Essay: Sustainable Livelihood Approach and the Triple Bottom line Approach – Oil and Gas

This chapter reviews relevant literature in relation to the topic. It also gives an overview of the theoretical issues related to oil and gas activities. It also outlines the theoretical issues relating to the risks, problems and potential impacts which oil and gas activities can have on environment, socio-economic conditions and culture of a country if no mitigation measures are in place.
2.1 THEORITICAL FRAMEWORK
The framework for the study is Sustainable Livelihood Approach and the Triple Bottom line Approach, based on the sustainable development concept.
2.2 Sustainable Livelihood Approach
Under sustainable livelihoods, the Sustainable Livelihoods Framework is adopted as an analytical tool to show the impact of gas processing plant on local livelihoods. Thus, the relationship between assets available to local people and how this impacts on their livelihoods is addressed. It is also used to explain the vulnerabilities that Ghana gas company presents to local communities, and the various strategies local communities have adopted.
The assets of the local people are discussed, and how social trends and networks can help to introduce alternative livelihood strategies. Ellis (2000) presents this more aptly in the concept of rural livelihood diversification, which he defines as: the process by which rural households construct an increasingly diverse portfolio of activities and assets in order to survive and to improve their standard of living.
Ellis (2000) defines livelihood as ‘the activities, assets, and the access that jointly determine the living gained by an individual or household’. Wallman (1984) on the other hand sees livelihood as more than just a matter of finding or making shelter, transacting money, and providing food. To him, it is equally a matter of the ownership and circulation of information, the management of social relationships, the affirmation of personal significance and group identity, and the interrelation of each of these tasks to the other. In Carney’s (1998) presentation he defined of livelihoods that is widely accepted;
‘A livelihood comprises the capabilities, assets (including both material and social resources) and activities required for a means a means of living. A livelihood is sustainable when it can cope with and recover from stresses and shocks and maintain or enhance its capacities and assets both now and in the future, while not undermining the natural resource base’ (Carney, 1998).
As useful as the definitions are, the issues of capability and difference in access by various groups and also how culture affects sustainable livelihood is not addressed. Therefore the study re-defines sustainable livelihoods as comprising the capabilities and access of individuals and households to assets and activities that provide a means of living so that a livelihood is deemed sustainable when it operates within a traditional and cultural context adapting to and coping with vulnerability, while maintain maintaining and enhancing assets and resources. Sustainable livelihood approaches have been adopted by many players in international development as a basis for rural development practice and the environment, and various frameworks have been devised, the most common being the one documented by the UK Department for International Development (DFID) to represent relationships between 5 interrelated factors in a sustainable livelihoods system ‘ assets, transforming structures and processes, livelihood outcomes, livelihood strategies, and vulnerability context. The factors are discussed below and incorporated into the framework, which will be used to aid assessment of the socio-economic and environmental impacts of gas processing plant on livelihoods in the coastal communities of Ellembelle District.
Figure 2.1
Source: DFID 2001
The sustainable livelihood approach is used because, it practically illustrates how Ghana gas company’s intervention activities such as land displacement may possibly have an effect on certain dealings like fishing and farming on local people. Livelihood assets are briefly outlined here in the perspective of livelihood prospects and threats. The Vulnerability Context of livelihoods comprises the shocks, trends and seasonality with their potential effect on people’s livelihoods; this can be presented in form of natural disaster, conflicts, employment opportunities or increased prices for products. However Policies, Institutions and Processes can also affect ways through which people utilize their assets.
2.2.1 Impacts on Livelihood Assets
Assets
The livelihoods approach is based on the premise that the asset status of the poor is fundamental to understanding the options open to them, the strategies they adopt to attain livelihoods, the outcomes they aspire to and the vulnerability context under which they operate (Ellis, 2000). DFID distinguishes five categories of assets (or capital) ‘ natural, social, human, physical and financial (Carney, 1998). It is these assets that help communities to explore to improve their various livelihoods. The five capital assets are:
Human capital: According to Carney (1998), human capital is the labour available to a household. (Ellis 2000) also emphasizes that the most important of all the livelihood assets possessed by the poor is their own labour. This includes health and education which is provided by the state. The value of human capital is boosted by investing in training and education and is also determined by ones skills acquired through work experience. When a person is free of illness and other health challenges, he is more effective at work (Ellis 2000).The human capitals available to coastal people are their indigenous knowledge on fishing and farming and the environment in general. When these capital are improved by helping them with alternative livelihood means.
Natural capital: It is the natural resource base which yields products used by human beings for their survival (Ellis 2000). These include land, the sea, forest and tree resources, biodiversity and wildlife. When human effort is applied to natural capital, its value increases. The natural capitals available to the coastal communities are their farmlands and the sea. About 70% of the world’s poor live in rural areas (Carney 1999), and they depend on natural resources to make a living.
