Natural Gas in Papua New Guinea and Oil in Ghana

This is from the New York Times the other day:

In 2014, ExxonMobil is scheduled to start shipping natural gas through a 450-mile pipeline, then on to Japan, China and other markets in East Asia. But the flood of revenue, which is expected to bring Papua New Guinea $30 billion over three decades and to more than double its gross domestic product, will force a country already beset by state corruption and bedeviled by a complex land tenure system to grapple with the kind of windfall that has paradoxically entrenched other poor, resource-rich nations in deeper poverty.

While the West’s richest companies are used to seeking natural resources in the world’s poorest corners, few places on earth seem as ill prepared as the Southern Highlands to rub shoulders with ExxonMobil. The most impoverished country in one of the world’s poorest regions, it went unexplored by Westerners until the 1930s. Believing that this rugged, mountainous region was uninhabited, the explorers were stunned to find at least one million people living here in one of the world’s most diverse areas, largely in small, distinct communities separated by different cultures, languages and nearly impassable terrain.

More often than not, the discovery or exploitation of natural resources in a country without the resources or good governance to manage the influx of wealth can spell disaster.  I have talked about this concept a few times in Develop Economies, as it pertained to diamonds in Zimbabwe.  This isn’t to say all countries with huge natural resource wealth will mismanage the gains.  Norway, for example, is the third-largest oil exporter in the world, controlling massive reserves in the North Sea.  The country has managed these resources well and, as a result, has a huge public sector, compared to other developed countries, a relatively high standard of living, and a strongly integrated social welfare system for its people.  How resource wealth is managed is most important.

Ghana is another country that has been in the news lately for a major resource find.  Very soon the country will begin extracting oil from newly-discovered fields of the coast of the West African nation.  How and to what extent it will benefit the country remains to be seen.  Ghana is more stable than some of its neighbors, such as Angola and Nigeria, who, in the past, have fallen victim to the resource trap and seen periods of strife as a result.  NPR explains:

Ghana has been praised by international rights groups for respecting democracy and human rights.

“Ghana is not going to be another Nigeria,” said Bright Simons, a development and energy analyst at IMANI Ghana, a think tank in the capital, Accra.

“There are more plausible similarities in the region. You can look at Ivory Coast, Cameroon,” Simons said. “There are several countries in Africa that produce oil, but they don’t produce it in sufficient quantities. And therefore you haven’t seen the same level of oil-induced governance and social solidarity problems that you’ve seen in Nigeria and Angola and elsewhere.”

Ghana has a comparatively strong and transparent government, as compared to its neighbors.  The discovery of oil in the country will hopefully be a blessing, rather than a curse.

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