Business News of 2014-07-19

Strengthen anti-corruption agencies to expose corruption in oil sector – ACEP

Government has been commended by the Africa Center for Energy Policy (ACEP) for the “bold” initiative in fine-tuning the Petroleum Agreements (PA). New Agreements have been submitted before Parliament for approval.

“We are encouraged that Petroleum Agreements for the first time in Ghana’s history contain provisions that shun corruption especially through bribery or any inducement of public officials, politicians and political parties,” said a statement signed by Mohammed Amin Adam, ACEP’s Executive Director.

But the statement on Friday, July 18 asked government to strengthen the state’s anti-corruption agencies in curbing corruption in the oil and energy industry. “However, whilst we commend government for these initiatives, we wish to also call on the government to strengthen Ghana’s anti-corruption agencies to identify, investigate and expose corruption in the emerging oil and gas industry.”

Below is the full statement from ACEP:

GOVERNMENT DESERVES OUR COMMENDATION FOR ANTI-CORRUPTION CLAUSES IN PETROLEUM CONTRACTS BUT RUSHING THE CONTRACTS THROUGH PARLIAMENT IS WORRYING – ACEP

The Africa Centre for Energy Policy (ACEP) is happy that the Government of Ghana has taken the bold initiative to improve on petroleum governance particularly in some of the new Petroleum Agreements (PAs) that have been submitted to Parliament for approval.

We are encouraged that PAs for the first time in Ghana’s history contain provisions that shun corruption especially through bribery or any inducement of public officials, politicians and political parties. Specifically, the anti-corruption clause in the PAs states as follows:

“Each contractor party warrants that neither it nor any of its Affiliates or any of its r their officers, directors or employers has made, offered, or authorized and will not make, offer, or authorize with respect to the matters which are the subject of this Agreement, any payment, gift, promise or other advantage, whether directly or through any other person or entity, to or for the use or benefit of any public official (i.e. any person holding a legislative, administrative or judicial office, including any person employed by or acting on behalf of a public agency, a public enterprise or a public international organization) or any political party or political party official or candidate for office, where such payment, gift, promise or advantage would violate to the extent applicable to such Party

(i) the applicable laws of Ghana;

(ii) the laws of the country of incorporation of such Party or such Party’s ultimate parent company;

(iii) the principles described in the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, signed in Paris on December 17, 1977, which entered into force on February 15, 1999, and the Convention’s Commentaries; (iv) the United States of America Foreign Corrupt Practices Act 1977; and (v) the United Kingdom Bribery Act 2010.”

Unfortunately, this clause is only provided in four (4) out of the six (6) new PAs currently before Parliament. ACEP has been campaigning for anti-corruption clauses to be put in Pas. ACEP further recognizes the introduction of new features in the PAs which will no doubt help in increasing fiscal and non-fiscal benefits to the state when there are discoveries in the Contract Areas. These include:

1. The removal of Stabilization clauses in the PAs that allows Ghana to implement new laws and regulations in the life of a PA without disturbing the original terms of the PA in so far as they do not create economic disequilibrium in the PA;

2. The introduction of capital gain tax which allows Ghana to impose taxes on the value gained from the assignment or transfer of interest under a PA;

3. The introduction of cost ring-fencing which prevents oil companies from using assets in one contract area to finance liabilities in another contract area. ACEP is of the strong view that the governance provisions in the contracts have once again demonstrated Ghana’s leadership in good governance.

However, whilst we commend Government for these initiatives, we wish to also call on the Government to strengthen Ghana’s anti-corruption agencies to identify, investigate and expose corruption in the emerging oil and gas industry.

Government must also adopt an open and competitive process in licensing oil blocks, make contract disclosure mandatory and establish a register for the disclosure of beneficial ownership information in all PAs.

Our worry about the licensing process in Ghana is that it is too open to abuse. Ghanaians must be asking the Government why it is delaying the passing of the new Petroleum (Exploration and Production) Bill which has a better governance regime, whilst at the same time rushing many PAs to Parliament for approval.

It is bizarre to contemplate how Parliament could effectively scrutinize six (6) PAs and approve them in two (2) days. For the purpose of public records, the six (6) PAs are between the Republic of Ghana and six lead companies, namely:

1. Brittani-U (1)

2. Heritage Oil (2)

3. Sahara Energy Fields (1)

4. UB Resources (1)

5. A-Z Petroleum (1)

These 6 PAs are in addition to 2 other PAs (i.e. AMNI International; and CAMAC Energy) which were approved by Parliament in March 2014. The approval of the six new PAs will therefore bring to eight (8) PAs approved within 4 months, usually without effective scrutiny. All these firms are Nigerian companies, most of them minnows with little experience in offshore exploration.

For most of them, their experience is limited to the operation of marginal fields, which is not what Ghana should be looking for at this stage of our oil industry. We strongly believe that Government is rushing these petroleum contracts to Parliament to avoid the public scrutiny required in the new Petroleum (Exploration and Production) Bill through open and competitive bidding particularly when the oil blocks in question are in known areas with considerably lower risks than unknown areas.

We also wish to draw Parliament’s attention to potential violation of the local content regulations (LI2204), which provides a minimum equity of 5% for indigenous Ghanaian firms in every PA. Two of the PAs do not meet this requirement. For example, in the Brittania-U’s PA, Hills Oil Marketing Company, the local indigenous Ghanaian firm, holds 5% in Brittania-U translating into 4% in the concession; whilst in UB Resources’ PA, the indigenous firm, Royal Gate, has 5% in UB Resources which translates into 4.35% in the concession.

We also suspect fronting in some of the PAs. For example, BlueStar, a Ghanaian firm has not submitted any documents on its financial strength. Heritage Oil in this case guaranteed the performance obligations of BlueStar. For this reason, we wish to call on Government to disclose the beneficial owners of all these companies, both foreign and local.

Government must demonstrate beyond the new anti-corruption clause in the PAs that it means well for Ghana’s oil wealth and must facilitate more comprehensive governance reforms around oil contracts if Ghana is to be a model of good petroleum resource management.

Source: tv3network.com
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