Business News of Tuesday, 12 December 2017
The government has been urged to review, as a matter of urgency, the petroleum agreements (PAs) that have been inactive for a while and prescribe sanctions for companies that have failed to meet their minimum work obligations.
The Executive Director of energy think tank, Africa Centre for Energy Policy (ACEP), Mr Benjamin Boakye, said about 13 out of the 14 existing PAs have failed to deliver on the agreements they signed with the Government of Ghana between 2006 and 2016.
That, he said, had implications on the sustainability of oil production should the companies continue to hold on to the oil blocks without exploration.
Speaking at the launch of a petroleum contracts monitor in Accra, Mr Boakye said the government was banking its hope on oil as one of the key drivers of growth for the economy, hence the need to sustain production by ensuring that inactive contracts were reviewed and given to investors who were ready to exploit the resource.
“Government should immediately review existing PAs and their deliverables to ensure that those who are not complying with their minimum work obligations are sanctioned.”
“This should be done in an open and transparent manner to provide assurance to prospective investors that sanctions are being applied to genuinely defaulting companies,” he said.
Mr Boakye said future PAs should also spell out the specific activities for each phase with timelines to ensure that contractors progressed along a defined activity which would feed into the assessment for extensions.
“This will reduce the tendency for companies to wait until the end of a particular phase before they rush to site to work,” he said.
The petroleum contracts monitor
The report was produced with support from the Strengthening Action Against Corruption (STAAC) -Ghana.
It examined the existing non-producing petroleum agreements to measure the performance of the agreements against work obligations of the companies involved.
The report established that most of the companies had not delivered on the agreements signed with Ghana.
“The fundamental reason for the inability of the companies to deliver on the contract terms was the lack of capacity on the part of companies to invest the required amounts of money in developing the blocks,” he said.
Some of the non-producing companies also had refuge in the preliminary ruling of the International Tribunal for the Law of the Sea (ITLOS) which placed an injunction on field operations in the disputed area until the determination of the case between Ghana and Cote d’Ivoire.
Mr Boakye, however, explained that companies whose operations were outside the disputed area also significantly failed to deliver on their obligations.
The ACEP boss attributed the laxity of the companies to exploit the resource to the fact that there was no room for competition for oil blocks and how political patronage contributed to companies not complying with contract terms.
“There is no room for competition for blocks. Even in cases where two companies were interested in a block, the discretion of the minister determined who got the block with a first come, first served policy.”
“Most of the companies did not have experience in offshore operations. They did not also show solid financial capacity that can guarantee that they can procure the needed technical competencies to comply with the terms of the petroleum agreements,” he said.
The report will form the baseline for subsequent monitoring of petroleum agreements in Ghana by ACEP.