US embassy cable - 05ACCRA1812

UNCLAS SECTION 01 OF 02 ACCRA 001812 
 
SIPDIS 
 
SENSITIVE 
 
DEPARTMENT PLEASE PASS FOR TREASURY LUKAS KOELER 
MILLENNIUM CHALLENGE CORP. FOR ROD NORMAN 
COMMERCE FOR MARIA RIVERO 
USTR FOR LAURIE-ANN AGAMA 
 
E.O. 12958: N/A 
TAGS: EAID, ECON, EFIN, ENRG, ETRD, ECPS, KMCA, GH 
SUBJECT: GHANA ECON HIGHLIGHTS AUGUST - SEPTEMBER 2005 
 
 
1. (U) This report covers noteworthy economic events and 
activities in Ghana for August and September 2005.  The 
issues covered are: 
 
-- ExxonMobil Exits Ghana, Thirteen other African Countries 
-- Visit of US Coast Guard Port Security Liaison Officers 
-- MCC gives $3 million to Develop GoG Compact Proposal 
-- Ambassador's Farewell Call on Minister of Communications 
-- Ambassador's Farewell Call on Minister of Energy 
-- Fuel Price Increases 
 
ExxonMobil Exits Ghana, Thirteen other African Countries 
--------------------------------------------- ----------- 
 
2. (SBU) ExxonMobil's Africa Retail Sales Director John Bell 
and Mobil Ghana Managing Director Sam Kareem made a courtesy 
call on CDA Lanier and EconOffs to announce the sale of 
ExxonMobil's 60 percent stake in Mobil Ghana, along with its 
interests in 13 other African countries, to Total.  Bell said 
the sale was restricted to downstream, retail operations 
only.  The deal includes ExxonMobil's downstream operations 
in Mauritius, Mozambique, Zimbabwe, Zambia, Malawi, Ethiopia, 
Djibouti, Eritrea, Togo, Chad, Sierra Leone, Liberia, Guinea, 
and Ghana.  According to Bell, these operations generated 
about 20 percent of ExxonMobil's total retail revenue in 
Africa last year, with minimal profit: in 2003 they generated 
a profit of only USD 1 million, collectively.  ExxonMobil 
will retain its retail operations in 12 other African 
countries. 
 
3. (SBU) Bell explained that ExxonMobil had decided to sell 
based on lack of economies of scale and limited demand growth 
in these particular countries.  He also said that crude price 
increases forced ExxonMobil to revise its growth expectations 
for Africa downwards.  Bell felt this deal was good for Total 
as well, since the increased market share -- and access to 
Liberia and Sierra Leone -- would give it the economies of 
scale needed to be competitive and profitable in the affected 
countries.  (NOTE: The deal, if approved, will give Total 
approximately 35 percent of the market in Ghana.  END NOTE.) 
Bell also noted that this decision would have no impact on 
its upstream activities in Africa. 
 
Visit of US Coast Guard Port Security Liaison Officers 
--------------------------------------------- --------- 
 
4. (U) US Coast Guard Port Security Liaison Officers (CGPSLO) 
LT Patricia Springer and LCDR Tanya Schneider visited Accra 
August 23 - 26 to introduce Coast Guard's International Port 
Security Program.  The program is designed to help implement 
and maintain the International Maritime Organization's 
International Ship and Port Facility Security (ISPS) Code 
through the sharing of best practices and international 
exchange.  EconOffs, DATT, and CGPSLOs presented the program 
at Ghana's ports of Tema and Takoradi, and also to Minister 
of Ports Harbors and Railways, Christopher Ameyaw-Akumfi. 
 
5. (U) Meetings at both ports were productive.  GoG Security 
and Port Authority personnel gave frank assessments of the 
current level of ISPS Code implementation and challenges to 
future progress.  CHPSLOs will coordinate with EconOffs and 
Port Authority personnel to arrange the visit of a Coast 
Guard assessment team to assess specific capacity building 
needs. 
 
