Any discussion on oil and gas in Africa has historically been dominated by the activities in the Nigerian oil and gas sector. Hydrocarbon discoveries in countries neighbouring Nigeria have to some extent changed the focus of discussions in the last few years and that trend is set to continue. Undoubtedly in terms of production numbers, Nigeria remains the leading oil and gas country in the region. However, Ghana is certainly taking the initiative to make itself the oil and gas hub in the region. We examine below some of the developments in the supply chain of the oil and gas industry in Ghana.
Ghana’s Petroleum Act 2016
With the discovery of larger commercial quantities of oil and gas in deepwater offshore Ghana, there has been the need for an update to its legislation. Historically two main statutes provided the framework for regulation of the upstream sector in Ghana, namely: the Ghana National Petroleum Corporation Act, 1983 (“PNDCL 64”) and the Petroleum (Exploration and the Production) Act 1984 (“PNDCL 84”). PNDCL 64 established Ghana National Petroleum Corporation with the mandate to undertake the exploration, development, production and disposal of petroleum in Ghana. The PNDCL 84, under which ownership in all petroleum within the jurisdiction of Ghana is vested in the Republic of Ghana, provided the framework for the actual activities undertaken in the oil and gas sector.
It was widely accepted that the existing legislative framework could not adequately address the challenges, including fiscal, environmental and issues of local content that arise from actual development, production and utilisation of the country’s oil and gas resources. As a consequence, the Ghanaian Parliament passed the long awaited Petroleum (Exploration and Production) Bill into law on 5 August 2016 (the “Act”). With its passage, the Act repeals the PNDCL 84, although it makes clear that regulations, rules and directives arising under the previous act and immediately in force prior to the enactment of the Act would remain in effect until revocation or termination.
Some key highlights of the Act include:
- The Act creates an attractive environment for potential investors to participate in the sector by providing certainty and transparency in the ground rules for operations. Open, transparent and competitive public tender processes have been introduced to precede the entry into a petroleum agreement
- In a bid to further improve transparency, the Petroleum Commission is required under the Act to establish and maintain a petroleum register of all petroleum agreement, licences, permits and authorisations and for such register to be open to the public
- The local content aims are evident with the Act imposing an obligation on persons carrying out petroleum activities to ensure that Ghanaian citizens, with the requisite qualifications in categories and functions as prescribed are employed
- Participants are required to prepare and implement a local content plan with provisions relating to the fulfilment of applicable Ghanaian content requirements with respect to the provision of goods and services, as well as the transfer of know-how and skills related to petroleum activities
- The Act provides for the establishment of a local content fund, funded by contributions from contractors as well as government and grants, to assist small and medium-scale Ghanaian businesses engaged in the oil and gas sector
- Under the Act, the state will hold an initial participatingcarried interest of 15%. The Act also introduces new fiscal terms such as bonus payments
- The Act provides more robust provisions in relation to environmental issues
- The enactment of the Act is a positive step as it brings in clarity, transparency and certainty in to the oil and gas sector in Ghana. The progress made is certainly in sharp contrast to the fate of the Nigerian Petroleum Industry Bill, which still hasn’t been passed into law despite years of debate on the topic.
Progress has also been made in the downstream sector following its liberalisation. Ghana has in particular been working on developing its storage and distribution network. It is now reportedly distributing petroleum products to neighbouring countries including Nigeria, with the state owned Bulk Oil Storage and Transport (BOST) Co. Ltd leading the way with investments in its Bolgatanga Petroleum Depot. It is interesting to note that neighbouring Cote d’Ivoire is also vying for the status of being the largest fuel hub in the region, with recently announced plans for a nearly USD1 billion in oil product pipelines and storage. With the above developments, Ghana is certainly signalling that it is open and ready for business and it is likely that investors will respond positively.