Oil contracts signed on concession basis breach the law - IEA

Research Director at the Institute of Economic Affairs (IEA), Dr John Kwakye has raised concerns on the need for Ghana to sign oil agreements on product-sharing basis instead of concessions.

His comments come on the back of various governments’ granting oil blocks on concession which makes IOCs win profitable investments as Ghana makes meagre gains.

Speaking at a press conference organized by IEA on the country’s 2020 State of the Nation Address, Dr. Kwakye said, although President Akufo Addo indicated that oil blocks are now being more transparent, Ghana is still receiving peanuts from contracts.

According to him, “oil contracts are still being singed on concession basis whereby investors are given ownership of the block while Ghana benefits from meagre royalties and taxes”.

This act, he said is a total breach of the country Petroleum Exploration and Production Act, 2016(Act 919), which stipulates that “oil contracts should be signed on a product sharing basis whereby the investor and Ghana agree on the formula to share the oil without the investor being offered any oil block concessions.

All contracts signed on concession basis are therefore in the breach of the law and therefore voidable, Dr. Kwakye stated.

He further compared oil exploration practices in other countries that Ghana can emulate.

“Other countries have even moved beyond product sharing contracts to service contracts whereby investor is paid for the cost of extracting the oil plus a profit margin rather than receiving a share of the physical product. This is the kind of contract Ghana should ultimately aim for”.