Ghana considers new measures to regulate petroleum exploration, production

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By Francis Tandoh

Ghana?s proposed petroleum Exploration and Production (E&P) Amendment Bill, 2014, currently before its legislature, seeks to introduce new measures to maximize revenue.

oilIt has proposed a capital gain tax, rules on transfer pricing and bonus payments which could either be signature bonus or production that would be dependent on new agreements.
The Provisional National Defense Council (PNDC) Law 84, Section 2(1) states: ?No person other than the Ghana National Petroleum Corporation (GNPC)?shall engage in the exploration, development or production of petroleum except in accordance with the terms of a petroleum agreement entered into between that person, the Republic and the Corporation.?

The taxes put in place by PNDC Law 84 included royalties, surface rental or acreage fees, petroleum income tax and additional oil entitlement.
However, the new bill seeks to introduce, among other measures, pre-emption rights of the state through the GNPC.
These cover cross border cooperation and unitization, restrictions on gas flaring and licensing for installation and operation of facilities for transportation, treatment and storage facilities.

The Director of WTS Ghana, a global network of selected consulting firms, Abdallah Ali-Nakyea, said at a workshop for journalists in Kumasi, 270 km north of the national capital, recently that ?the introduction of these new fiscal requirements may have been occasioned by the de-risking of some of Ghana?s petroleum basins following the commencement of commercial production of crude oil since December 2010?.
These and other measures are geared toward ensuring the highest transparency standards of general application in the oil and gas sector.

Unlike in PNDC Law 84, the new bill also provides a comprehensive ?health and safety, security and environment? standards such as safety precautions, emergency preparedness, against deliberate attacks, and safety zones for petroleum facilities and wells.
Additionally, the new bill seeks to provide a robust environmental protection regime for petroleum activities and reaffirms the ?polluter pays? and ?exclusive liability? principles.
Ali-Nakyea observes: ?The Bill promises major improvements on the exploration, development and production regime created under PNDC Law 84 as it seeks to widen the frontiers of good governance in the management of Ghana?s upstream petroleum resources.?
Tuinese Edward Amuzu, a private legal consultant and lecturer at the Ghana Institute of Management and Public Administration (GIMPA) School of Law, shares this perspective.

?The focus of this bill is mainly to engender transparency and accountability in the exploitation of our natural resources. It?s taken for granted that transparency is good for business, is good for the citizenry, is good for companies, is good for governments so that?s the trust of this bill.?
Similar protective mechanisms exist in other parts of the world.

For example, Brazil has since 1970 allowed its citizens to make public comments on contracts as part of the evaluation process before oil contracts are awarded to companies.
South Sudan and Kenya have also come out with strong laws on the petroleum sector to protect the interest of their countries.
Thus PNDC Law 84 is essentially Ghana?s basic legislation for regulating the upstream petroleum sector, including the juridical nature and character of an operating international petroleum agreement (IPA).

Ghana discovered oil in commercial quantities in 2007 and commenced production in the last quarter of 2010.
The discovery has however heightened the interest of leading industry players, thereby opening up the country to experienced oil companies.
The actual production and utilization of oil and gas, and the growing sophistication of technological developments and modern industry needs have brought to the fore the enactment of a new legal and regulatory framework.
These are the Petroleum Commission Act, 2011 (Act 821), and the Petroleum (Local Content and Local Participation) Regulations, 2013 (LI 2204).

The new Petroleum (Exploration and Production) Bill, 2014 before parliament and Petroleum Revenue Management (Amendment) Bill, 2015, and a host of others are seeking to amend certain provisions of Act 815 to strengthen the revenue management regime.

When the new legislation comes into operation, it is expected that government revenue will increase in addition to ensuring good governance, transparency and accountability.

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