Government will find it challenging in meeting the demands of civil society about transparency and accountability in the oil sector due to the lack of necessary skills by the public to understand and analyze oil contracts.
The high expectations among citizens, despite the low capacity to understand technical information will be another area that will prove a tough hurdle for the authorities and must also be tackled with care.
According to Mohammed Amin Adam, National Coordinator of the Civil Society Platform on Oil and Gas, Ghana, who made the observations in a paper delivered on ‘Petroleum Contracts Management in Developing Countries: Governance Risks and Remedies’ at the Ghana 2011 Summit, which ended in Accra last week, civil society demands transparency and accountability but lacks the necessary skills to understand and analyze contracts.
He said even though the government may make available documents to the public, it may necessarily not quench the agitations of the people, since most of them lack the skills to understand them.
He is also of the view that independent regulation will be problematic because of technical capacity problems, lack of appropriate logistics and equipments, financial dependence on the government and possible political party patronage.
Mr. Adam is therefore calling on the government to pass legislations with extensive provisions for transparency and accountability, while creating public awareness to help moderate expectations and prevent oil nationalism.
He is also advocating the development of an all-inclusive national development plan to prevent the possibility of abuse and misuse of oil revenue.
Turning his attention to oil investors, Mohammed Amin Adam said most often, investors rarely considered issues of governance risks, which involves the lack of transparency arising from contract and revenue non-disclosures, regulatory capture and political patronage, and lack of clarity of rules of engagements.
He said governance risks were not necessarily about which regime is in charge, but about good governance and transparency, which will assure the governed that the agreements entered into by their government and the oil companies are to their benefit.
This, he indicated, will ensure security for those companies, enabling them to operate in peace.
He said generally, contract terms should give a fair reward for the risks of companies, with higher risks requiring more favourable contract terms, but posed a question as to how the risk will be calculated.
He observed that bureaucratic processes of government are costly with the approval of costs recovery and the establishment of reference price as major challenges to confront.
He implored the investors to understand the fiscal regime and observe changes in fiscal regime over time. He also called on them to mainstream into their budget and activities, social spending and citizens’ engagement.
The Chief Executive Officer of the National Petroleum Authority, Mr. Alex Mould, speaking on the ‘Regulatory Framework to Optimize Infrastructure Investment in Downstream Sector’, said to ensure adequate investment flow downstream, government agencies must upgrade their service provision standards.
He said the local financial sector needed much encouragement to become actively involved, adding that the World Bank and other major global financial institutions must be lobbied for support.
According to Mr. Mould, what sponsors need for investments to flow into the downstream sector include: fair regulatory tariffs, allowance for appropriate rate of returns, the development of inter-regional markets and the improvement of public-private partnerships.