GHANA ECON HIGHLIGHTS AUGUST - SEPTEMBER 2005

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