brownhill 2005:173) . 8 Reasons to invest in oil and gas The oil industry has been strong for almost two centuries now. And it is still getting stronger.

We know that you want to invest your money where it is profitable and stable, and the oil industry is just that. Besides that, there is a growing demand for oil. And it is expected to continue growing in the years to come. Unlike stocks, bonds, or other forms of investment, oil investment is less, if not dependent on the economy. With the economy being in recession because of oil and gas, investment in these will prove advantageous.Besides, with drilling on coastal waters being suspended recently, the demand for oil investments is super strong As soon as you hit an oil well in as soon as 60-90 days, you will start receiving money for your investment. These profits are usually quick and are always very high. You won’t be able to find any other type of investment that can offer quick returns like oil investments do.

2. 9 Importance of Petroleum Products The analysis in this section focuses on the magnitude and importance of petroleum products for society and for fueling the world economy.There are strong links between the oil industry and other sectors of the domestic economy. 2.

9. 1 Petroleum products supply chain The energy supply cycle can be divided into upstream and downstream elements: the upstream comprises exploration and production activities; while the downstream includes refining and retail activities. In basic terms, the cycle consists of acquisition of crude oil, important issue in developed countries; the same cannot be said of low income countries, where a majority of the people lives on less than $1 a day.Transportation to the refinery, refining, transportation to storage, management of inventories, and selling of final products. Specifically, the complex downstream industry consists of • Refining: Crude oil ships and refinery terminals • Refinery storage and local terminal rack • Refinery products • Wholesale: Shipping activities • Marine terminals • Local and international markets • Retail: Bulk terminal, retail/wholesale, and industrial and home usage.

2. 9. 2 Important refined productsRefineries turn crude oil into liquefied products, aliphatic chemicals, asphalt paving mixtures, aviation fuels, benzene, butylenes, resid/fuel oil/bunker, cumene, cyclic aromatic hydrocarbons, diesel fuels, ethylene, gasoline, heating oils, hydraulic fluids, jet fuels, kerosene, lubricating oils and greases, naphtha, naphthenic acids, paraffin waxes, petrochemicals, petroleum coke, petroleum jelly, petroleum lubricating oils, propane gases, propylene, solvents, styrene, tar, toluene, and xylene (EIA, 2008).Petroleum products, especially motor gasoline, diesel, and jet fuel, provide virtually all the energy consumed in the transportation sector. Transportation is the greatest single use of petroleum, accounting for over 67 percent of all U. S. petroleum consumed in 2005.

The industrial sector is the second largest petroleum-consuming sector and accounts for about 24 percent of all petroleum consumption in the U. S. The residential/commercial and electric utility sectors account for the remaining 9 percent of petroleum consumption (EIA, 2008). Distillate fuel oil includes diesel oil, heating oils, and industrial oils.It is used to power diesel engines in buses, trucks, trains, automobiles, and other machinery. It is also used to heat residential and commercial buildings and to fire industrial and electric utility boilers.

Liquefied petroleum gases (LPGs) rank third in usage among petroleum products, behind motor gasoline and distillate fuel oil. LPGs are used as inputs (feedstock) for petrochemical production processes. This is their major non-fuel use. LPGs are also used as fuel for domestic heating and cooking, farming operations, and as an alternative to gasoline for use in internal combustion engines.

Most jet fuel is a kerosene-based fuel used primarily in commercial airlines. Naphtha jet fuel meets the specifications required for certain military aircraft. Kerosene-type jet fuel is sometimes blended into heating oil and diesel fuel during periods of extreme cold weather. Although this sector uses relatively little petroleum, compared with the transportation and industrial sectors, the electric utility sector depends on petroleum for about 3 percent of its total energy requirements. Residual fuel oil is also used as bunker fuel (fuel for ships), industrial boiler fuel, and heating fuel in some commercial buildings.Kerosene is used for residential and commercial space heating. It is also used in water heaters, as a cooking fuel, and in lamps.

