Ghana’s new exploration and production bill, currently before Parliament, offers more transparency than the legislation it replaces, but may also give the energy minister too much power to enter into petroleum agreements without public tender.
While Parliamentary approval will be needed for such agreements, economists and analysts worry that these discretionary powers could be abused.
‘’Discretion is good in certain circumstances, as it provides space for innovation and exploitation of rare opportunity; however unfettered discretion as expressed in the bill, enabling the minister not to be held to account for the exercise of such powers, cannot bode well for the state. It creates room for the promotion of rent-seeking tendencies and may lead to abuse and corruption’’ said Major Rtd Daniel Ablor Quarcoo who is Chairman of the Public Interest Accountability Committee-PIAC and who wants Parliament to consider removing this section before it passes the legislation.
The Exploration and Production (E&P) Bill targets an open and competitive bidding process for granting oil concessions, plus the creation of a public registry for disclosure of petroleum agreements, contracts and permits. It will replace the Petroleum (Exploration and Production) Act, 1984 (PNDC Law 84).
Key clauses of the new legislation, numbers 10 to 25, call for an “open, transparent and competitive” tender process. But they also say the energy minister does not have to adhere to the results of the tender and can also negotiate directly with a qualified bidder if that’s in the public interest.
That is the section that that has sparked concerns among analysts, who think the broad discretionary powers available to the minister may lead to corruption
‘’Should there be the need to grant the minister such wide discretionary powers in negotiation, I believe the specific conditions ought to be set out clearly; In order not to provide a leeway for the minister to be tempted to act in a way that will not be in the interest of the people of Ghana,” says Dr John Gatsi, Economist and lecturer at the UCC School of Business.
The E&P legislation seeks to boost private sector participation and investment in the petroleum sector. It will strengthen the regulatory framework for competition and quality assurance, providing for comprehensive regulation of petroleum operations, rights and obligations of contractors and subcontractors.
Petroleum resources, and studies and economic reports about them, remain the property of Ghana and all energy agreements must be between a developer, the republic and the Ghana National Petroleum Corporation.
Dr Gatsi notes that section 268 of the bill tasks Parliament with scrutinizing each deal, whether it emerges from public tender or from the minister’s discretionary choice, and that means the legislation can only be effective if parliamentarians know and understand the Oil and Gas sector and if there is a public record of every deal, for example in the Gazette. “If they understand their job, it is not every agreement that the minister will send to parliament that will receive the nod.’’ Said Dr Gatsi
Dr Mohammed Amin Adam, Energy economist with the Africa Center for Energy Policy (ACEP), also believes that the sections of the bill which allow the minister to forgo open and competitive bidding may offer the minister too much discretion. “Where discretion is not controlled, indiscretion becomes the order; So if a minister defines efficiency to favour a company of his choice, what happens?” Dr Amin Adam retorted
Dr. Mohammed Amin Adam added that there are also no requirements for the mandatory disclosure of beneficial ownership information in oil contracts because true owners of oil firms have always been difficult to trace. According to him, such gaps undermine the open contracting and competitive bidding process, so Parliament must try to incorporate the views of relevant consultation by stakeholders when the bill is laid before the house for deliberation.
He however commended government for certain aspects of the bill, which seeks to address governance challenges in the upstream exploration and production sector.
Citi business news investigations have revealed that the E&P bill should have been passed before the petroleum Revenue Management Act(Act 815), but analysts say, it is better late than having the current Provisional National Defense Council (PNDC) law to regulate prospecting, development and production in the petroleum sector.
‘’There is a lot of improvement in terms of dealing with the gaps in the PNDC law 84,” says Dr Steve Manteaw, Campaign coordinator of the International Social Development Sector (ISODEC). “One of the things that gladdens me about the bill is that it commits us to open competitive bidding in a way to deal with rent seeking in the sector so that the best offer wins the block when its put on open tendering.”
Asked about the discretionary powers of the minister, Dr Manteaw said ‘the minister will have to justify the use of his discretion’’; this he says is because the whole tendering process is aimed at assigning blocks to companies with financial capabilities because it requires huge financial capabilities making it difficult to award it to a company that is not actually competent to be granted such a block’’
Though Dr Manteaw was hopeful that the state will gain economically should the bill be passed in its current form, he recommends that the unfettered discretionary powers given the minister is checked through regulations.
Minority Spokesperson on Energy, K.T Hammond said, ‘’I do not have any difficulty with the minister when he decides to exercise his discretion as it has certain parameters; the challenge may be how the discretion is exercised, however with the way things are, there will not be enough room for open abuse’’ adding that should there be any a tendency of abuse, there bill will have a mechanism for redress.
Parliament resumed sitting on February 2 but are yet to debate the E&P bill, but analysts are hopeful that the sections of concern will be addressed before it is passed.
Meanwhile, efforts to get comments From the Energy Ministry has proven futile.
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By: Lorrencia Nkrumah/citifmonline.com/Ghana