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Ghana’s Petroleum Exploration and Production Bill: Steps Forward, But Room for Improvement

  • SOURCE: | qwesa2big
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    Ghana’s petroleum industry has undergone massive changes in recent years. Discoveries of commercial quantities of oil in the Jubilee fields in 2007 have triggered significant growth in Ghana’s petroleum sector and brought hope that petroleum resources will yield meaningful benefits for Ghana’s people. These changes have also necessitated an upgrade of the legislative and regulatory framework governing a petroleum sector that was traditionally based largely on oil trading and refinement.

    Armed with the lessons from the failures of other countries, Ghana embarked on this upgrade in 2011, with the establishment of the Petroleum Commission to “regulate and manage the utilisation of petroleum resources and to co-ordinate the policies in relation to them” under the Petroleum Commission Act. The next step, a new petroleum law to replace the Petroleum (Exploration and Production) Act, 1984, has been pending for the last two years.

    This year, the petroleum bill is back in the spotlight. The current draft of the legislation has been tabled in parliament and referred to the Parliamentary Select Committee on Mines and Energy for consideration. The committee reached out to the Natural Resource Governance Institute (NRGI), among other key stakeholders, to provide comments on the bill as part of a wider public consultation. NRGI presented its comments to the committee at a stakeholder meeting on 6 July 2015.

    The petroleum bill is fairly comprehensive in scope, providing for some public participation in decisions around opening and closing of areas for petroleum activities; establishing a fiscal regime in general terms; and providing for local content and environmental management. The bill also includes several strong governance provisions such as a public petroleum register and, importantly, an open and competitive bidding process, which has the potential to help Ghana get the best deals for its petroleum resources.

    However, the bill could be strengthened in some key areas:

    Ministerial discretion may undermine provisions for competitive bidding. The current bill gives the petroleum minister discretion to disregard bid results and to skip the tender process altogether. While there may be good reasons for bypassing or skipping the competitive bidding process under specific circumstances, we recommend that the minister be required to publish the reasons. A decision to enter into direct negotiations following an unsuccessful public tender process should be published and if the minister receives more than one expression of interest within a prescribed time frame, a competitive tendering process should take place, limited to the parties expressing interest.

    The law includes only limited transparency requirements. The bill explicitly acknowledges the importance of transparency as a key to good governance, providing that petroleum resources shall be conducted in accordance with principles of transparency. The bill also provides for a public register of petroleum agreements. However, as written, this provision does not provide assurance that the full contracts, as well as their amendments and annexes, will be made public, rather than a simple list of agreements. Contract transparency is an important component of overall transparency in the sector. Ghana has already published several agreements. We strongly encourage Ghanaian legislators to build on this positive development by requiring publication of full text of contracts, along with their amendments and annexes.

    The bill does not require disclosure of beneficial ownership. Disclosure of beneficial ownership of license holders is a key anti-corruption tool allowing all stakeholders to understand who the real natural person beneficiaries are of Ghana’s petroleum agreements. Increasingly, countries and international organizations are recognizing the importance of disclosure of beneficial ownership to combat corruption in the extractives sector. Disclosure of beneficial ownership is currently encouraged by the EITI and soon to be implemented in the UK and across EU countries under the Fourth Anti-Money Laundering Directive. We strongly recommend that the bill require public disclosure of beneficial ownership of all license holders.

    The bill does not clearly define GNPC’s role. The Ghana National Petroleum Corporation Law (1983) is now outdated, in light of the corporation’s evolving role in the larger institutional framework governing the petroleum sector. The bill should therefore specify the new overall role and responsibilities of the corporation. It is also important that the rules for operations, governance structures and reporting requirements of the corporation are revisited to ensure that they reflect the government’s current goals for the corporation. Given the significant revenues retained by the corporation, it is crucial that the transparency and accountability requirements for the corporation are strengthened to ensure effective management of these revenues.

    Ghana has the advantage of learning from the mistakes of others to lay a solid foundation at a crucial stage of development of its petroleum sector. While this bill does much to strengthen governance of the petroleum sector, Ghana should not miss the opportunity to ensure that the petroleum law is the strongest possible cornerstone of this foundation.

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