The History of the Development of Ghanaian Petroleum Exploration and Production
PREAMBLE TO THE STUDY
The Ghanaian legislature passed the Petroleum (Exploration and Production) Act, 2016 [Act 919] on August 4, 2016, ushering in a revolutionary change for the nation’s fledgeling oil and gas industry. Act 919 is regarded as a watershed moment in Ghana’s legislative history for the upstream oil and gas industry. The new petroleum legislation’s defining idealogy is the oil and gas industry’s strategic positioning as the Ghanaian economy’s centre. This is done to ensure that the industry maintains its status as an engine or driving force for economic growth. This study aims to analyse the new legislation’s key stipulations and indicate the constitutional context of Ghana’s upstream petroleum industry. Act 919 overrides a large corpus juris of legal provisions that together form the legislative framework overseeing Ghana’s upstream petroleum industry. Even so, it could be contended that it functions as an integrating statute. This is evidenced by its numerous interlaced stipulations, which replicate some key elements of the Ghana Model Petroleum Agreement (MPA) of 2000 and facets of the policy response embedded in existing regulations and budgetary instruments. Discrepancies in the ultimate legislative framework have inevitably resulted from conflicting clauses. The study examines the unique statute’s suitability by conducting a thorough appraisal of its regulatory and legislative goals. A range of outmoded stipulations from existing law and instruments are also recognised in the preceding part of this study. The study concluded with a series of objectives, including the need to standardise the regulatory framework as a whole in order to reconcile its ambiguous amendments and the removal of superfluous references from existing textsThe discourse is set against the history of the development of Ghanaian petroleum exploration and production.
CHAPTER TWO
LITERATURE REVIEW
An Overview of Oil Exploration and Production in Ghana
Ghana is a relatively new addition to the international oil and gas scene, widely regarded for its gold mining and cocoa industrial sectors. However, Ghana has a longstanding experience of oil and gas exploration and prospecting dating back to 1896. An evaluation of Ghana’s oil and gas industry confirms four major historical phases. This period extends from the colonial era to 1957. Exploratory drilling in Ghana stretches back to 1896 when the Gold Coast was under the British colonial Government. The first subsurface oil exploration wells were drilled in the Tano Basin, which is now in Ghana’s Western Region. Prospecting activities concentrated on region designated to the early explorers to have petroleum & energy seepages. The Gulf Oil Company signalled the culmination of this early 61-year stage of development in Ghana’s oil and gas exploration history by acquiring four onshore exploratory contracts and digging four wells. The unavailability of a precise regulatory framework devoted solely to the oil and gas industry is the most crucial aspect of this phase from a legal standpoint. Oil and gas exploration and production licenses were provided under the Minerals Act of 1962 from 1962 to 1984. (Act 126).
The Ghanaian upstream oil and gas activities comprise exploration and production. The Inland Voltaian Basin, the Accra/Keta Basin, Western Basin, the Saltpond Basin in the Central Region, the Cape Three Points Basin and Tano Basin are the five sedimentary basins within Ghana’s territorial areas. While the Accra/Keta Basin, Saltpond Basin, and the Western Basin, which are offshore, have been explored, little attention has been paid to the Inland Voltaian Basin, which is onshore. Hydrocarbon exploration in Ghana dates back to the late seventeenth century. West Africa Oil and Fuel Company conducted the first documented hydrocarbon exploration in 1896. Other companies involved in upstream operations from 1905 to 1925 comprise the Golf Oil Company, African and Eastern Trade Corporation and the Société Française de Pétrole. At independence in 1957, twenty-one wildcats were already drilled for exploration. Among these was the Saltpond Field, the first offshore discovery in the Saltpond Basin by the Signal-Amoco Consortium, which began production in 1978. The Saltpond Field’s output plateaued at 4,500 barrels of oil per day during its production phases before being halted in 1985.
Following the commercial discovery of crude oil offshore Ghana in 2007, the Oil and gas Commission, 2011 (Act 821) was enacted to establish the Oil and gas Commission as the authorities to ensure interoperability in the upstream oil and gas industry in line with the legislation. Furthermore, the Petroleum Revenue Management Act, 2011 (Act 815), as revised by the Petroleum Revenue Management (Amendment) Act, 2015 (Act 893), was ratified to provide a blueprint for oil and gas revenue management. The Petroleum (Exploration and Production) Act, 2016 (Act 919) (the E&P Act) was enacted in 2016 to substitute the PNDCL 84 as the primary legislation governing petroleum activities. In addition, the Income Tax Act of 2015 (Act 896) as amended provides a framework for taxing the earnings of subcontractors and suppliers in the industry. To aid in executing the industry’s law passed, the Government, via the Minister of Energy (the Minister) and the Oil and gas Commission, has enforced a number of laws, regulations, and initiatives. These are some examples:
- The Petroleum (Local Content and Local Participation) Regulations, 2013 (LI 2204);
- the Petroleum Commission (Fees and Charges) Regulations, 2015 (LI 2221);
- the Petroleum (Exploration and Production) (Measurement) Regulations, 2016 (LI 2246);
- he Petroleum Exploration and Production-Data Management Regulation, 2017 (LI 2257);
- the Petroleum (Exploration and Production) (Health, Safety and Environment) Regulations, 2017 (LI 2258);
- the Petroleum (Exploration and Production) (General) Regulations, 2018 (LI 2359);
- the Energy Sector Strategy and Development Plan;
- the Gas Master Plan;
- the Gas Pricing Policy Guidelines to the Petroleum (Exploration and Production) (Measurement) Regulations;
- Guidelines for the formation of joint venture companies in the upstream petroleum industry of Ghana (March 2016);
Act 919 Of 2016 and Associated Instruments Governing the Contractual and Fiscal Regime
This Act applies to petroleum activities within the Republic of Ghana’s jurisdiction, including activities in, under and upon its territorial land, inland waters, territorial sea, exclusive economic zone and its continental shelf.
