Ever since Ghana discovered and started producing oil in commercial quantities, Ghanaians have become very interested in the oil and gas industry. The interest in this sector is driven by the prospects and enormous benefits that oil and gas is expected to generate in Ghana’s economy. Expected Oil revenues have been included in budgets and projections and actual oil revenues have also been included in Gross Domestic Product (GDP) reports, justifiable evidence to the fact that oil and gas is a major driver of the Ghanaian economy now and will be for the years ahead.
Nevertheless, despite the contribution from the oil and gas sector, the average Ghanaian still feels the country is not getting her fair and reasonable share because the very information in the public domain shows that Ghana is not getting enough from her hydrocarbon resources. However, there are countless defenses to this claim and assertion whenever the subject is broached. Irrespective of political affiliations, successive governments have been criticized about Ghana’s position with respect to her own hydrocarbon resources. The citizens are beginning to appreciate and embrace the reality that government is duly responsible for this plight on the nation and hence demand government to rise up to do the needful. Does this mean we as a nation, a people and a government are failing to take what rightfully belongs to us? The answer still hangs in the balance because it calls for critical analysis and reviews.
Getting the Fundamentals Right
If we as a nation are to get the fundamentals right, then we can get all other things right as well. The question here is – what is the fundamental element that we need to get right? It all boils down to our Petroleum Contract Agreements (PCAs). Getting this in the right balance will help us appreciate whatever gains we are making from our oil and gas sector at any given point in time. Not to switch into the legalities and the technicalities, it will do the nation much good to understand the various era and dispensation we find ourselves in.
Before Ghana went into commercial production, Ghana was not listed as an oil producing country. This dispensation made the risk profile of the sector very high for investors and operators who were willing to put their investment and expertise on the line. A lot of investors can attest to their loss of investment, time and energy trying to discover commercial quantities of oil and gas. Till we became an oil producing country the risk was unreservedly born by the investor, thus requiring agreements that put the interest of the investor ahead of the state. With the government unable to finance its own exploration and production activities, an external or independent entity assumed this position without certainty. Since the sector did hold many prospects at the time, the few investors who decided to roll the dice did so by prioritizing their interest. Consequently, the structure of our petroleum contracts agreement had to – of course – entice these investors to pursue what seemed absolutely impossible then. If our government will not risk scarce resources, which cannot meet the pressing needs to pursue oil and gas activities then we have to genuinely admit the risk associated with the oil and gas sector. Investors must be duly rewarded for deciding to take the risk. The rewards, in the eyes of the state and citizens to be precise might portray a mismatch but seems to be a fair trade off. It is in light of some of these reported mismatched agreements that Ghana has become an oil producing country. The previous signed agreements may not look much at a glance, but appreciating the era in which those agreements were signed will help Ghana make informed decisions and be better placed for improved negotiations and contracts.
The Future, Our Compensation
After 10 years of commercial production, Ghana’s oil and gas industry is in a different era. Even though it is too early to compare to the likes of Saudi and Nigeria, It is too late for Ghana to compare to countries that are not producing oil. Admittedly Ghana is an oil producing country.
This calls for reviews of most of the agreements and policies in order to meet the current identity of Ghana. Ghana can no longer sign agreements without acknowledging that she now produces oil and gas in commercial quantities, and must also take into consideration the other reserves and discoveries.
Granted that the only few investors who were interested in our high risk profile fields handed the state the short end of the stick, the Ghanaian fields have blossomed over time with proven reserves, making it almost irresistible to investors to bet their last dollar on it. There is a very low degree of doubt about the Ghanaian Oilfield – unless the State is in doubt about this, but if Ghana embraces the realities of our prospects and potential, then it becomes paramount to have a “big boy seat” at the negotiation table, which must reflect in the agreements we sign.
The new identity of Ghana as an oil producing country, and the evidence of continuous discovery of oil and gas should influence the nation’s position when it comes to entering into petroleum contracts and signing agreements. The gateway to Africa as Ghana claims to be, must certainly be the safe way to Africa. The safety of investment is one of the factors that investors consider before engaging parties in business. The Economic and political climate in Ghana is conducive and most importantly safe for any form of legal business. Unlike other oil producing countries that are plagued with political unrest and instability, Ghana is quite the safe haven.
Moving forward with future petroleum agreements, it is imperative that we engage more prospective investors in the discussion, and ultimately choose one – perhaps even more who appreciate where we are in our journey, aligns with the vision of where we are headed and gives us the maximum value.
Competitive bidding will give Ghana her fair and reasonable share of her hydrocarbon resources, creating wealth and promoting national development. Ghana should negotiate from a position of power in order to gets what is due her.