Parliament must protect the interest of Ghanaians on oil contracts

Parliament house
Parliament house

By Francis Tandoh

Ghana discovered oil in commercial quantities in July 2007 but commenced production in November 2010.

Parliament house

The expectation of many Ghanaians was that the newly found wealth would boost the fortunes of the country, which also produces cocoa, gold, diamond, manganese and bauxite.

Ghana has so far earned 2.7 billion US dollars after four years from oil production with the foreign companies making 8.448 billion U.S. dollars.

In March 2009, then President John Evans Atta Mills, in an address to parliament expressed the government?s commitment to full disclosure of all present and future oil contracts to ensure transparency and accountability.
Subsequently the country?s legislative body passed the Petroleum Revenue Management Act (PRMA) 2011 Act 815 to regulate the new sector. The World Bank (WB) and the International Monetary Fund (IMF) have projected that Ghana could make 20 billion dollars from its oil fields within 20 years.

But a Ghanaian oil and gas management expert, Frank Toledzi, has estimated that the country could earn 20 billion dollars more than the WB and the IMF have projected if it conducts due diligence while signing oil contracts.

Ghana, since the discovery and exploitation of oil, has signed 23 contracts with various firms. In 2014, for example, eight oil contracts were signed by the government with Med Songhai, AMNI International, CAMAC Energy and Heritage Oil Plc, Sahara Energy Fields, UB Resources Limited, Brittania-U, and Eco Atlantic Oil & Gas Limited.

Parliamentary ratification is an important component in the licensing regime, which is embedded in the principle that natural resources belong to the people who must of necessity benefit from them. Article 268 of the 1992 Constitution of the Republic of Ghana requires international transactions to be ratified by Parliament. Parliament, accordingly, has its own Standing Orders (SO) to regulate its proceedings. However, it can waive any of these when it deems it necessary.

The first of these contracts was over the Expanded Shallow Water Tano Block between the Government of Ghana, the Ghana National Petroleum Corporation (GNPC), CAMAC Energy Ghana Limited and Base Energy Ghana Limited. The second contract over the Central Tano Block Offshore was between the Government of Ghana, GNPC and AMNI International Petroleum Development Company (Ghana) Limited.

These contracts were laid before the House on February 27, 2014, and approved within six hours after the notice of the motion. This made civil society groups, energy experts and think tanks send a strong warning that Ghana risked losing out if oil contracts were signed without due diligence.

A member of the Public Interest and Accountability Committee (PIAC), Yaw Owusu-Addo, told Xinhua in an interview that the way oil contracts were approved by Parliament was not the way to go for the country. ?I think that the best way to do oil contract is not to rush it through Parliament as we are seeing today. This is simply not right,? he stated, adding: ?Our House has not been fair to future generations.?

Dr. Steve Manteaw, Chairman of the Civil Society Platform on Oil and Gas and member of the Ghana Extractive Industry Transparency Initiative (GHEITI), shared his thoughts on ratifying petroleum contracts in a mad rush. ?Well, whether or not it is right to be passing oil contracts in a rush would be subject to the reasons for which those actions were taken. Currently, we don?t know what the reasons are but what we know for a fact is that there is a draft Exploration and Production (E&P) Bill before Parliament.

?That bill commits this country to open competitive bidding round; so it stands to reason that the speed with which those contracts were passed was invariably to avoid being caught up by the E&P Bill when passed into law. So clearly, for me it seems we were in a hurry to escape being caught by the E&P Bill.?

He recommends enacting an E&P Bill to safeguard the interest of Ghanaians regarding the oil resource. The Africa Centre for Energy Policy (ACEP), a think tank here, recently reiterated concerns over the contracting of eight foreign companies in the oil and gas sector, pointing out that the award of the contracts lacked transparency and was likely to breed corruption in the sector. ?Oil blocks are given out through the administrative process which lends itself to corruption and abuse of office,? says ACEP.

Executive Director for ACEP, Dr. Mohammed Amin Adam, at a recent workshop at Dodowa in the Greater Accra Region, 40 km north of Accra, expressed worry at the manner government had not been transparent in the signing of oil contracts.

He insists that some of them lacked the requisite experience to execute deep water exploration and the financial resources to operate. ?Within the next three years, we will see most of these companies selling off their shares to bigger companies and making monies at our expense,? he remarked. In spite of these misgivings, Ghana?s oil sector has in the last four years made significant contributions to the economy, raking in 2.756 billion dollars in revenue. According to the World Investment Report (WIR) 2012 released by the United Nations Conference on Trade and Development (UNCTAD), Ghana became the third largest recipient of Foreign Direct Investment (FDI) inflows into Africa for 2011.

The report showed that Ghana received about 3.2 billion US dollars FDI inflows at the end of 2011 as against 2.5 billion US dollars in 2010 and 2 billion US dollars in 2009 when the country was not an oil producing country. These, ACEP admits, were largely on account of investments that came to Ghana?s oil sector. Again, in 2012, oil overtook cocoa as the second largest foreign exchange earner. In spite of these achievements, Dr. Adam notes that Ghana could have benefitted more from better terms if the contracts signed had been done transparently.

?We don?t have a requirement for the mandatory disclosure of contracts and so Ghanaians don?t know the terms of contracts negotiated on our behalf by our government and to what extent the oil companies comply with the terms negotiated with them because there is no public scrutiny,? he lamented.

Experts who converged at a recent forum to take stock of Ghana?s oil production here expressed similar concerns over parliament?s ratification of the oil contracts. In most oil-producing countries such as Uganda, Tanzania and Kenya, oil blocks are awarded through the open and competitive process thereby paving way for the state to negotiate better terms.

Meanwhile, Ghana?s Ministry of Energy and Petroleum has said the award of new petroleum contracts to eight foreign companies in 2014 was done within the existing legal and regulatory framework of the country. ?The companies went through all the necessary processes to be considered for the contracts,? it insists. Chief Executive Officer of the National Petroleum Authority (NPA) Moses Asaga has also dismissed accusations that government has been negligent in awarding oil blocks to companies whose local partners appeared elusive. ?All petroleum agreements are brought to Parliament and they are mostly voluminous so it depends on individual Members of Parliament to go through painstakingly and debate appropriately,? he explained.

However, Ghanaians hold the strong opinion that their legislature must live up to their responsibilities by protecting the interest of future generations in the management of the country’s oil resource. Enditem

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