Are There Good Institutions in Ghana’s Oil and Gas Industry?

Abstract

Managing petroleum resource revenue and turning it into a sustainable treasure is challenging, and the role of institutional factors in this regard cannot be over emphasized. Oil producing countries in Africa have not achieved better living standards. In 2001, out of 32 oil exporting countries worldwide, 6 of the 9 countries with the lowest human development indicators are in sub-Saharan Africa. Following this situation it becomes necessary for a country like Ghana with relative political stability and who recently discovered oil takes institutional measures to escape from issues of oil curse, hence the need for such a study a worthwhile venture. To do this, the study employs the use of secondary information from articles, journals, and other relevant academic literature to do desktop analysis. Deductive approach to qualitative analysis is used as this helps to devise a framework to organize and direct the data analysis. The study reveals that with the exception of Norway, who has strong productive institutions, the institutions of the rest of the three sample countries (Ghana, Nigeria and Saudi Arabia) appear to be weak. Also, the study indicates the importance and the criteria for measuring good and effective institutions, and how petroleum wealth affects institutions and reciprocally how institutions affect sustainable development and management of petroleum resources.

A framework developed in figure 3 shows that participation, human and social capitals are important determinants of institutional factors and thus necessary for sustainable development and management of petroleum resources. The framework indicates two different outcomes when hydrocarbons are discovered in a country; either sustainably managed or oil cursed depending on the kind of institutions that precede the oil discovery. The study also shows that Ghana, Nigeria and Saudi Arabia respective oil and gas industry institutions are characterized by strong destructive and weak productive institutions. How and what the oil revenue is invested in is the most crucial decision in terms of sustainable development and management. Good governance is the most appropriate option now for Ghana, Nigeria and Saudi Arabia. To do this the study recommends that the concept of ‘Good Enough Governance’ by Grindle should be employed. The idea is that these countries should pursue improvements in their governance in ways that are feasible and possible to their specific context rather than trying to replicate the so called best functioning models from a country like Norway. It is also recommended that Ghana, Nigeria and Saudi Arabia invest in human and social capital since they are vital ingredients for every functioning institution. Key words: good institutions, oil and gas