Social capital: Consists of social networks and connections which people join in order to get support. Examples are group representatives, social and religious organizations).The impact of the gas processing plant can be enormous as the social fabric of the coastal communities can change with the influx of migrant workers.
Physical capital: Refers to assets which are brought into being by humans as end products of economic activities (Ellis 2000). Examples are infrastructure (transport, roads, vehicles, secure shelter and buildings, water supply and sanitation, communications and energy) . The physical assets in the coastal communities include, hand-made wooden canoes, fishing nets and farm tools.
Financial capital: It includes other sources of income, such as cash, credit facilities and remittances available to a household. It is the least asset to poor people, and so all the other livelihood assets are very important. Few people in the study area have remittances from relatives or investing in piggery farming.
2.2.2 Transforming Structures and Processes
The structures and the processes are the laws, policies, societal norms, and incentives. Access, control and use of assets are influenced by the institutional structures and processes. An understanding of structures and processes provides the link between the individual, household and community ,regional, government, powerful private enterprise (Carney, 1998).Such an understanding helps to identify areas where restrictions, barriers or constraints occur and explain .In Ghana, policies include environmental and legal policies relating to oil and gas industry. District assemblies and regulatory institutions must ensure legislations are enforced and local views are integrated into policies. And opportunities created for local people.
2.2.3 Livelihood Strategies and Outcome
‘Livelihood strategies are composed of activities that generate the means of household survival’ (Ellis, 2000). Livelihood strategies change as the external environment over which people have little control changes. Natural-resource based activities may include gathering of firewood, cultivation or harvesting of food crops such as corn and rearing livestock. (Ellis 2000:41). The natural resource available to coastal communities include non timber forest product like mushroom and snails. Non-natural resource based activities are trade, remittances, and at other times livelihood activities are introduced as coping strategies. When livelihoods strategies of people are understood, it makes it easier to plan an intervention for them.
A focus on outcomes leads to a focus on achievements, indicators and progress. An understanding of livelihood outcomes is intended to provide, through a participatory enquiry, a range of outcomes that will improve well-being and reduce poverty in its broadest sense (DFID, 1998 in Carney 1998).
2.2.4 Vulnerability Context
Vulnerability context is about how people adapt to and cope with stresses and shocks when they occur. People’s livelihoods and their access and control of resources can be affected by events largely beyond their control. Vulnerability of people to life’s shocks and stresses differs. The vulnerability context firstly frames the external environment in which people exist (DFID, 1998:13),trends in population growth, national , natural resources, politics, and technology, sudden shocks or events such as disease, earthquakes, floods, droughts, conflict, problems such as disease, economic shocks, and seasonal variability of prices, production, employment opportunities can impact on livelihoods (DFID,1998).Local people are vulnerable to the drastic changes the project brings, the high expectations and perceptions of the goodwill the project brings to the communities may result in shocks when they are unmet.The vulnerability of fishing livelihoods is also increased by when the breadwinner of the family loses the source of income in the coastal communities.
2.2.5 How the Study fits into Sustainable Livelihood Framework
First of all, it shows us what people have or do not have, in terms of assets and capital. It also helps to improve our understanding about the livelihood of poor people. Thus it also shows us what factors impede livelihoods and what improve it. A major reason for developing the approach was to incorporate poor and vulnerable people into development research, program and policy making. Thus groups such as women, the poor and rural people were incorporated (Chambers 1987).
The main livelihoods of the study area are fishing, farming, net menders, petty trading and fishmongers, who all fall within this category of poor and vulnerable. Through this approach to development thinking, the voices of the poor and marginalized are heard, and their views taken into consideration in the implementation of policies. The livelihood assets of the communities within which land was acquired for the development of oil and Gas infrastructure has also been affected, hence, the need to involve the communities affected as major stakeholder developing strategies to mitigate the effects of the project on their livelihoods. In the coastal communities of Ellembelle District, the people are represented by traditional leaders and community liaison personnel at meetings and negotiations with the Ghana gas company. It encourages the bottom-up approach to solving problems.
2.3 The Triple Bottom Line Approach and Sustainable Development Concept.
The Triple Bottom Line (TBL), in congruence with sustainable development and incorporates three dimensions, often referred to as the three Ps, people, planet and profit. The TBL is an accounting framework aimed at moving beyond traditional profit measures or reporting corporate performance to incorporate social and environmental measures. The major challenge is that while economic performance is easily measured, environmental and social performances are not easily quantifiable in these terms. According to the oil and gas journal (1999) focusing on economic prosperity and the element of business environmental quality, social justice had tended to overlook.
