Government needs to take action against 13 companies which have acquired oil blocks but so far failed to invest in them, the African Centre for Energy Policy (ACEP) has said.
The energy policy think-tank said domestic oil production and revenues could dwindle in the future and that high hopes of national economic growth could also be dampened if government fails to engage companies on the way forward, or cancel those contracts numbering up to 13.
In all, Ghana has 15 Petroleum Agreements excluding the ExxonMobil deal, out of which only two have been developed.
“The evidence from many of the existing contracts do not paint a sustainable picture for the industry. Most of the companies have not delivered on the agreements signed with Ghana,” ACEP’s Executive Director, Benjamin Boakye, told the B&FT at the launch of a new report in Accra.
The report, titled ‘Petroleum Contracts Monitor, 2019: A Public Interest Report’, examines the existing non-producing petroleum agreements to measure their performance against work obligations of the companies involved.
“Some of the companies are not performing and they are not ready to give up the blocks. The contracts defined their responsibilities and the work programme for them, so if they are not satisfying the work programme, then they have to relinquish the blocks and allow those who can actually work on those blocks to come in,” Mr. Boakye said.
When someone is sitting on a block, he said, it means that they are deferring the possibility of producing oil and ultimately denying the country vital revenue needed for development, “because they are not doing the work they are supposed to do. It is only when you drill that you can discover oil; so, if they are not drilling they are not discovering oil”.
He explained that some of the companies cited the preliminary ruling of the International Tribunal for the Law of the sea (ITL0S), which placed an injunction on field operations in the disputed area – until determination of the case between Ghana and Ivory Coast – as their reason for holding back investments.
However, two years after the ruling in favour of Ghana, he said, the story has not changed.
He added that companies outside the disputed area have also failed to deliver on their obligations: “This failure is the direct function of non-enforcement of contracts terms by government”.
On recommendations, ACEP said government should immediately review existing Petroleum Agreements and their deliverables to ensure that those who are not complying with their work obligations are sanctioned – while future Petroleum Agreements should detail the specific activities for each phase with timelines to ensure contractors progress along a defined activity chart.
It also charged the Ghana National Petroleum Company to be firm and demand compliance with minimum work obligations, and said government should initiate a bipartisan conversation about the level of investments GNPC should be exposed to.
The Petroleum Commission, ACEP recommended, should also deepen the transparent monitoring process through publication of companies’ deliverables to allow for independent monitoring by civil actors.
The reported also said the two oil blocks, allotted for direct negotiation and receiving more than one application, should be subjected to a transparent process of selecting eventual contractors to operate. This, it noted, will promote fairness and also ensure that the country gets the best from the process.