In order to avoid a Niger-Delta situation in Ghana

A-G pushes for review of oil & gas laws
… For effective management of resources
Posted: The Chronicle | Wednesday, December 09, 2009

By Charles Takyi - Boadu

Ghana seems to be learning a lot of lessons from neighbouring West-African countries, including Nigeria, which are having a tough time dealing with the challenges presented them by their oil find and exploration.
Though there are existing legal and regulatory frameworks governing the oil industry in the country, the Attorney-General and Minister of Justice, Mrs. Betty Mould-Iddrisu, says the government is striving to modify it.

Speaking at the All Africa Energy Summit, which opened in Accra yesterday, she noted “Ghana must rapidly make the transition from a country competing to attract valid oil and gas investment, into one that is a major producer.”

The transition, according to her, is complex, and must be managed with skill, in order to avoid the pitfalls other countries have suffered.

In order to achieve this, she said the government intends to maximise the country’s revenue from the oil and gas discoveries, effectively manage oil and gas operations to ensure proper development of fields, maximise local content in the industry i.e. the participation of Ghanaians in the revenue associated with the industry, to facilitate job creation and introduce transparency into the nascent industry in Ghana.

Considering the fact that there are many aspects to an effective transition, the Attorney-General says one indispensable component was the establishment of a solid legal framework, to ensure that Ghana’s interests are maximised and fully protected.

She stressed the need for Ghana, as a country, to “approach the industry from a position of legal strength,” laying emphasis on the fact that “we must confront head-on the legal challenges of becoming a major oil and gas producer.”

In the light of this, Mrs. Mould-Iddrisu said, “it is imperative that Ghana’s legal regime, relating to the oil and gas industry, is reviewed and adapted to Ghana’s new condition as a major oil producer.”

This, according to her, might include the need to review and update the Petroleum Exploration and Production law PNDCL 84, issuance of Petroleum Regulations in accordance with PNDCL 84, and also review and update the country’s petroleum taxation and revenue laws.

“The current stabilisation clauses may also have to be looked at again, since they are too broad, and were incorporated at a time when Ghana did not know its oil and gas potential,” she indicated.

She however noted that the government had already begun the review of the regulatory framework, indicating, “the Ministry of Energy has drafted a local content policy and proposals on various regulations, which are in the process of being referred to the Ministry of Justice for drafting.”

The Attorney-General and Minister of Justice also talked about a new oil and gas revenue bill, which seeks to manage revenue from the oil and gas industry, and ensure transparency, stressing, “the oil and gas tax law has been reviewed and incorporated in the general income tax law.”

Meanwhile, she said there were proposals for the formation of an independent regulator, which, according to her, are being made ready for preparation into a bill, and it is expected that most, if not all, of the proposed review legislation, would be ready by the production date in 2010.

According to her, the amendment expands the responsibility for the regulation of activities in the Petroleum Up and Mid Stream sub-sectors.

The objective of these amendments, she said, was to regulate, oversee and monitor activities in the upstream, midstream and downstream petroleum sector, and support the national policy objectives of the up, mid, and downstream petroleum sector.

Whilst admitting that Ghana had not been given much time to prepare for the transition, the A-G said, “we are determined to make our oil find a blessing, and not a curse, by putting the appropriate legal and regulatory structures in place, to ensure that Ghana gets the most out of its oil and gas reserves, and runs an industry that is transparent and best-practices oriented.”

Available information has it that the PNDC Law 64 established the Ghana National Petroleum Corporation, and makes it responsible for the development and production and disposal of oil and gas.

PNDCL 84 provides a framework for the management of oil and gas exploration development and production, and makes it clear that all petroleum existing in its natural state, is the property of Ghana, and also that the exploration, development and production of petroleum, shall be done only in accordance with the terms of a petroleum agreement that is regulated and executed with the Minister of Energy, and the interest acquired cannot be assigned to any other person, without the prior consent in writing of the Minister of Energy.

Mrs. Betty Mould-Iddrisu believes this is essential, because the rights to petroleum products in its natural state is the property of the people of Ghana vested in the government, since the law provides the basic terms of every petroleum agreement.

It also spells out the rights and objectives of the parties, and the sanctions to be applied in case of breaches.

Section 32 of the Act provides for regulations to be made in 24 areas of oil and gas management, unfortunately, since 1982 most of them have not been made.