Petroleum bill omits key concerns

The Ministry of Energy has presented a final draft of the Petroleum Exploration and Production (E&P) Bill to the Attorney General’s Department for “final comments”, but concerns raised by Civil Society over aspects of the bill may have to wait for another day.

The bill does not address the call for a mandatory disclosure provision – thus, the disclosure of oil and gas contracts remains a matter of discretion on the part of the sector minister.

Mr. Edward Bawa, a Communications Specialist at the Ministry of Energy, told the B&FT that the Right to Information Bill and the Extractive Industries Transparency Initiative (EITI) make it possible for members of the public who may want information on oil and gas contracts to have it upon request.

The position of Mohammed Amin Adam, Executive Director of the African Centre for Energy Policy, however, is that the mandatory disclosure clause is needed so that it would no longer lie within the discretion of the Minister to decide which contracts to publish.

Due to the lack of a provision in the bill for a mandatory disclosure of oil contracts, only seven of about 14 contracts signed so far have been published, he told the B&FT.

“If we agree that disclosing the contracts is a fundamental step in ensuring transparency, then we should go all out and ensure that it is done.”

Another concern raised by Civil Society which the bill may not address is for the country to have an open and competitive bidding process in the award of oil and gas licences.

According to Mohammed Amin Adam, Ghana would have higher value if it allows an open and competitive bidding process for basins that have been proven to hold significant accumulation of oil reserves.

Mr. Bawa indicated, however, that government is sticking with the process of negotiating the licences because “we must, at these early stages of the industry, guide the process.”

“Irrespective of wherever you are coming from, your philosophy and your thinking in exploring should fit into what we call the strategic fit of Ghana,” he said.

He said in future, when the country has gained enough experience in the industry, it might change the rules to suit the times.

“The E&P law in itself will not be cast in stone, and therefore over a period of time, if we realise that as a country we should now do open and competitive bidding we will do it. We don’t intend doing that – at least for now.”

It does appear also that the bill maintains the situation where additional oil entitlements or windfall taxes would be determined based on oil companies’ rate of investment returns, instead of production as Civil Society is calling for.

“By production-based additional oil entitlement, I mean we should have a benchmark for oil production, and if they produce beyond that benchmark, then the extra production attracts additional oil entitlement or the windfall tax. As it is now our system is based on rate of return.

If they make profit beyond a certain level, then that is where we get additional oil entitlement. And because these companies have a tendency of inflating their cost – and also because we don’t have a cost-control mechanism in our law – Ghana becomes disadvantaged and so we don’t get windfall tax,” said Mohammed Amin.

“The additional oil entitlement should be moved from rate of return-based to price of production-based. This is what Nigeria and Venezuela are doing,” he added.

After several revisions, the bill appears to be getting ready to go before law makers. According to Edward Bawa, from the Attorney General’s Department, the bill will go to Cabinet for approval before it eventually goes to Parliament.

“We would have wished that this bill were in Parliament yesterday; it has gone through a lot of consultations, and we think that at the Attorney General’s Department it shouldn’t take up to a month,” he said.

An initial draft of the bill was prepared in 2010 but has had to go through various revisions and polishing-up.

When passed, the E&P law will replace the 1984 Petroleum (Exploration and Production) Act (PNDC Law 84) to make way for a more comprehensive and advanced legal regime to govern petroleum activities.