Bose (2006), also asserts that since oil and gas resources are natural assets and non-renewable and it is generally accepted that the environmental impact from the sector is significant, so economic valuation, accounting and reporting of these resources and their environmental impacts are very important to ensure sustainable development. With the growing concern for sustainable development, there has come a demand for environmental and resource accounting. Environmental accounting may play an important role to provide the needed data on environment to different users. Environmental reporting will ensure the ‘Corporate Environmental Stewardship’ to local people. John Elkington in Cannibals with forks (1998) strongly asserts that as the world of business increases in complexity, ignoring social justice and environmental quality, and the global cultural revolutions that propel the alignment of these factors with the financial bottom line could result in extinction for businesses and suppliers unprepared for the challenges. Further, that a company’s economic sustainability would be dependent on its ability to simultaneously incorporate these values into its practices in order to yield higher overall profitability.
Sustainable development came into spread in 1987, when the world commission on environment and development (United Nations) published a report known as Brundtland Report (Garriga, Mele, 2004). Base on the report, we can understand that sustainable development meets present human activities without compromising the ability for the future generation to meet their own needs (World Commission on Environment and Development, 1987, p.8.). Moreover, sustainable development requires the integration of social, environment and economic considerations to make balance judgments for the long term (World Business Council for Sustainable Development, 2000). Other definition for sustainability are, Daily and Ehrlich (1992) suggest to consider it as improving the quality of life while living within the long run carrying capacities of supporting biophysical and social systems. This implies that every development should come at the least cost. I t is important for Ghana national gas company to incorporate the local communities needs in its operations this will contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large.’ In as much as the project is for profit it should also to ensure that development activities take in consideration environmental and social needs.
2.4 An Overview of the Oil and Gas industry in Ghana
The oil and gas industry in Ghana is made up of upstream, midstream and downstream sectors. (UNEP, 2007).The upstream sector covers activities from exploration, development and production of oil and gas it is regulated by the Petroleum Commission (PC).The PC was created to fulfill a Constitutional requirement Article 269(1) of Ghana’s Constitution which enjoins Parliament to establish a Commission to be responsible for regulation and management of the utilization of any natural resources (including oil and gas) found in the country. Additionally, Government’s policy lays a lot of emphasis on the upstream petroleum sector due to dual outcomes of it becoming a blessing or a curse. (PC,2015).The industry is unbundled with separate jurisdictions and entities regarding activities of petroleum development and production, transportation and storage and distribution.
Petroleum exploration, development and production are undertaken by International Oil Companies (IOCs) Tullow Oil Ghana and Kosmos Energy in partnership with the state owned Ghana National Petroleum Corporation (GNPC), which is a National Oil Company (NOC).The downstream sector is an onshore operation that revolves around refining, distribution, and marketing of petroleum products. The Tema Oil Refinery (TOR) and the Ghana national gas company are national downstream companies. There are other private oil marketing companies in the downstream sector. The National Petroleum Authority (NPA) established by an Act of Parliament in 2005 is to regulate, oversee and monitor activities in the downstream petroleum industry. However, downstream natural gas is regulated by the Energy Commission (EC).
2.4.1 History of oil and gas development in Ghana
Oil and gas exploration in Ghana has a chequered history from the 1880’s; there has been an attempt to develop various basins. According to the ‘Ghana Geological Survey Bulletin No. 40’ exploration for oil and gas in Ghana started in 1896 in onshore Tano basin in the Western Region. This was due to the presence of onshore oil and gas seepages found by early explorers in that area. During that period early wells were drilled without geological understanding and the benefit of seismic data.
The early part of the twentieth century, (1909 to 1925) also saw the influx of international oil companies to Ghana. Notable among them was a French oil company, Societe Francaise de Petrole (SFP) which drilled a total of six onshore. Another company, African and Eastern Trade Corporation (AETC) also drilled two wells (AETC-1&2) in onshore Tano between 1923 and 1925, progressively encountering heavy oil, light oil and gas at various depths.
According to Petroleum Commission, (2012), there was however, inactivity in exploration for a long time after the year 1925. Onshore exploration activities continued during the First Republic (1957-1966). Acting under the auspices of a Ghana-Soviet Union friendship pact, Soviet and Romanian Geoscientists explored for oil and gas in the Accra/Keta and Voltaian basins. In the G.O Kesse’s book ‘Rocks and Mineral Resources of Ghana’, reports that salt used to be mined at Daboya along the White Volta northwest of Tamale in the Northern Region. The association of salt deposits with hydrocarbons in sedimentary basins worldwide is well documented and these are all indicative pointers to the possibility of commercial accumulation of hydrocarbons in the Voltaian Basin.
