# **3. The challenging road to becoming resource rich**

The sector can have many benefits and costs for a country. Our analysis is focused on the direct economic impacts and the expectations surrounding them. We analyzed the sector’s development and impact across three dimensions: resources discovered; timelines from discovery to production; and government revenues. Resources discovered and timeline to production underpin all other opportunities that a sector provides to a country; while the generation of government revenue tends to offer it the greatest potential source of benefits (Natural Resource Governance Institute, 2014) and should be an indicator of any wider disappointments. These dimensions are also easiest to measure and assess.<sup>9</sup> Each of the 12 countries we looked at has suffered from at least one disappointment on its road to benefiting from its perceived resource wealth. We now discuss these disappointments in more detail.

## **3.1 Resources discovered**

Economists often depict countries as being resource rich or resource poor based on a snapshot and using a single indicator. For example, Sachs and Warner (2001) use the single measure of resource export to GDP, Venables (2017) uses resource rent to GDP and Arezki et al. (2017) use the net present value of oil finds to GDP. In practice, the reality is more complex. Only known resource wealth can be readily assessed, but countries differ substantially in the amount of exploration undertaken (Arezki, van der Ploeg, and Toscani, 2019). Given that countries with weaker institutions are much less explored (Cust and Harding, 2019), estimates of known wealth mask how much more may be found if institutions improve. The certainty and commercial viability of resources found also varies significantly and may change over time. For example, a gas field once seen as non-viable may become lucrative once the necessary infrastructure is in place to utilize it.

In this section, we review how much the perception of the 12 countries’ resource endowments changed in the period of study.

In five of the twelve countries—Ghana, Mauritania, Mozambique, Niger and Senegal—discoveries have attracted a final investment decision (FID). Three countries—Kenya, Tanzania and Uganda— are still awaiting an FID. The initial oil discoveries in the other four countries—Guinea-Bissau, Liberia, São Tomé and Príncipe and Sierra Leone—have already been deemed to be non-commercial and abandoned by the companies. Kenya has also suffered from disappointment in this area. While its oil discoveries may still attract an FID, discoveries of gas have already been abandoned. Current estimates of oil and gas reserves in the 12 countries are provided in the appendix.

## _Resource growth_

Initial discoveries in the East and Southern African countries of Kenya, Mozambique, Tanzania and Uganda led to further discoveries and production plans. For example, after Uganda’s first oil discovery in 2006, 20 subsequent discoveries were made in blocks 1, 2 and 3A. These blocks now comprise the Albertine Graben project planned by China National Offshore Oil Corporation (CNOOC), Total and Tullow. Similarly, offshore gas discoveries in Mozambique and Tanzania in 2010 were followed by multiple others, with LNG projects now planned in both countries.

Similar success has been experienced in the West African countries of Ghana, Mauritania, Niger and

> 9 For example, government revenue forecasts are more common than, for example, employment forecasts. It is therefore easier to determine whether government revenue has disappointed rather than whether job creation has disappointed.

6