MCC gives $3 million to Develop GoG Compact Proposal 
--------------------------------------------- ------- 
 
6. (U) On August 11 Millennium Challenge Corporation (MCC) 
interim CEO Charles Sethness signed a grant agreement of up 
to $3 million (of 609g funds) to assist Ghana in the 
continued development of a Millennium Challenge Account 
Compact.  Ghana's Compact proposal aims to make Ghana a 
world-class exporter of high value fruit and vegetables 
through the creation of a strong investment climate.  In 
order to achieve this the proposal recommends efforts to 
improve roads, irrigation, training and access to finance. 
Minister of Finance Kwadwo Baah-Wiredu signed on behalf of 
the GoG. Ambassador Yates and Attorney General Ayikoi Otoo 
signed as witnesses.  Vice President Alhaii Aliu Mahama 
presided over the ceremony. 
 
Ambassador's Farewell Call on Minister of Communications 
--------------------------------------------- ----------- 
 
7. (SBU) During Ambassador Yates farewell call on Minister of 
Communications Albert Kan-Dapaah August 12, the Ambassador 
asked about the proposed settlement of the long-running 
Westel dispute. Kan-Dapaah explained that the parastatel 
Ghana National Petroleum Company (GNPC) had proposed to buy 
out Western Wireless International's (WWI) 70 percent stake 
in Westel for $10 million, making GNPC the sole owner. 
Kan-Dapaah was "pretty certain" that the Ministry of Finance 
would make funds available for the purchase. (NOTE: GNPC 
never paid the WWI for its original 30 percent stake in 
Westel.  Westel Managing Director Bill Taylor confirmed with 
EconOff in a telcon August 11, however, that WWI had agreed 
to sell its stake to GNPC if funds could be provided, thus 
ending the dispute.  WWI had not received payment as of 
August 31.  END NOTE.) 
 
Ambassador's Farewell Call on Minister of Energy 
--------------------------------------------- --- 
 
9. (SBU) Ambassador Yates' made a farewell call on Minister 
of Energy, Prof. Mike Oquaye August 9.  The Minister said the 
American oil company Amarada Hess was awarded a license for 
offshore exploration at least partially based on the 
Ambassador's letter July 28 to the Minister, adding that it 
was important to "consider a company's reputation and track 
record" when issuing government tenders. 
 
10. (SBU) The Ambassador asked about recent media reports 
claiming the Valco aluminum smelter would reopen before the 
end of the year and how the Ministry of Energy planned to 
supply Valco's huge power needs, which are roughly one third 
of Ghana's total demand.  The Minister confirmed that Valco 
would reopen soon and conceded that the strain on Ghana's 
power grid would be a "great burden on the nation" until the 
West Africa Gas Pipeline could be completed in late 2006 or 
early 2007. 
 
11. (SBU) The Ambassador also asked about progress on the new 
oil refinery announced by Oquaye in March.  The Ambassador 
said that Embassy Staff had not been able to find any 
information on the company slated to build the refinery, 
Arabian Gulf Oil Limited.  The Minister said that he expected 
initial feasibility studies for the refinery from Gulf Oil 
before the end of August.  He said that he knew little about 
Gulf Oil of Arabia, but added that it was important to "give 
unknown companies a chance." 
 
Fuel Price Increases 
-------------------- 
 
12. (U) On August 8 Ghana's newly created National Petroleum 
Authority (NPA) announced fuel price increases for gasoline 
and diesel of 1.67 percent and 3.41 percent, respectively. 
Kerosene and LPG -- both used for cooking by many poor 
urbanites -- were reduced by 8.33 percent and 9.26 percent, 
respectively.  The NPA was created by an act of Parliament-- 
after the GoG raised fuel prices by 50 percent in February 
--to issue fuel tenders and regulate fuel prices.  The NPA 
said the new prices were based on a weighted average of 
import prices and the ex-refinery price at the parastatel 
Tema Oil Refinery (TOR).  (NOTE: The August 8 changes were 
based on crude prices signifianctly lower than current world 
prices.  Post expects to see further changes reflecting the 
higher cost of new deliveries in the coming months.  END 
NOTE.) 
LANIER