Petroleum coke can be used as a relatively low-ash solid fuel for power plants and industrial use (marketable coke) if its sulfur content is low enough, or used in non-fuel applications (catalyst coke), such as in refinery operations (Nigeria, 2005). Non-fuel use of petroleum is small, compared with fuel use, but it is nevertheless very important from a commercial and economic point of view.Non-fuel uses for petroleum include various specialized products for use in the textile, metallurgical, electrical, and other industries. A partial list of non-fuel uses for petroleum includes (Nageria, 2005): • Solvents such as those used in paints, lacquers, and printing inks; • Lubricating oils and greases for automobile engines and other machinery; • Petroleum (or paraffin) wax used in candy, packaging, candles, matches, and polishes; • Petrolatum (petroleum jelly) in medical products and toiletries; • Asphalt used to pave roads and airfields, to surface canals and reservoirs, and to make roofing materials and floor coverings; Petroleum coke used as a raw material for many carbon and graphite products, including furnace electrodes and liners, and the anodes used in the production of aluminum; and • Petroleum feedstock used as chemical feedstock derived from petroleum, mainly for the manufacture of chemicals, synthetic rubber, and a variety of plastics. Petroleum has been used as feedstock in the production of petrochemicals since the 1920s. Petrochemical feedstocks also include products recovered from natural gas and refinery gases (ethane, propane, and butane).Petrochemical feedstocks are converted to basic chemical building blocks and intermediates, such as ethylene, propylene, normal and iso-butylenes, butadiene, and aromatics such as benzene, toluene, and xylene, which are in turn used to produce plastics, synthetic rubber, synthetic fibers, drugs, and detergents. 2.

9. 3 Indirect Importance of Petroleum Products Petroleum products are very important for governments, essentially because they are a source of revenue through tax contributions. Furthermore, both downstream and upstream industries and associated services employ a significant number of people.

The oil industry has social responsibilities with local communities where it helps in building access, schools, and hospitals. CHAPTER THREE METHODOLOGY 3. 0 INTRODUCTION This chapter is concerned with how various methods were used by the researcher to collect data and also to analyze the data and also to analyze the data collected. This may consist of the population of the study, area of the study, sampling procedure, sampling frame and sample size, and how the data was analyzed and presented. 3.

1 POPULATION OF THE STUDYThe Oxford dictionary defines population as all the people who live in a particular area, city or country. It can also be said to be all the elements or individuals that fall within a certain specification and have certain common characteristics. The actual population consists of the Kosmos Energy and Tullow oil staffs in Ghana and therefore requires the two companies to help achieve the desired objective and to give concrete and reliable information. 3. 2 AREA OF STUDY The study was carried out at Komos Energy and Tullow oil Plc offices in greater Accra, Ghana. .

3. 0 SAMPLING PROCEDURE The concept of sampling is most fundamental to the conduct of any research and interpretation of the research results. Sampling procedure therefore is concern with how the study was carried out with reference to the type of people or group to which the questionnaires, interview and personal observation were administered and the criteria used for selecting the respondents. According to Twumasi (2001), there exist basically two types of sampling which incorporates probability and non-probability sampling. PROBABILITY SAMPLINGIn probability sampling, each and every unit within the population is given an equal chance of being selected. This type of sampling permits computation or accuracy of selection, and offer high degree of representativeness. However, it is the most expensive and time consuming type of sampling.

i. Simple Random Sampling Simple random sampling is a type of probability sampling which employs the method of drawing from a portion (sample) of a population or universe so that each member of the population has an equal chance of being selected.That is to say that, this method gives all the units of the target population equal chances of being selected. Under this method of sampling it is assumed that all the elements or individuals in the population are homogenous (i. e. the individuals for example have similar characteristics and attributes).

One most important point here is that a sample drawn at random is unbiased in the sense that no member of the population has a probable chance of being selected than any other member (Ghauri, 2002). ii. Cluster SamplingCluster sampling is the technique whereby the researcher selects a group of units from groups of similar units as a first stage in sampling. By definition, the term”cluster” means a number of units or elements of the same kind. For example, in large scale surveys, they researcher may identify areas inhabited by people from the same socio-economic background. In a particular city there may be similar areas where the elites reside. Each area is identified as a cluster. In using this technique, therefore, all the high class residential areas must be identified and through the simple random sampling method a specific residential area is selected.