The Act’s object is to provide for and ensure safe, secure, sustainable and efficient petroleum activities to achieve optimal long-term petroleum resource exploitation and utilisation for the benefit and welfare of the people of Ghana.
The Minister, shall in consultation with the Commission, prepare a reference map showing areas of possible accumulation of petroleum within the jurisdiction of Ghana and those areas shall in the map be divided into numbered areas, each of which shall be described as a block.
The Petroleum (Exploration and Production) Act, 2016 [Act 919] is the cornerstone of Ghana’s legal and regulatory framework the upstream oil and gas industry. The new law arose from the Petroleum (Exploration and Production) Bill, which had a difficult passage marred by numerous setbacks and disruptions as a result of a prolonged period of deliberation. Much of the scepticism and resistance to the legislation, primarily from non – governmental organisations and lawmakers, centred on the planned transition from the old legislature’s production sharing agreement (PNDC 64 and PNDC 84) hybrid model under the proposed policy. The Ghana Royalty Tax/Hybrid system, the contract regime, is a fiscally universal model imbued with marginalised provisions dealing (represented by GNPC) on the premise of 10-15% pulled investment equity interest. Championed by the Fair-Trade Oil Share-Ghana initiative, the new legislation’s resistance has persisted even after the new legislation’s enactment, which the group believes was rushed. They also contend that the numerous provisions recommended at the bill phase (with more than 100 reform proposals in the development phase and another proposed amendment after the first reading of the bill) count as evidence of Ghanaian legislators’ implicit disapproval of the new legislation. Nevertheless, it is worth noting that many pundits have supported the new Act’s passage amidst vehement opposition in some parts.
CHAPTER THREE
RESEARCH METHODOLOGY
CHAPTER FOUR
DATA PRESENTATION, ANALYSIS AND DISCUSSION OF FINDINGS
Data Presentation
Introduction
Given the substantial nature of investments that international oil companies make to carry out their obligations under the terms of a PA, litigation of disputes in the courts is often rare in the industry, even on a global scale. These companies’ primary aim is to protect their investments by ensuring that the Government and the State are not made an adversary. The situation is not any different in Ghana. A reason for the low number of actions is the fact that international arbitration is a customary provision in all the PAs as the means of dispute resolution. Usually, the international arbitration will be preceded by negotiation and consultation among the companies and the State’s senior personnel. This often leads to the amicable resolution of disputes between the State and the international oil companies.
The case in review was a constitutional case brought to the Supreme Court by a lawyer and former member of Parliament, Mr. John Akparibo Ndebugre. In this case, the Supreme Court interpreted ratification as used under Article 268(1) of the Constitution to mean approval relying on the language of Article 269(2) of the Constitution. The Supreme Court further determined that natural resource exploitation agreements ratified by Parliament under Article 268(1) required further parliamentary approval to be terminated. However, the Supreme Court refused to invalidate a PA’s termination that had been done without Parliament’s approval based on some interesting observations that are discussed further below.
CHAPTER FIVE
CONCLUSION AND RECOMMENDATION
Conclusions
Whilst there has been substantial actual and proposed development in the upstream petroleum sector as discussed in this study, particularly in paragraphs, there are some specific steps that must be taken in order to develop a very viable and robust Ghanaian upstream sector that would ensure that our petroleum resources are translated into tangible national development. For instance, revenue distributions to the GNPC, the ABFA and the Ghana Petroleum Funds must be in accordance with the PRMA. Especially, the Government must commit not to allocate revenues to the ABFA exceeding the upper limits prescribed by the PRMA, i.e., not more than 70% of the projected benchmark revenue for any given year and must provide accurate and reliable information to PIAC that shall inform the PIAC’s credible reporting on the use of petroleum revenue. Also, in exercising the Minister’s discretions in relevant matters, fair and adequate consideration must be given to the advice of the PC in instances where the law requires such consultation. This would ensure that the Energy Minister makes informed decisions devoid of political connotations that would advance the objects of the industry laws.
Further, while we laud the Government’s mooted amendment of the Petroleum Local Content Regulations to guarantee real local participation in the industry, the Government and other stakeholders to ensure the creation of a fair environment for all Ghanaians to take advantage of the opportunities in the sector. Incidents of politicians and other politically-exposed persons who, by irtue of their positions, seize available opportunities in the sector for their selfish interests have become too rampant. Foreign companies are pressured to select politically exposed/affiliated companies that are only created for such purposes, and have no demonstrable technical expertise and financial muscle to meet industry requirements. It is troubling that foreign companies are unduly influenced to sideline their preferred choices of capable local partners who satisfy the detailed due diligence processes informing the foreign companies’ selection.
The effect is that local participation in the sector is assumed by a select minority, whereas the independent companies are deprived of the opportunity to gather more experience and grow into strong and reputable local companies that can, eventually, take over control of the sector from foreign companies. Nevertheless, we consider the present legal framework of the upstream industry to be a tremendous improvement as compared to the pre-commercial discovery regime. For instance, the PEPA makes some very important strides in providing a framework to improve transparency in relation to the award of oil blocks and in relation to oil industry activities in general. This framework has culminated in the establishment of the petroleum register162 and the conduct of Ghana’s maiden petroleum licensing round.
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