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Business News of Friday, 15 May 2020


Delayed petroleum pact negotiations concerning — Civil Society Groups

FPSO Kwame Nkrumah FPSO Kwame Nkrumah

Three civil society groups in the natural resource sector have advised the government to expedite negotiations of petroleum agreements with successful bidders selected in July 2019 during Ghana’s first competitive oil licensing round.

The groups, which comprise Natural Resource Governance Institute (NRGI), Ghana Oil and Gas for Inclusive Growth (GOGIG), and Civil Society Bid and Licensing Round Monitoring Group, said the delay in the process portends corruption risks which could negatively impact future investor interest.

“Although the selection process met the timelines set by the Ministry of Energy, the actual negotiations of petroleum agreements are yet to be concluded five months after the deadline,” the groups said in a monitoring report put together on the licensing round.

Bid and licensing rounds are now a global norm for resource-rich countries in selecting investors for upstream petroleum activities. Ghana’s first oil bid and licensing round was launched in October 2018, and winners were announced in July 2019.

The country introduced competitive bidding after a decade of operating on a first-come-first-serve (direct negotiation) system of awarding oil and gas exploration and production rights.

Six blocks were made available for the licensing round; three blocks to be awarded through an open and competitive bidding process, two through direct negotiations, and one to be solely operated by Ghana National Petroleum Corporation (GNPC), the national oil company.

Only two blocks were awarded at the end of the process. Eni, the Italian multinational, and Vitol, the Dutch firm, secured one block, and a second block was assigned to First Exploration and Petroleum Development Company Limited, a Nigerian firm, and its local partner, Elandel Energy Ghana Limited.

The process was conducted in accordance with applicable laws and international standard practices, the civil society groups said. This provides opportunities for sustained investor confidence in future licensing rounds, they added.

They also identified certain challenges in the process, including the fact that out of 60 applications received from 16 companies, only three companies progressed to submit bids after prequalification.

This reflected issues with thequality of data and fiscal terms, which are very crucial in sustaining investor interest beyond the initial expression of interest.

According to group, while the licensing process was ongoing (competitive tendering and direct negotiation), the Ministry of Energy opened an escape window for companies to negotiate outside the licensing round process. This had the e?ect of undermining the competitiveness of the process, they said.

Ms. Nafi Chinery, West Africa Regional Manager at NRGI, said competitive bidding is expected to generate optimal returns for Ghana as it is likely to provide avenues for highly competent and qualified companies to bid, and therefore achieve relatively higher market values for all stakeholders, and crucially for Ghana.

Unlike direct negotiation, she said an open competitive bidding process is subject to public monitoring and oversight, and potentially reduces rent-seeking practices that usually characterise the open-door approach to contracting.

Competitive bidding reduces information irregularity among companies and provides citizens comprehensive information for oversight and monitoring purposes, she added.

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