After the selection of the specific area, the researcher may decide to use all the houses in the area or resort to the systematic method to select some of the houses. iii. Systematic Sampling Under systematic sampling, the selection of sample units is dependent on the selection of the previous one. It is often used in large survey. With the systematic sampling, the unit in the population must be arranged serially and then the selection will be started by finding a random number to begin with. NON-PROBABILITY SAMPLING In non-probability sampling procedure, there is no known way of estimating ampling errors. The method means that the selected sample is not representative of the population because the units in the population are not given the chance to be included in the sample.

The procedure does not call for any systematic sampling design but rather the researcher decides to take what he thinks is the representative unit of the group. i. Purposive Sampling This is a non-probability method of sampling. Under this method of sampling the researcher purposely chooses respondents who the researcher thinks are relevant to the research problem.This method is less strict and makes no claim for representativeness. They are normally used in pretesting and pilot testing of data collection instruments such as questionnaires and interviews (Ghauri, 2002). ii. Accidental Sampling This type of non-probability sampling technique is commonly used by journalists and by people engaged in pilot studies.

Under this technique, the researcher goes to the field to get whoever is available and take a certain sampling size to interview and to obtain information.In this case representativeness is not an issue. He may also consider those who are willing to be interviewed. This exercise raises all manner of questions such as; why were they willing? What type of respondents were they? What type of information are they willing to give? Why are some respondents not willing to be interviewed? The interviewees in this case show some biasness in the information they give.

iii. Quota Sampling In quota sampling the researcher selects some people from each sector of the population.For example, in studying the views of university students towards a particular issue, the researcher with a general knowledge about the characteristics of the students may decide to obtain views from a group of students from each hall. He includes some of the people on the basis of their social and demographic characteristics. The elements are taken according to the proportion in which the sampler thinks they appear in the population.

The critical requirement is that there should be enough cases from each segment of the population to make possible an estimation of the population-stratum value.The researcher employed both methods of sampling techniques in the study. The researcher employed the simple random sampling method and the purposive sampling method under probability and non-probability sampling techniques respectively.

The researcher employed simple random sampling in dealing with how a staff is selected to respond to a questionnaire or any other research instrument because the researcher believes that all the staff have similar qualifications and attributes and therefore have equal chances of responding to the research instrument being used.The researcher also chose this method to avoid biasness on his part as far as ethical rules in research are concern. The purposive sampling method was employed because it helped the researcher to select the case study and the population as well as institutions engaged in the study and employed the banking industry with reference to managers and accountants in the various institutions. 3.

4 SAMPLING FRAME AND SAMPLE SIZE A sample frame is a description of all the sampling units that make up a population or universe.Sampling unit according to Osuala (1993), is defined as the elements or set of elements considered for selection in some stage of sampling. The sample frame is also said to be a complete list of all the cases in the population from which your sample will be drawn.

For the purpose of this study the sample frame will consist of the Junior and Senior staffs of the various companies. Sample size according to Francis (1999), relates to the number of elements in the obtained sample that were picked for the study. In this study, the researcher engaged a sample size of forty (40) out of the sampling unit of one hundred and eighty (160).

This sample size represent one-third (1/4) of the sampling unit selected, which serve as a good representation of the total population to make reliable conclusions. 3. 5. 0 DATA COLLECTION METHOD Data collection method is concern with the method used by the researcher to gather the necessary information or data he requires on the research problem identified to help him make reliable and valid conclusions. One important aspect of this facet of the study is that it feeds researcher with a lot of knowledge. These are primary and secondary methods of collecting data. .

