Ghana is one of the most stable democracies in Africa with a record of peaceful, democratic elections and impressive economic growth. A model for political and economic reform in Africa, Ghana now has a new opportunity to become a leader in the global community thanks to recent offshore oil discoveries. The little known nation is doing everything it can to make friends with its international trading partners.
Ghana is also trying to learn from the mistakes of its better known neighbors. Take oil-rich Algeria. The North African giant once enjoyed solid reputation in the global business community. It was a model for Ghana's approach to the world. But Algeria is now enmeshed in a protracted commercial dispute between its state-owned oil and gas company, Sonatrach, and Spain’s leading integrated gas and power utility, Gas Natural Fenosa. The result is rising doubt about Algeria's willingness to be a reliable global partner.
Ghana is not as eager anymore to follow Algeria's lead.
As President Barack Obama said during his historic visit to Ghana in 2009: “Africa’s future is up to Africans.” Ghana took his view to heart. It has adopted sound and equitable business practices, which it believes are the path to becoming a prosperous nation.
To make the most of its newly found oil fields, Ghana has overhauled its Ghana National Petroleum Company (GNPC) to ensure that it can cope with the demands of oil extraction. The GNPC is committed to harmonious and cordial dealings with its domestic and foreign partners and has successfully promoted an investor-friendly environment. Ghana now has several joint agreements with foreign oil companies to extract and deliver the oil. Its relations with those partners -- quite on purpose -- has been excellent.
Ghana’s Jubilee Field oil wells, which were discovered in 2007, began pumping a few months ago. A consortium led by UK-based Tullow Oil hopes to initially produce 55,000 barrels a day and plans to double that production within six months. With the recent discovery of a second offshore field, Ghana has the potential to eventually produce as much as 10 billion barrels of oil and to double the country’s economic growth rate in the coming years.
Many oil-rich African nations have found that oil is as likely to be a curse as it is a blessing. And Ghana understands it must learn from those mistakes. Just down the coast, lies the rich oil region of the Nigerian Delta, where the discovery of oil has fueled conflict and corruption instead of funding much-needed development.
Algeria, however, was one place that Ghana did not expect to see as a reverse role model. Unfortunately, that has lately been the case.
Gas Natural Fenosa's dispute began a few years ago when Algeria's Sonatrach, citing fluctuations in the price of natural gas, demanded close to $2 billion in back payments and penalties from Gas Natural Fenosa – an excessive, unfair and unreasonable retroactive assessment.
The Spaniards do not deny that they should provide some level of compensation for increases in worldwide gas prices. But instead of accepting Spain’s repeated attempts to negotiate a fair settlement, Sonatrach rebuffed those efforts and levied the $1.9 billion retroactive tax – a levy so large that at if ever collected, it would have a devastating impact on the already-weak Spanish economy.
After two years of efforts by Gas Natural Fenosa to negotiate a fair settlement, Algeria remains inflexible and arbitration continues. Clearly a settlement is the most sensible course for both parties, but only one side is seeking that outcome in earnest. And it is not Algeria.
Algeria’s ongoing unwillingness to negotiate has caused investors and policymakers in Spain and the West to conclude that Algeria is not acting in good faith, which puts its reputation on the line.
Ghana is watching and learning. It has decided to deal with its trading partners with more respect and the outcome has been exemplary for both sides.
Jeffrey Johnson is an MSNBC contributor.
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Ghana Leads by Example, but Algeria Fails the Fairness Test
February 19, 2011
Ghana is one of the most stable democracies in Africa with a record of peaceful, democratic elections and impressive economic growth. A model for political and economic reform in Africa, Ghana now has a new opportunity to become a leader in the global community thanks to recent offshore oil discoveries. The little known nation is doing everything it can to make friends with its international trading partners.
Ghana is also trying to learn from the mistakes of its better known neighbors. Take oil-rich Algeria. The North African giant once enjoyed solid reputation in the global business community. It was a model for Ghana's approach to the world. But Algeria is now enmeshed in a protracted commercial dispute between its state-owned oil and gas company, Sonatrach, and Spain’s leading integrated gas and power utility, Gas Natural Fenosa. The result is rising doubt about Algeria's willingness to be a reliable global partner.
Ghana is not as eager anymore to follow Algeria's lead.
As President Barack Obama said during his historic visit to Ghana in 2009: “Africa’s future is up to Africans.” Ghana took his view to heart. It has adopted sound and equitable business practices, which it believes are the path to becoming a prosperous nation.
To make the most of its newly found oil fields, Ghana has overhauled its Ghana National Petroleum Company (GNPC) to ensure that it can cope with the demands of oil extraction. The GNPC is committed to harmonious and cordial dealings with its domestic and foreign partners and has successfully promoted an investor-friendly environment. Ghana now has several joint agreements with foreign oil companies to extract and deliver the oil. Its relations with those partners -- quite on purpose -- has been excellent.
Ghana’s Jubilee Field oil wells, which were discovered in 2007, began pumping a few months ago. A consortium led by UK-based Tullow Oil hopes to initially produce 55,000 barrels a day and plans to double that production within six months. With the recent discovery of a second offshore field, Ghana has the potential to eventually produce as much as 10 billion barrels of oil and to double the country’s economic growth rate in the coming years.
Many oil-rich African nations have found that oil is as likely to be a curse as it is a blessing. And Ghana understands it must learn from those mistakes. Just down the coast, lies the rich oil region of the Nigerian Delta, where the discovery of oil has fueled conflict and corruption instead of funding much-needed development.
Algeria, however, was one place that Ghana did not expect to see as a reverse role model. Unfortunately, that has lately been the case.
Gas Natural Fenosa's dispute began a few years ago when Algeria's Sonatrach, citing fluctuations in the price of natural gas, demanded close to $2 billion in back payments and penalties from Gas Natural Fenosa – an excessive, unfair and unreasonable retroactive assessment.
The Spaniards do not deny that they should provide some level of compensation for increases in worldwide gas prices. But instead of accepting Spain’s repeated attempts to negotiate a fair settlement, Sonatrach rebuffed those efforts and levied the $1.9 billion retroactive tax – a levy so large that at if ever collected, it would have a devastating impact on the already-weak Spanish economy.
After two years of efforts by Gas Natural Fenosa to negotiate a fair settlement, Algeria remains inflexible and arbitration continues. Clearly a settlement is the most sensible course for both parties, but only one side is seeking that outcome in earnest. And it is not Algeria.
Algeria’s ongoing unwillingness to negotiate has caused investors and policymakers in Spain and the West to conclude that Algeria is not acting in good faith, which puts its reputation on the line.
Ghana is watching and learning. It has decided to deal with its trading partners with more respect and the outcome has been exemplary for both sides.
Jeffrey Johnson is an MSNBC contributor.
