Overhaul petroleum agreements regime

  • CSOs demand in wake of ExxonMobil’s exit

Government needs to overhaul the petroleum agreements (PA) regime to make the industry more attractive to international oil companies, energy sector Civil Society Organisations (CSOs) have said, following the recent exit of American oil multinational ExxonMobil.

The oil major’s exit – coupled with Aker Energy Ghana’s delay in submitting a Plan of Development (PoD) and increasing shift to clean energy globally – warn the African Centre for Energy Policy (ACEP) and Institute for Energy Security (IES), may result in the country’s hydrocarbon resources being stranded; thus denying the state of badly needed revenues.

“Government as a result has alternative options to explore in the immediate term, and in the long-term to exploit the country’s hydrocarbon resources for the benefit of the citizenry. Urgent action is required for efficient exploitation of the resources as expeditiously as possible before the ‘green’ revolution, which is directing more focus into the renewable energy space.

“Government may consider as part of strategic options improving its fiscal regimes, reviewing PAs, and resourcing the state oil company to achieve operatorship status without the usual political interferences,” IES said in a statement titled Strategic Options for Ghana as ExxonMobil Exits.

Among the options proposed by IES is included reducing royalties and other related taxes; reviewing up-front payments that the country takes, as captured in the PAs in the form of technology transfer and training; and extend the exploratory period from the current 7 years to possibly 10 years.

Others are: reviewing all existing Petroleum Agreements, particularly those that are not performing; and most importantly, limiting government influence on the Ghana National Petroleum Corporation (GNPC) to allow it focus only on hydrocarbons. This, it added, will position GNPC to take up from where the international oil companies are stopping.

“Since these fields, particularly ExxonMobil’s, are de-risked by virtue of the additional information gathered, the GNPC represented by its subsidiary Explorco can attempt to appraise the fields and venture into full production if commercial discovery is made. To beef-up GNPC’s financial and technical capability, a strategic partner can be sought to develop stranded fields,” it further noted.

For ACEP, the exit of ExxonMobil is a major setback to efforts aimed at attracting oil majors to enhance development of the oil industry – but at the same time is a wake-up call to re-examine the country’s upstream strategy so as to attract investments and align the sector with the global conversation on energy transition.

It said current trends require that the country adopt an upstream strategy that accounts for realities of the global oil industry which may have played out during ExxonMobil’s stay in Ghana.

“The future of oil continues to be extremely dicey, particularly for smaller oil producers like Ghana – which requires that Ghana remains cautious and transparent about signals it sends to the market. Speculations and the lack of active government response to them potentially undermine investment attraction,” it said in a statement to the B&FT.

It added: “Ghana also needs to be transparent in the implementation of local equity participation requirements in petroleum agreements. Operators must only be held to comply with local content provisions and choose local partners who have met the Petroleum Commission’s requirements, not impositions by government or the GNPC.

“Government must also deepen engagements with all stakeholders in the industry – including civil society actors, political actors, academia etc. – to enhance understanding of the industry and reduce occurrences of political and social controversies in the contracting process.”

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