In the era of 1972-1979, exploration for commercial oil, both onshore and offshore, continued and intensified. Seventeen (17) wells were drilled, with two of the wells being onshore, one in the Accra/Keta basin and the other in the Voltaian basin. The Premuase-1 well in the Voltaian basin, incidentally, is the only exploratory well in this vast frontier region to date. The Saltpond Field came on stream and started producing oil in 1978 with Agri-Petco as the operator. The first deepwater well, the South Dixcove -1X (SD -1X) was drilled by Phillips Petroleum in the offshore Cape Three Points in 2,927 ft of water. In 1979, Phillips Petroleum appraised the South Tano discovery and made gas and condensate find on the satellite 1S-3AX structure down dip of the main field. They went ahead to further appraise the South Tano find by drilling IS-4X in 1981 and later declared the South Tano discovery sub-commercial and finally relinquished the block.
When Ghana National Petroleum Corporation GNPC was established in (1983), with the passage of Petroleum Exploration and Production Law (1984) and promulgation of Petroleum Income Tax Law (1987), several Petroleum Agreements with international oil companies such as Atlantic Richfield Corporation (ARCO), Amoco, and Diamond Shamrock (Onshore Keta) were executed. (GNPC, 2009). In 1989, GNPC funded the acquisition, processing and interpretation of first 3D seismic over the South Tano Field. And drilled three wells over the South Tano Field in 1994 using its acquired drillship (Discoverer 511) and three other rigs in addition to other infrastructure to help facilitate rapid development of the Tano Fields.
Major prospecting was after the year 2001, with various companies having prospected for oil. Within this period, exploration for commercial hydrocarbons intensified with interest of some independent Oil Companies such as Kosmos Energy, Hess Corporation, Tullow Oil, Norsk Hydro Oil and Gas taking note of the potential hydrocarbon prospectivity.
First Oil discovery in the Jubilee field was in 2007 in the deep water block of Cape Three Point and Tano, by Tullow Ghana and Kosmos Energy. (Ministry of Energy, 2010). However, commercial production of oil started in the last quarter of 2010. The Jubilee field is estimated to produce between 600 million and 1.8 billion barrels, one of the largest finds in West Africa in recent years (Ministry of Energy 2010). There is also additional 800 billion cubic feet of gas in the field (ISODEC 2009).
2.4.2 Regulatory and institutional framework for the oil and gas industry in Ghana
The basic laws and regulations affecting the oil and gas exploration and development in Ghana include the following:
‘ Ghana National Petroleum Corporation Act (Act 64 of 1983)
‘ Petroleum (Exploration and production) Law 1984 (PNDCL 84)
‘ National Petroleum Authority Act (Act 691 of 2005)
‘ Petroleum Revenue Management, (Act 815)
The Ghana National Petroleum Corporation Act (Act 64 of 1983) established the Ghana National Petroleum Corporation (GNPC) with mandate to promote exploration and planned development of the petroleum resources of the Republic of Ghana; ensure the greatest possible benefits from the development of Ghana’s petroleum resources; obtain effective technology transfer relating to petroleum operations; ensure the training of citizens and the development of national capabilities; and to prevent adverse effects on the environment, resources and people of Ghana as a result of petroleum operations.
GNPC has assumed an additional role; acting as both a regulator and a commercial entity in Ghana’s oil industry. This mixed role by the GNPC underestimates the neutral role which the Corporation is expected to play in the industry.
The Petroleum (Exploration and Production) Law (Act 84 of 1984) establishes the legal and fiscal framework for petroleum exploration and production activities in Ghana. The Act sets out the rights, duties and responsibilities of contractors; details for petroleum contracts; and compensation payable to those affected by activities in the petroleum sector. Act 84 gives regulatory authority to the Ministry of Energy on behalf of the State. All petroleum operations are required to be conducted in such a manner as to prevent adverse effects on the environment, resources and people of Ghana. The act requires that a Plan of Development (PoD) for proposed developments be submitted and approved by the GNPC and the Ministry of Energy and the EPA before development of the field. The National Petroleum Authority Act (Act 691 of 2005) established the National Petroleum Authority (NPA) of Ghana with a mandate to regulate, oversee and monitor downstream activities.
The Ghana Petroleum Revenue Management Law Act, 815 was enacted in 2011. The Act offers one of the transparent means by which revenue accruing from the commercialization of petroleum resources can be safeguarded and utilised in the most equitable way. (Ghana News Agency, 2011). Section 21 subsection 5 of the law states that ‘in other to maximise the impact of the use of the petroleum revenue, the Minister (reference to the Minister of Finance) shall prioritise any four sectors when planning how to utilise the petroleum revenue’ (Asiamah, 2011). The lack of transparency in oil revenues makes it difficult to hold governments to account and to fully understand the potential economic benefit of the sector for national economies.
