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Confusion rocks oil industry

The controversial South Deepwater Tano oil block, taken back from Norway’s Aker ASA in 2009, has allegedly been awarded to an unnamed contractor, industry sources have disclosed to Economic Tribune.

Industry analysts are expressing concerns about the legal implications of such a contract without a new Petroleum Law in place, as well as its timing when it is barely a couple of months to a general election and major oil companies usually avoid such contracts till the elections are over.

It will be recalled that Aker and Chemu Power Company Ltd., a local Ghanaian Company, were awarded the South Deep Water Tano Contract Area, an area of 3,482 square kilometers which was part of the area relinquished earlier by Vanco Ghana Ltd.

The Aker agreement was ratified by parliament on November 5, 2008; quite close to the elections in December of that year.

In a letter dated December 30, 2009, Energy Minister Dr. Joe Oteng-Adjei, stated that the government considered the agreement invalid in that it did not meet the legal requirement that a Ghanaian company must be party to the agreement.

Both the Majority and Minority in Parliament, at the time, considered the move by the ministry an affront to the Legislature since the minister took that decision without recourse to the House.

Hints about this new deal come in the wake of another announcement, this past week, that South Africa’s national oil company PetroSA has purchased, for an undisclosed amount, Sabre Oil and Gas Holdings together with its 1.7 percent stakes in the Jubilee field, as well as its 4.05 percent holdings in Deepwater Tano, a block operated by Africa focused Irish explorer, Tullow Oil.

Earlier In February, Kosmos Energy, another Jubilee player had announced it was acquiring Sabre’s stakes at a purchase price estimated at about US$365 million only to balk and announce later in May it had terminated the acquisition based on mutual agreement with Sabre Oil and Gas.

While industry observers are puzzled about the identity of PetroSA’s local partner, their greater concern is about a seeming lack of transparency and intrigue surrounding South Deepwater Tano, a block lying just south of the two blocks hosting Jubilee field, and having similar bedrock formations.

The minister’s termination of the earlier contract was occasioned by threats of legal action by Aker, and conflicting reports, by various government functionaries, about the monetary implications of the action to the state.

In August, 2011, the Ghana National Oil Corporation (GNPC) disclosed that Sahara Energy Fields and Hess Ghana/Rockfield were seeking exploration rights over offshore West Keta and Deepwater Tano/ Cape Three Points blocks.

“We’ve evaluated the applications for these open blocks and have made the necessary recommendations to the Ministry of Energy for consideration,” Mr. Thomas Manu, Director of Exploration and Production at GNPC was reported as having said at the time, adding that the blocks have potential but it was up to the ministry to accept or reject the recommendations by GNPC.

Industry observers have questioned under what law new oil exploration and production contracts are being awarded since no new law has been passed to replace the old Petroleum Exploration and Production Law (PNDC Law 84), which provided the framework for the management of petroleum exploration, development and production in Ghana, before the Jubilee discovery which derisked Ghana’s offshore prompting the call for a new law to reflect the country’s changed status.

Another worry is whether parliament is in the know about any new contracts awarded in the oil and gas sector.

Civil society organisations have accused government of dawdling over the formulation of a new petroleum law, which would improve transparency and accountability in the country’s nascent hydrocarbons sector.

The Institute of Economic Affairs (IEA), in a report on the oil and gas sector, last year, noted that after a flurry of doubts expressed by members of parliament, the new Exploration and Production Bill was rapidly withdrawn from the House in November 2010.

Since then however, government has not re-submitted a revised bill to parliament to be deliberated upon to pass into law.

The earlier bill was asked to be withdrawn in large part due to concerns that it failed to provide for a stable, accountable framework that would give Ghana a strong opportunity to maximize the benefits of the sector and minimize the risks of corruption and volatility that can accompany it, and because of arguments that it was inconsistent with Article 269 of Ghana’s Constitution.

Some analysts say that with Ghana’s oil and gas exploration and production legal regime becoming increasingly murky, more credible upstream companies would be diverting investments towards new and exciting oil frontiers in East Africa such as Kenya, Uganda and Tanzania.

Joy Business

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Reporting Oil and Gas project was launched on 4th June 2009atTakoradi, Western Region, Ghana by Penplusbytes (PPB – www.penplusbytes.org) with the vision of providing a one stop online information and knowledge about Ghana’s oil and gas sector
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