…says delays deny state of much-needed revenue
The Africa Centre for Energy Policy (ACEP) has urged government to review exploration contracts of companies that have failed to invest in their oil blocks.
In all, about 12 oil agreements, awarded prior to 2016, are said to be idle. The delay in exploring and developing these blocks, ACEP said, is denying the state of an opportunity to expand and sustain its oil industry, as well as, revenue for much-needed development.
The energy think-tank said a review of these contracts will afford the government an opportunity to renegotiate or where possible, cancel such deals because some of the companies holding oil blocks lack the financial and technical capacity to execute them.
ACEP’s Head of Policy Unit, Pauline Anaman, said after seven years if a company fails to make a discovery, the law requires that it relinquishes the block. But despite what the law says and repeated calls by ACEP, 12 oil blocks awarded between 2007 and 2016 remain idle.
“Sadly, ACEP’s 2019 update of the contract monitor revealed no significant improvements from the 2017 findings. Only two companies graduated into the compliance bracket. Companies have failed to deliver on their contractual obligations due to lack of competition for blocks – all contracts monitored were granted based on the open-door policy; weak parliamentary oversight; poor track record of some companies; and political patronage of the inefficiencies we see,” she said.
ACEP, she added, “will continue to call on the government to review existing petroleum agreements and sanction non-compliant contractors.”
She spoke in Accra at the launch of Ghana Contract Monitor Platform, an online tool that provides update on work progress of non-producing extractive sector companies who have valid agreements with the Government of Ghana to explore, develop, and produce petroleum and mineral resources in the country.
The rationale of the platform is to ensure that contractors do not hold Ghana’s blocks for speculative reasons, but rather make the necessary technical and financial investments that will increase resource production for fiscal and non-fiscal benefits that drive the country’s development.
The Ghana Contract Monitor Platform, which currently reports work progress of 14 operators in Ghana’s upstream oil and gas industry, started in 2017 as a simple study into the challenges and causes of inactivity over non-producing oil blocks in the country contrary to the contractual and legal obligations on contractors to make minimum financial and technical investments within specified periods.
“It is interesting to note that the study showed gaps in the enforcement of existing petroleum agreements. Among other reasons, the evidence pointed to poor due diligence done on the financial and technical competences of the companies during contract award processes; government’s failure to strictly enforce contractual terms and impose sanctions upon breach; and lack of relevant, recent, and publicly available data on the performance of the companies to aid civil society and interested parties to track performance,” she added.
Commenting on the platform, she said “this is a representation of how far Ghana has come, from the abyss of extractive contract secrecy, to the glory of contract transparency. But contract transparency is not enough in the wake of an era of open contracting,” adding ACEP intends to expand the scope of the Ghana Contract Monitor Platform to cover mining contracts.