Petroleum Contracts Monitor, 2017: A Public Interest Report
Petroleum Agreements (PAs) are important part of Ghana’s success story with the oil industry. After several decades of unsuccessful investment of national resources, both human and monetary, in the exploration business, the engagement of private contractors with the technical and financial capacity led to the discovery of commercially exploitable oil in 2007 in the Tano Basin. Ghana, like many other resource rich countries, is faced with the challenge of lack of adequate financial and technical capacity to exploit her own resource. Investment Investment attraction therefore becomes the necessary tool to ensure that natural resources can be extracted. Investment attraction to Ghana’s upstream sector faced significant challenges prior to the early 2000s. Some primary challenges which accounted for low investment include the following:
- High risk of the basins
- High fiscal take by government
During the period before 2007, when the commercial discovery of oil was made, Ghana operated an open-door policy to drive investment attraction into the oil sector; an administrative measure that gave oil blocks to companies on a first come, first served basis. However, after discovery, a new discussion emerged to look at the adequacy of industry regulations for upstream contracting. The general consensus was that the Petroleum (Exploration and Production) law, PNDC Law 84, was unfit for purpose, and Ghana needed a stronger law addressing its shortfalls. Key among the demands for change in the contracting practice was transparency in the award process to take advantage of the renewed interest in the sector after commercial discovery.
Even though Government recognized the need for change after commercial oil discovery and started the processes to pass a new E&P Act, post discovery contracts were still awarded through the first come first served process. The trend was a scramble for blocks by new entrants and marginal field developers in the oil industry.
This raised concerns about the technical and financial capacity of the companies to deliver on their contractual obligations. ACEP was very active in scrutinizing the contracts signed post oil discovery and consistently hinted at the challenges Ghana could face by engaging inexperienced companies.