9 May 2014

Ghana: ACEP Applauds Government for New Petroleum Exploration and Production Bill

press release

The Africa Centre for Energy Policy (ACEP), an energy policy think tank has commended government for the introduction of a new bill to regulate the upstream exploration and production of crude oil to ensure that the country's oil and gas potential is exploited to the full benefit of Ghanaians.

The new Petroleum Exploration and Production Bill, which will repeal the PNDC law 84 enacted some three decades ago has received approval from Cabinet, and is expected to be laid in Parliament when the House reconvenes from recess later this month.

Speaking at a two-day workshop sponsored by Deutsche Gesellschaft fur International Zusammenarbeit (GIZ) at Elmina to build the capacity of the Parliamentary Press Corps on the bill and other issues relating to the oil and gas industry, the Executive Director of the Centre, Mohammed Amin Adam, applauded government for developing the bill to replace the existing law and described it as very timely since the fundamentals of the petroleum industry had changed.

"This is clearly a progressive bill because it is investment friendly and will attract investors to our largely unknown oil and gas basins," he said adding that with the discovery of oil in commercial quantities, the country's risk profile had reduced, therefore placing the government in a better position to negotiate for good contracts.

He disclosed that one of the significant features of the bill was that, it sought to encourage government to consider the net benefits for the country when negotiating for contracts with international companies in the industry and proposes a shift from the polluted pay principle where the country took up the cost of cleaning whenever there was an oil spillage to the exclusive liability principle which compels the private oil companies to be exclusively responsible for cleaning and paying compensations whenever they caused a spillage.

This, according to him, would indemnify the country from spending the revenue it accrued from the industry in the name of petroleum cost on environmental cleaning.

Mr Adam pointed out that the new bill would improve transparency and governance in the exploration and production of oil since it proposed an open and competitive bidding process in acquiring oil blocks rather than the administrative process which gave room for corruption.

"The bill also calls for the disclosure of oil contracts for Ghanaians to know the terms the government negotiates oil contracts on behalf of the public," he said.

He however, expressed concerns that certain clauses in the bill undermines open and competitive bidding for contracts and allows the minister of Energy and Petroleum to ignore open and competitive bidding if in the opinion of the minister, direct negotiations offered the most efficient way of exploring the resources and called on Parliament to amend some of these provisions to discourage corruption in the industry.

He also identified a provision in the bill which seeks to establish a Local Content Development Fund to be managed by the minister to build the capacity of Ghanaians and provide financial support for Small and Medium Enterprises in the industry and described it as problematic since the minister can influence who becomes a beneficiary.

"I think the Local Content Committee of the Petroleum Commission should be solely responsible for the management of the fund, and not the minister," he said.

He appealed to Parliament to include a provision that would compel the managers of the fund to report on how much had been accrued, the amount that had been disbursed, as well as beneficiaries of the fund.

ACEP-Ghana, works to influence energy sector policies in Africa by providing professional analysis of energy policy, training, advisory services and policy advocacy for the efficient and transparent management of Africa's energy resources.

- ISD (Gilbert Ankrah)

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