May 14, 2019
The Africa Centre for Energy Policy (ACEP) has called for the immediate review of all petroleum agreements and the subsequent abrogation of non-performing contracts in the interest of the country.
According to the energy think tank, its petroleum monitor report on the performance of active petroleum contracts for this year had revealed that 12 out of the 15 entities that had petroleum agreements in the country failed to deliver on their contracts.
The Executive Director of ACEP, Mr Benjamin Boakye, who made the call at a news conference in Accra yesterday, alleged that among the lot, Tullow Ghana Limited, ENI Ghana and Aker Energy Ghana Limited were the ones that had been productive, while the 12 others failed to "even drill a well, despite holding on to the oil blocks".
"The evidence from many of the existing contracts does not paint a sustainable picture for the industry because many of the companies have not delivered on the agreements signed with Ghana,” he contended, and said the time had come for a bold action to be taken on those entities, so that Ghana could produce more oil.
Mr Boakye said it was worrying that although ACEP had consistently called on the government to prudently police petroleum contracts and abrogate non-performing ones, nothing had been done about it.
"The government has, for the past two years, been making the point that the contracts will be reviewed and non-performing ones abrogated, but nothing has been done so far. But the point is that if we fail to take steps to add to our production profile, it will be dangerous for us as a country because we rely so much on oil revenue," he stated.
He also stressed the need for performance benchmarks to be imposed on all phases of petroleum contracts before the contracts were entered into to ensure that only companies that had the capacity to deliver were given the contracts.
He called on the Ghana National Petroleum Corporation (GNPC) to be firm and demand compliance from the companies.
"If contractors fail to deliver on their work programme at any particular time, the GNPC should demand the payment of the unspent balance of the minimum expenditure requirements," he stressed.
Mr Boakye also said there was the need for the government to open a bipartisan conversation on the level of investment it wanted the GNPC to be exposed to in the exploration and production of oil.
"The GNPC is currently operating two offshore blocks and the government has given an additional block to the corporation to explore for oil. This has the risk of exposing the company to financial challenges or encouraging non-performance on the oil blocks if the GNPC is not able to respond to cash calls," he said.
He also called on the government to ensure that processes for the award of contracts on the two oil blocks that had been reserved for direct negotiations through the Ministry of Energy were done in a transparent manner.
According to him, ACEP had information that the two blocks received more than one application, for which reason the allocation process ought to be transparent, so that a reliable contractor would be found to operate the blocks.
Mr Boakye commended the government for the introduction of the competitive bidding regime for oil blocks, as required by the Exploration and Product Act, 2016 (Act 919).
He, however, said there was the need for due diligence to be done to ensure that companies that had the capacity to deliver on contracts were given the blocks.
Energy Ministry’s response
Meanwhile, the Ministry of Energy has given an assurance that due procedure would be followed to scrutinise the petroleum contracts within the confines of the law to make sure that the interest of the country was served.
The Head of Communication at the ministry, Nana Kofi Oppong Damoah, told the Daily Graphic in an interview that processes had already begun to review the contracts.
“This issue that has been raised by ACEP is already being tackled by the Ministry of Energy. The ministry is aware that 13 companies have not met the minimum work obligations but we are going through the process to review the contracts,” he said.
He explained that while some of the companies said the International Tribunal for the Law of the Sea (ITLOS) ruling had affected their contract others managed to get extensions although they had not delivered on their contracts.
When asked how fast the ministry was likely to carry through the review process and possibly abrogate the non-performing contracts, he said “these issues involve a lot of legalities and so we want to go through the process carefully so that whatever decision that is arrived at will be in favour of the country.”
Responding to ACEP’s call for transparency in the allocation of the two blocks reserved for direct negotiation by the Energy Ministry, he said the systems were in place to ensure that the process was open to all.
“It is for the purpose of transparency that the government switched from administrative bidding to open bidding system in allocation of petroleum contracts so we can assure ACEP and the public of a transparent process because the government will not rig it,” he said