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Ghana government approves four oil contracts in one month – ACEP

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Dr. Mohammed Amin Adam
Dr. Mohammed Amin Adam

The Africa Centre for Energy Policy (ACEP) has expressed concern about the manner in which the Ghana government rushes to approve oil contracts without careful considerations.

According to Dr Mohammed Amin Adam, Executive Director of the energy policy think tank, in the instances of agreements approved for two oil companies, CAMAC and AMNI, around March 2014, Parliament hastily considered the contracts in about six hours, by moving a motion to suspend the standing order in Parliament that requires a minimum of 48 hours between the notice of a motion and opening of its debate.

In one particular month, as many as four oil contracts were approved and ACEP believes the contracts which are long term, were approved too quickly without due diligence.

“The contracts we are signing are long term contracts. You are signing an oil contract with an oil company for 30 years and you want to use one month to be sure you have scrutinized the contract which will last for 30 years?”, Dr Adam asked rhetorically in an interview with ghanabusinessnews.com.

ACEP is also worried about the competence of the companies being contracted and warns of a harsh and unpleasant future in Ghana’s oil industry if government does not re-examine its bad agreements with companies that lack the requisite financial and technical ability to make new discoveries to replace Ghana’s oil reserves in the future.

In one case involving the companies AGR Norway and AGM Petroleum, a supposedly Ghanaian company, ACEP says it was dismissively told, after questioning AGM’s experience and capacity for deepwater exploration, that AGR Norway, which has upstream experience and the requisite technical know-how, was a partner on the block and would bring its technical capacity on board.

As things have turned out, AGR Norway, from initially being the majority shareholder on its oil block with 49 per cent, now has a stake of 10 per cent and is now mysteriously said to be demanding a technical agreement with the other partners before bringing its technical services to bear on the block.

Dr Adam said the possible explanation for AGR Norway now demanding a technical agreement, is that the local company AGM, used the more technically-competent AGR Norway, as “the face of the consortium” to secure the oil block, intending to later reacquire its real shares and leave AGR Norway with a lesser stake negotiated earlier.

Interestingly, ACEP was castigated by the Ghana National Petroleum Corporation and the Petroleum Ministry, with the latter issuing a strong statement condemning ACEP as liars, for raising issues about AGM during that time (mid-August 2013).

“Today the reality is staring at us: AGM is now trying to sell part of its shareholding to another company,” Dr. Adam said.

Dr. Adam speaking at ACEP’s maiden oil governance summit in Accra, reiterated that a country’s most important policy after starting commercial production of oil – a depletable resource – should be how to replace the reserves being depleted, but some of the companies being contracted by parliament lack the required technical ability and financial muscle as required by the exploration and production law (PNDC Law 84), to make new discoveries in the future..

He explained that commencement of production usually de-risks a basin and attracts the big oil companies that like to avoid risk but in Ghana’s case, Ghana is now attracting smaller and less capable companies than those that made discoveries in the past, putting the possibility for future discovery at risk.

“If we cannot get new discoveries on the contracts we have just signed, we will go to 280,000 [barrels] a day; all the blocks that are producing now and those that are yet to produce have short plateau periods – we will start to decline. And that is where Ghana will see,” Dr. Adam warned.

By Emmanuel Odonkor

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