Ghana’s Energy Ministry between the period of 2006 and 2019, signed 18 different petroleum agreements with independent companies to explore and produce oil in the country.
Despite having signed these agreements for oil production activities in the country, only 4 oil blocks out of the 18 are currently responsible for the country’s 194,000 bpd oil production.
The four oil blocks currently producing oil according to the 2019 Ghana Petroleum Industry Report by the Ghana Chamber of Bulk Oil Distributors (CBOD) are; Deep Water Tano/Cape Three Points, Cape Three Point block 4, South Deep water Tano and West cape Three Point Block 2.
According to the report, Petroleum Agreements (PA) signed between the Ministry of Energy on behalf of Government of Ghana (GoG) and the remaining 14 oil companies require that the companies satisfy some minimum obligations whereby failure to do so will attract sanctions in the form of payments to the Ghana National Petroleum Corporation (GNPC).
The minimum obligations needed to be satisfied by the companies include exploration activities between six (6) to seven (7) years which are divided into three phases – initial, first extension and second extension phases – where the oil company is obligated to satisfy the minimum requirements for a phase as a prerequisite to transition to the next phase.
The division of the exploration period into three phase the report notes, is to prevent oil companies from holding on to blocks for speculative reasons, and to also deter inactivity on the blocks.
But CBOD notes in the report that an analysis of the existing petroleum agreements reveals that, despite not satisfying the minimum contractual obligations in the agreements signed, the International Oil Companies have been allowed to hold onto the blocks and been given further extensions without paying any penalties for the inactivity on their blocks.
Attributing the non-application of sanctions and continuous hold of oil blocks by companies to political patronage and frail commitments by government to abrogate and re-ward oil blocks.
This, CBOD further stated in the report, defer potential revenues to the country.
“While it may not be easy to establish the exact cost to Ghana from the inactivity of the companies, the opportunity cost of possible early discoveries on those blocks defer potential revenues to the country, and, consequently, developmental outcomes from the revenues.”
“The country also defers other attendant benefits, such as employment, linkages with the rest of the economy and benefits to the GNPC who participate in all contracts free from exploration cost with a mandate to learn through the process to become a viable entity capable of venturing into exploration and production with the experience gained,” the report said.