Even though the Act is to ensure transparency in Petroleum revenues there are suspicions from citizen and mistrust to its actual usage due to lessons learned from the mining sector. Traditional Leaders in the Western Region for instance demanded a 10% share of the Petroleum revenue to develop infrastructure of the region. (Graphic online, 2015). PWC Ghana further explains why oil and gas investors are finding it relatively easier to operate in Ghana than other African countries this is due to the rather favourable terms of their contracts which includes but not limited to: negotiable royalties (normally 10%), negotiable income tax rates (normally 35%), no import duties on exploration and production equipment and materials, no export duty on crude oil, and no restriction on repatriation of fund.
2.4.3 The Oil and Gas Industry and the Energy Sector
It is a fact that crude oil moves the world economy. Crude oil is refined into various products which go into all the means of transportation across the globe. The discovery of commercial quantity of oil and gas deposits in any part of the world is met with great optimism because of the huge financial benefits to both the government and the oil producing company. With commercial production of about 120,000 barrels per day in Ghana and an estimate of over US$20BN when exploitation of the field begins 2012 and ends 2030.Then President John A. Kuffour, of Ghana, made a correlative statement ‘oil is money and we need money to do the schools, the roads, hospitals. Even without oil we are doing well already. Now that we have oil money”we are going to fly’.(BBC,news Africa,2011). According to Rogoff (2006), oil and gas serve as a very important source of energy to industries. This contributes to the growth and development of economies of both developed and developing countries.
The same optimism is also shared by the international community when developing countries make such discoveries as can be read from the World Development Report presented at the UN Conference on Trade and Development (UNCTAD) (2007:95) for example states that; the oil and gas sector is at the heart of the global energy market as one of the two industries that produces and supply the energy needs of society. The oil and gas industry is committed to investing in new technologies to meet energy demands and the challenges of sustainability.
Demand for energy is growing and is expected to continue due to increasing in population and global higher standard of living. Although recent economic turmoil has reduced consumption in recent years, the year 2010 saw the strongest rebound with energy consumption growing by 5.6% the highest since 1973 across all forms of energy and across all regions. (BP, 2011)
Based on the position of oil and gas industry in the energy value chain, it has the potential to affect significant change related to the sustainable energy. Three particular areas of importance are: cooperation with regulators and policy makers to develop national energy plans; increasing operation energy efficiency; and investing in new renewable fuels and renewable fuels generation.
The industry is also at the forefront of creating the next-generation of advance biofuel and large scale offshore wind farms, developing and advancing renewable technologies from pilot project to scale. There are several innovation trends taking shape in the oil and gas industry to address sustainable energy opportunities and market development.
2. 5 Energy and National Development
Energy is the basic requirement of humans for almost every facet of our daily lives from heating, power and lights. It is also the key which unlocks all other resources, and will continue to be the answer to human’s physical prosperity by fuelling the modern world (NDPC, 2008).According to the United Nations Development Programme (UNDP); energy is central to sustainable development and poverty reduction efforts. Oil accounts for over 90% of global energy consumption (IEA, 2010) .The International Energy Outlook (IEO) stated that natural gas is the fastest growing component of the primary global energy consumption cited in Asamoah, (2011). Global gas utilization is projected to be more than double in the future. Nations with reliable and efficient energy supply have seen tremendous growth in their economies.
The global economy relies heavily on oil and gas to fulfill majority of its energy demands,
and it is a key indicator of the economic wellbeing of both developed and developing
nations. The International Energy Agency (IEA) predicts that global oil demand will
reach 90 million barrels/day in 2010 and about 104 million barrels/day by 2020( world Energy Outlook, 2009).
In developing countries, UN report on VOA 15 says 1.6 billion people lack access to adequate energy service. Of these 80% live in the rural areas of South Asia and sub Saharan Saharan Africa. Increasing consumption of energy has long been directly associated with economic growth and improvement in human welfare. Developing countries need more energy to develop their economies at the same rate as developed countries, through structural changes, energy consumption has been to a great extent has be decoupled from economic growth. Countries that have explored its energy potential have seen increased economic growth and improvement in welfare of the citizenry.
China and India are typical nations that have capitalized on their energy to develop their nations. China is the world’s largest and second largest producer of coal and electricity respectively. According to Lam (2005) China’s energy sector plays an important role in the economy, both in terms of employment and industrial output.
