On Oil Exploration MBA IMRE ALUMNI EVENT November 11-14, 2010, KNUST

On Oil Exploration MBA IMRE ALUMNI EVENT November 11-14, 2010, KNUST

Background The paper is not only applicable to oil and gas but major projects that are scoped in deprived communities as well. Eg, Mining, Dams, Manufacturing, Plantations etc. Ghana will soon join the league of oil producing nations when the first few tonnes of oil hit the international market. Ghana discovered oil in commercial quantities about four years ago but research into oil prospects dates back to the 1950s.

What is socio-economic Impact? Socio-economic impact examines how a proposed development will change the lives of current and future residents of a community. The indicators used to measure the potential socioeconomic impacts of a development include the following: Changes in community demographics; Changes in cost of living Demand for public services and social amenities; Changes in employment and income levels; and Changes in the aesthetic quality of the community.

Changes in Social Structure Changes in social structure and interactions among community members may occur once a new development is proposed to the community. In addition, real, measurable and often significant effects on the human environment can begin to take place as soon as there are changes in social or economic conditions.

Social Amenities Migration brings about increase in population leading to demand in utilities and social amenities absence of which brings about deprivation; potable water, electricity, telephone, roads etc. Developmental projects by local authorities take off a result of these demands thereby bringing about improvement in quality of life. Ideally, taxes and royalties must speed up development of infrastructure in the area.

Job Creation Most jobs (technical and non-technical) are skewed towards the indigenous youth. In some cases, there are contractual agreements to that effect giving the inhabitant of the area an urge over his graduate counterpart from elsewhere. Technology transfer enures to their benefit. In addition, there are numerous spin-offs in the oil industry (upstream, mid-stream and downstream) Other organizations also provide entrepreneurship training and employable skills training.

Migration As a result of the oil find, potential investors will try to enjoy first mover advantage. There will be migration towards the area with the view to getting closer to the exploration base. Most of these companies are independent contractors eg. suppliers, artisans, etc. This puts pressure on the few accommodation in the area leading to high cost of living.

Corporate Social Responsibility In order to pacify communities as a result of such consequences, companies operating in the area direct a chunk of CSR activities to the benefit of the target communities. People living in the oil communities by now will have a fair share of CSR schemes. National level Community Level Employees

Purchasing Power and Living Standards The oil industry is capital intensive and pays well. Employees in the oil industry are well paid way above the community average. Purchasing power of this focus group therefore has a spill over effect within the community especially immediate family. Employees can easily afford basic needs in the community.

Deprivation of Land When a government project is proposed in an area, in most cases, there is compulsory acquisition of land. In most cases, the acquired lands deprives the community of their livelihood. Even though the rig is offshore, communities around believe it is part of their inheritance. In the case of the oil, greater area of the territorial waters of Ghana around the Cape Three Points is no longer accessible for fishing activities which is a major livelihood for settlers along the coast.

Cost of Living There is no doubt the economic activity will open up the areas under review. This is because development follows demand. Communities tend to change as a result of foreigners and aliens. There is always demand for accommodation, hotels, restaurants, transport services etc. The improved standard of living brings about high cost of living.

Culture Adulteration Adulteration refers to the process of making something less pure by adding another substance to it. Rapid social and economic development lead to a situation where alien or foreign influences affect the traditional values of a people. It is common for the way of life of a closely-knit society to be influenced by the lifestyle of people who are in the community. Such ways of life infringe on customs, values, and beliefs. In the end, it dilutes the culture of the community.

Social Vices Hardened criminals (robbers) pitch their camps in the area since they expect higher economic gains because of the quality of businessmen who patronize the area. Prostitution and homosexual activities are heightened especially the presence of expatriates who are camped on and around the rig without spouses. Teenage and unwanted pregnancies as a result of temporal participants (haulage drivers, suppliers, job seekers, researchers etc.)

Primary Production suffers In most cases, primary production and indigenous businesses are abandoned for oil related jobs. Most fishermen and farmers within these communities may end up doing other jobs. In the end, when the project is over, the indigenes lack skills for the traditional crafts or trade in the area and are force to migrate.

Environmental Degradation Not long ago, the story of BP oil spill in the Mexican gulf was topical in the news. In the end a chunk of money have been set aside by BP to compensate those who were directly or indirectly affected by the oil spill. Whether we like it or not, there is the likelihood of gas flaring, effluent disposal and discharge, contamination that will affect our aqua-culture. In addition, movement of heavy equipment and vehicles on roads leading to the area will contribute to the environmental degradation.

Pressures from Host Communities Exploration will not last forever. For it to have a positive socio-economic impact, there must be a clear developmental agenda by government, oil companies and communities so as to prevent some of the issues we have raised from occurring. This will prevent negative advocacy that is prevalent in Ogoniland, Niger Delta. Such situations bring about insecurity in the employees of exploration companies, especially expatriates.

Conclusion There is no doubt that the oil industry will affect the country in a variety of ways at the same time. On one hand, it will have remarkable effect on the economic landscape of the country, however on the negative side, petroleum exploration and production will have adverse socio-cultural effects on the people of the oil producing communities.