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The absence of a competitive bidding process, the lack of transparency and due diligence prior to the award of oil blocks in Ghana’s upstream sector is set to endanger the otherwise bright prospects of the industry.

Four years after production, energy experts and civil society think- tanks are warning that Ghana risks losing out on the benefits of the resource if government’s handling of oil contracts remain shrouded in secrecy. 

The Africa Centre for Energy Policy (ACEP), a think- tank, has recently reiterated concerns over the contracting of eight foreign companies in the oil and gas sector, pointing out that the award of the contracts lack transparency and is 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 of ACEP, Dr Mohammed Amin Adam insists that A-Z Petroleum, Sahara Energy fields and Heritage Oil, among other companies who have all received oil blocks lack the 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 warned.

Ghana’s oil sector has in the last four years made significant contributions to the economy, raking in US$2.756billion in revenue.

According to the World Investment Report (WIR) 2012 released by the United Nations (UN) Conference on Trade and Development (UNCTAD), Ghana became the 3rd largest recipient of Foreign Direct Investment (FDI) inflows into Africa for the year 2011.

The report showed that Ghana received about $3.2 billion FDI inflows at the end of 2011 as against $2.5 billion in 2010 and $2 billion in 2009.

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 laments.

Experts who converged at a recent forum to take stock of Ghana’s oil production expressed concerns over parliament’s ratification of the oil contracts under certificates of urgency, indicating that the rush conditions under which the contracts were signed and passed give room for suspicion of ill intent.

According to ACEP, one of the contracts was over the expanded Shallow Water Tano Block and was signed between the government of Ghana, the Ghana National Petroleum Corporation (GNPC), CAMAC Energy Ghana Limited and Base Energy Ghana Limited.

Another contract was over the Central Tano Block Offshore which was signed between the government of Ghana, GNPC and AMNI International Petroleum Development Company (Ghana) limited.

The experts are also asking for the disclosure of the persons behind the companies which have been given the contracts. According to them, Parliament’s Energy and Mines Committee failed to demonstrate scrutiny of the beneficial owners of the companies in its report to Parliament as well as the financial capacity of the local firms involved in the contract deals.

“Government must adopt an open and transparent process for awarding oil contracts in order for us to do due diligence on the companies that are coming in to explore for oil to ensure that we maximize the value of our oil resources,” Dr Adam recommends.

In most oil-producing countries, such as Uganda, Tanzania and Kenya, oil blocks are awarded through the open and competitive process and so provide opportunity for the state to negotiate better terms.

Chairman of the Civil Society Platform on Oil and Gas, Dr Steve Manteaw attributes the issues surrounding the award of contracts to the delay in passing the Petroleum Exploration and Production bill into law.

“It has led to the perpetuation of block allocation through the open-door, negotiated deal type, with its attendant rent-seeking opportunities for public office holders,” he observes.

According to him, after barely two years of implementing the Petroleum Revenue Management Act (PRMA), some weaknesses and challenges  have  been identified but these shortcomings could only be addressed through the revision of the law.

“The passing of the law has dragged on for too long and indeed the fact that we have not passed the new bill to replace PNDCL 84 can deny us opportunities for maximizing our benefits from oil,” Dr Manteaw notes.

Ghana can maximize gains from the sector by strengthening further, the governance of the petroleum sector, especially of the revenues, he stressed.

Dr Manteaw points out that the manner in which Ghana has approached the management of the petroleum sector marks a complete departure from the reckless and wasteful management approaches that characterized the mining sector.

“At least, for the first time in our history, we are using revenue from a natural resource not only for consumption, but also as investible income,  through the petroleum funds,” he adds.

It is important to note that the new Petroleum Exploration and Production Bill in its current form has elicited criticism from civil society organizations who have referred to some contradictory clauses likely to restrain openness and transparency.

They point to a clause that rightly pushes for competitive bidding of contracts on one hand and then another that gives the Minister the sole discretion to directly award contracts when he or she feels it’s in the best interest of the industry.

According to them, the bill must promote transparency and openness across board, from how the revenues are generated to how they are managed.

Meanwhile, the Ministry of Energy and Petroleum has maintained that the award of new petroleum contracts to eight foreign companies was done within the existing legal and regulatory framework of Ghana. 

“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 award of oil blocks to companies whose local partners appear elusive.

“All petroleum agreements are brought to Parliament and they are mostly voluminous so it depends on individual Members of Parliaments to go through painstakingly and debate appropriately,” he explains.

To ensure greater transparency and the judicious use of revenues from the sector to support the country’s socio-economic development, efforts must be made to resource all institutions with oversight responsibilities on oil.