5. 1 SECONDARY DATA Secondary data is said to be the collection of information on theories proposed by others for purposes which can be different from that of the researcher. The secondary data is useful to the researcher in the sense that it helps him to answer research questions or solve some of the research problems. It provides standard measures and findings that can be compared later with the results of the study at hand. The use of secondary data is relevant to the research because it helps the researcher to save time and money.This is because with the use of secondary data the researcher can go to the library to organize notes or visit the related ministries, departments and agencies (MDAs) to collect relevant data which may be sourced internally- from invoices, annual reports, brochures and catalogues, or externally from published general statistics, industry statistics etc and reports (Ghauri, 2002). For the purpose of this research the research sought information from various issues of the annual reports of the Tullow oil Plc and Kosmos Energy in Ghana, quarterly bulletins and from various issues of Ghana oil and gas Survey.Information was also gathered from text books and also from the internet as well as newspapers-to be precise; Business and Financial Times.

3. 5. 2 PRIMARY DATA According to Ghauri (2002), primary data consist of original data collected by the researcher for the research problem at hand. The use of primary data is normally engaged to collect data which are relevant to the researcher’s study and research problem under situations where data from secondary sources are not available or are unable to answer the researcher’s questions.Under this method the research problem and research design are the criteria used for determining what to look for, ask about and collect data on. The method can be used to seek specific information on the demography of customers such as education, income, life style, age, personality and interest which might not be available on a census report (i.

e. secondary data). The primary method of collecting data normally includes observations, surveys or questionnaires and interviews. 3. 5. 3 RESEARCH INSTRUMENTS USED QUESTIONNAIREQuestionnaires are series of structured questions which are related to a research topic which are directed to a respondent with the aim of gaining first hand knowledge on the research problem at hand.

A questionnaire can also be said to be a document containing a number of questions on a particular problem under investigation. These questions are intended to be answered by particular groups of individuals and institutions believed to have knowledge or answers to the research questions. The questionnaire must be of standard, uniform, comparable and measurable.The work must be related and organized around the central theme or subject under investigation and should be undemanding to make analysis feasible. The questionnaire contained closed and opened-ended questions. The close-ended questions were easy which encouraged the respondents to co-operate while the open-ended enabled the respondents to bring out their different views to reflect the true picture of the study.

OBSERVATION It is a method of data collection whereby the field worker goes to live and participate in the daily activities of the people he is studying.It is the oldest method of data collection and employs the sense of vision as its main source. This involves the observer obtaining data by noting the behavior of people such as number of people who are doing a particular thing. This process does not involve interview and questionnaire and does not require highly skilled staff to gather information. In principle, observation applies to all social phenomenons. The limitation of the observational analysis for example, personal sensitive issues, events of past and future cannot be observed. INTERVIEWThis involves the researcher interviewing individuals or group of individuals, personalities etc.

It is a method of field investigation whereby the researcher meets his respondents and through the interaction he asks specific questions to find answers to his research problem. This method is used when respondents are willing to talk and have knowledge of the research problem. The researcher made use of the questionnaire to gather the necessary data he may require because the researcher sees it to be the best instrument to use in an environment like the banks which have busy time schedule.He also observed the activities of the banks over a short period of time. 3. 6 DATA COLLECTION CONSTRAINTS There researcher encountered some difficulties allocating the required information (e. g. text books, annual reports etc) and even getting approval from some of the institutions to administer the questionnaire.

There was also a problem of getting in touch with the target group for the interview or to administer questionnaires because of their tight schedules and reluctance of some respondents to disclose certain information.Some of the questions were poorly answered by the respondents and some questions were left unanswered. 3. 7 DATA ANALYSIS AND PRESENTATION The researcher used Statistical Packages for Social Sciences (SPSS) for analyzing the data collected from the field. Bar chart and pie chart were used to analyze and present the research findings gathered by the researcher. Other data collected were presented in writing for argument sake. The bar and the pie charts were used as graphical illustrations to show the development of the banking sector as posed by the financial policies implemented over the years.The frequencies of the bar and pie charts being one of the most frequently used technique for analysis, specify the quantitative relationship between two variables, which help to make quantitative judgments about the nature of the oil sector investment in Ghana. The pie charts and the ba

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