In Ghana, the discovery and exploitation of oil and the potential impact on the economy can be immense, Foreign Direct Investment (FDI) inflows constituted about 36% (US$ 5,755 billion) of the country’s GDP (US$ 16,004 billion) for the 2008 fiscal year (UNCTAD report, 2009), an increase of 115 per cent from 2002. This is because of discovered oil in 2007 and the country expects about 1 billion US dollars as revenue from the oil and gas exploration in respect of royalties, income tax and interest payment with an anticipated unit price of 60 US dollars a barrel per day. According to the Ministry of Energy’s estimate, 120,000 barrels per day is expected in the first phase of the exploration until 2015.Which is expected to increase government revenue from one billion US dollars(US$1.0 billion) in 2011 to one billion, eight hundred million (US$1.8billion) in 2016( CEPA,2010) before declining. This has been possible because the Country is now oil producing country.
The MoFEP (2008), reveal that due to the power rationing exercise in Ghana, the manufacturing sector’s contribution to GDP slacked from 9.5 per cent in 2006 to 7.4 per cent in 2008. Unreliable electricity supply in Ghana is subsequently ranked first among 13 problems identified to affect the manufacturing sector (NDPC, 2008). Thus the role of energy to national development is indispensable.
2.5.1 The socio-economic impacts of oil and gas development
The gas processing plant construction and installation may greatly impact on the socio-economic status of the local communities, the districts involved and indeed the Western Region as a whole. It is anticipated that social structures, income levels and economic wellbeing, infrastructure will be significantly improved in the project area. On the other hand, this same economic boom could impact negatively in the form of social problems. There can be therefore be positive or negative impact
2.5.2. The economic impacts of oil and gas development
Oil and gas industry the world over has transformed economies where they were properly harnessed and exploited. It is moving engine of America’s economy, the impressive and encouraging job growth across the country is made possible by oil and natural gas companies’ contributions to and investments in America’s economy. The American Petroleum Institute (State of American Energy,) in its report stated that industry supports more than $1 trillion in total value added to the economy, representing 7.3 percent of U.S. GDP. Therefore, it is no surprise the industry represents jobs created in the oil and natural gas industry paid more than $12,000 higher than the national average in 2011. And for every direct job created in the oil, natural gas and related industries, two or more indirect jobs were also generated across the U.S.economy.
U.S. oil and natural gas companies also pay considerably more in taxes than other manufacturing industries. In 2011, industry income tax expenses, as a share of pre-tax net income, averaged 40.6 percent, compared to 25.1 percent for other S&P industrial companies. This implies more revenue for the US Government.
According to Daniel Poneman (US Deputy Secretary of Energy) July 2012’The natural gas boom in the United States offers a tremendous opportunity to strengthen American energy security by drastically reducing our dependence on imported oil, while at the same time creating new U.S. jobs and industries.’ This emphasis the good fortunes the oil industry provides to nations with the resource.
The development of the oil and gas Industry in Norway has equally increased Norwegian GDP per capita from 90% to 150% of the OECD average in the last three decades .( ) Unemployment has been low accounting for the low crime rate in the country. The Norwegian government has considerably increased its net financial assets erasing a net debt of about 60% of GDP in the 1970’s. This is a contrast to other
In Africa, the oil industry has attracted many investments to oil producing countries which in a way has stimulated economic growth. Angola, the largest Oil producing nation for instance industry accounted for 90% and over 40% of export revenues and GDP respectively (mBendi, 2010). Angola as a member on in Africa of Organisation of Petroleum Exporting Countries (OPEC) has leveraged on its oil prospect to develop their economy. While oil exports from the Republic of Congo and Gabon are small in comparison with other producers in the region, the sector accounts for a significant share of GDP in both countries (50% and 37% respectively), highlighting the economic importance of the oil industry. In Cameroon and DRC, oil contributes only 6% and 4% respectively (AfDB, 2009).
Whiles countries like Angola and Libya have harnessed the benefits of their oil industry, Nigeria has suffered to maintain its oil wealth and the economy’s growth. Akanji (2011) summarises the impact of oil and gas on the Nigerian economy as follows: Nigeria has earned billions of dollars exporting oil and natural gas, but the industry has not generated the type of multiplier effects necessary to facilitate sustainable natural development and economic growth.
Since the commercial production of Oil in Ghana, the nation has been receiving significant share of petroleum revenue. The Daily Graphic of Friday, February 17, 2012, published petroleum liftings and receipts for the 4th Quarter of 2011. Total oil lifted amounted to 6,886,552 barrels out of which 949,469 barrels constituted the share of Ghana Groups (GOG/GNPC). This formed only about 13.8% of the total oil pumped within the period. The Ghana Groups total net receipts from the oil lifting amounted to US$ 54,955,054.06. This is made up of royalties of US$29,560,397.90 and Carried and Participating interest of US$ 25,394,656.16.
