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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