2.5.3 Social impacts of oil and gas industry on local communities
Social cost of oil and gas on nations has been extensive. Of all sub-Saharan African countries, Nigeria is probably the most infamous for oil production- and oil company-related difficulties. The environmental impacts of the oil industry also have economic ramifications, spanning from environmental degradation which eliminates sources of income for fishing and farming, which displaces local populations, which in turn causes the collapse of local economies. According to Clarke (2008), locals argue that in some areas agrarian land will be unusable for 25’30 years in spite of remedial action by oil companies. Oil pollution has rendered much of the delta’s agricultural land infertile, so subsistence farming and fishing communities have been denied their principal food sources (SERAC/CESR 1996).
The bulk of the literature on the impact of oil discovery and exploration in developing countries indicates the dwindling health status of the people in communities near oil reserves (Bloomfield 2008; Bisina 2004 and US Non-Governmental Report 1999). A UNEP (2009) report also confirms that the exploration of natural resources has the tendency to engender health risks and that this health risk is more acute in developing countries. For example, a report by a US Non-Governmental Delegation (1999) that visited the Niger Delta indicated that in the local communities there, diseases such as respiratory disorders, skin rashes, coughing up blood, tumours, gastrointestinal problems, different kinds of cancers and malnourishment were not uncommon. Hurtig and Sebastian (2005) also state that the incidence of haematopoietic diseases tends to increase the closer one resides to oil fields.
Oil and gas activities may lead to occupational and income losses that set in both voluntary and involuntary migration (Opukri and Ibaba, 2008). Those who stay in oil communities may end up living as aliens in their own communities, where they are unable to actualize their interest or aspirations (Opukri and Ibaba 2008). Nigeria is a typical example. Research by Okoli (2006) in the government area of River State, Nigeria, showed that oil activities have led to cases of sexual promiscuity, prostitution, sexually transmitted diseases, high rate of school drop outs, broken homes and unwanted pregnancies among others.
Eventhough Sudan has had a shorter experience with oil exploitation, Bassey (2001) compares the massive war in the oil areas with the oil wealth. ‘Southern Sudan, where most of the oil is, has long been a zone of extraction rather than of development. As a way of keeping the oil operations areas clear of conflict, the Sudanese government has resorted to bombings and the burning of entire communities to create no-man’s lands around the production wells.
Fishing communities in Angola which rely almost exclusively on fishing as a source of livelihood have their livelihoods taken away. Fish is a central food item in the Angolan diet (Agostinho et al. 2005). Angolans consume around 16 kg of fish per person per year, twice the average African. Fish accounts for approximately 9% of the population’s protein supply, although this share is likely to be much higher in coastal communities. This has highlighted the negative impacts of the oil industry on local fishing livelihoods that are already threatened by unsustainable and illegal fish in Angola.
Employment potential in the oil sector has generally not lived up to communities’expectations. While jobs in oil companies tend to be among the highest paid in oil-producing countries, they often may remain far reached from local people in many oil producing countries.
The European Parliament Policy Department (2011) blamed oil companies for giving rise to conflicts and social unrest in the areas where they operate as communities vent their anger about limited employment opportunities in the oil industry, inequitable sharing of oil revenues, environmental degradation.
2.4.2 The oil and gas industry and the Environment
The exploitation of oil and gas reserves in the world over has not always been without some environmental issues especially on biodiversity. The awareness therefore of the importance of environmental issues is now central to everyone concerned. In the UN Millennium goal 7 states ‘ensure environmental sustainability for national development.(UN millennium project.org)This is also backed by Rio declaration’s principle 4 that to achieving sustainable environmental protection shall constitute an integral part of the development process and a cannot be considered in isolation from it’. On the environmental degradation, there are numerous report s on the impact of the Nigerian gas and oil industry’s severe damage on the environment and the livelihood of many of those inhabiting the oil producing communities (Amnesty International 2009).
Various players in the oil and gas industry also recognize that its operations have potential impacts on the environment. Some of the environmental impacts may also have health, safety implications.
The extent of these changes is especially important to local people who may have their traditional lifestyles affected. Some of the environmental impacts of oil activities, according to the UNEP technical publication (1997) are emission of greenhouse gases and other gases into the air. The primary sources of atmospheric emission from oil and gas operations arise, according to UNEP technical publication (1997), from flaring, venting and purging gases, combustion process such as fugitive gases from loading operations and tankage and losses from process equipments, airborne particles. The introduction of these greenhouse gases and other gases could eventually lead to localized problems such as eye defects and respiratory diseases in the inhabitants of the surrounding areas, and more delocalized problems such as global warming.
Furthermore, the environmental pollution associated with oil exploration has serious implications for the survival of species in communities near oil reserves. Oil spillage massively pollutes water bodies thereby threatening fisheries and reducing tourism, harming bird life and severely affecting ecological ocean life (UNCTAD, 2007). The environmental pollution caused by oil drilling also results in a destruction of livelihoods in local communities making it difficult for the present and future generations to make a living off their land. Farming and fishing activities, the mainstay of these economies, literally grind to a halt with the exploration of oil. Likewise, according to Dadiowei (2003), the ten kilometer construction of the Gbaran Deep Oil Field Bayelsa state in Nigeria led to the destruction of seasonal creeks, lakes, swamp pools and other water bodies which hitherto had being relied on by fisherwomen from the Gbaran field communities for fish, shrimps and lobster.
According to Legborsi (2007) in order to address the environmental challenges associated with oil and gas exploration, there is the need for Environmental Impact Assessment (EIA). He stated that Environmental Impact Assessment (EIA) is the scientific assessment of the positive and or the negative impact a proposed project may or is likely to have on the environment and as well as the people living within the catchment area of a project. This is often done to identify the future consequences an ongoing project or those that which one yet to be implemented will create. The impact is measured as the difference between what will happen with or without the project. The necessity of an Environmental Impact Assessment may not necessarily be used to shape policy direction and to specify specific actions a government to act on. It will also inform the government, civil society organizations and opinion leaders on the opportunities that will be created in order to take advantage of such a project. (Balmford et al., 2002; Barbier and Thompson, 1998) have established that in projects where environmental impacts and management are ignored or poorly considered, the expected economic gains in the long term become sometimes elusive In extreme situations of improper environmental impact assessment and management, conflicts could be inevitable. Currently, some of the environmental concerns facing the oil and gas industry are the emissions mostly from fossil fuels Pollution in China and USA. There is a strong public and government scrutiny of oil and gas companies operations worldwide.
2.4.2 Environmental laws and legislations relating the oil and gas sector in Ghana
The constitution of Ghana requires that all citizens (employees and employers) protect and safeguard the natural environment of the Republic of Ghana and its territorial waters. This is specifically stated in Article 41(k) in Chapter 6 of the constitution. The sustainable use and conservation of marine resources are encouraged through legislation, regulations, education and awareness creation programs as well as the enforcement of existing legislation. There is comprehensive legislation and regulation on environment protection in the country.
The Environmental Protection Act (Act 490 of 1994) for instance establishes the authority, responsibility, structure and funding of the Environmental Protection Agency (EPA). EPA with the formulation of environmental policy, issuing of environmental permits and pollution abatement notices and prescribing standards and guidelines. The Act defines the requirements and responsibilities of the Environmental Protection Inspectors and empowers the EPA to request that an Environmental Impact Assessment (EIA) process be undertaken for every project.
Environmental Assessment Regulations, 1999 (LI 1652) is a principal enactment within the Environmental Protection Act (Act 490 of 1994) and it requires that an Environmental Impact Assessment (EIA) process be undertaken. Specifically, all activities likely to have an adverse effect on the environment must be subject to environmental assessment and issuance of a permit before commencement of the activity.
The problem with the Environmental laws relating to the sector is that these legislations were formulated for extractive industries in general both the mining and oil and gas industries, and are, therefore, more generalized than specific to the oil industry. Consequently, they have not been effective in the mining industry, and may therefore, face to some extent challenges in the oil industry. As Darko Mensah (2009) puts it ‘there are no comprehensive environmental laws directed at the oil industry.
2.6 Conceptual Framework
In order to examine the potential socio-economic and environmental impact of the gas processing plant on coastal communities in the Ellembele District, a conceptual framework was developed based on the literature reviewed. The conceptual framework as represented by Figure 2.2 below assumes that the communities are made up of social, economic and environmental systems that constantly interact in a harmonious manner for continuous survival benefits. In this regard, the gas processing plant on coastal communities in the Ellembelle District is assumed to have both positive and negative impact. With the potential socio-economic impact, the study assumes that the gas production within the communities would result in both positive and negative impacts. The positive impact would be that the communities would have new access to goods and services such as housing, education, healthcare, water, gas, electricity, waste disposal and consumer goods brought into the region, job opportunities, positive multiplier effects as illustrated. The negative socio-economic impact would be forced eviction due to influx of foreigners, loss of land use, conflict. Concerning, the environmental impact, the study assumes that the gas processing plant would necessitate the application of sustainable principles in the context of the Livelihood Framework which would ensure that there’s protection of the environment.
However, if these principles are not observed strictly to the fore, then the effects would be negative, thus the consequences would be pollution, greenhouse effects, diseases to human, animals.
Figure 2.1
Source: Researcher’s own illustration based on literature reviewed