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December 21, 2012

Ghana to Improve Transparency in Oil Contracts

by Joana Mantey

In Ghana, efforts are underway to boost transparency in the country’s newly developed oil industry, which some say will likely double economic growth. New rules require the quarterly disclosure of contract agreements and oil revenues as a way of avoiding the corruption that that many African oil exporters call the “resource curse.”

The rules are included in two new laws:  the Petroleum Commission Act and the Petroleum Revenue Management Act. They aim to empower citizens to demand accountability from government as Ghana develops its petroleum sector.

Stephen Manteaw, the chairman of the Civil Society Platform on Oil and Gas, describes the legislative push towards openness as a rarity in Africa. And, he says unfortunately, regulations are yet to be developed to make one of the laws workable.  In particular, a public interest and accountability committee has not been set up to monitor the management and use of petroleum revenues. It would also provide a platform for public debate on the spending of the revenues

“There is absence of regulations to the Petroleum Revenue Management Act," he says. "We [had] a similar [issue] in the mining sector where we had the Mining Act in 2006, but it was only in 2012 that regulations to the act were developed. When you have a situation like this, it becomes very difficult to operationalize the law that have been developed to manage the sector.”

Manteaw says a Public Interest and Accountability Committee set up to monitor compliance with the law is poorly funded. The institution has no office space and is currently operating with the support of the German Development Agency and of non-governmental organizations such as Revenue Watch Institute. 

Another challenge confronting Ghana’s oil industry is the failure of companies to reach a target of 12 thousand barrels per day. Current production levels fall between 60 thousand and 80 thousand barrels per day indicating shortfalls in the government’s projected revenues.

Meanwhile, foreign companies continue to dominate the sector. Government policies meant to encourage the participation of local business in the industry is not making much impact. Manteaw attributes the problem to high fees the government has established for any companies wanting to get involved in the lucrative oil business.

“In my view," he says, "these fees are exorbitant. Some of the companies are required to have turnover of up to about five million dollars and pay a subscription fee of 30 thousand dollars renewable on the payment of 25 thousand dollars. This, to many Ghanaians is exorbitant, in fact, unaffordable”.

The government is also encouraging the use of local expertise, goods, services and financing arrangements in the oil sector.

Kwame Djantua is the chief executive officer of the African Energy Consortium.  He says the Petroleum Commission which regulates such policies must do more to train Ghanaians.

“When will Ghanaians take control of the oil industry? What did Brazil do?," he asks. "They invested in their people for their people to go and learn and come back. Trinidad and Tobago did the same, Norway did the same. Why can’t we do the same for Ghana?’

Djantua is not sure whether the oil industry has been managed well in 2012.   For example, by law, oil company agreements with the government must be made public.  But he says the details of some contracts have not yet been disclosed.

“Another issue," he says, "is this collateralization of the revenue and where 70% of the revenue is put into the consolidated fund. How do you target the revenue into projects? Once it goes into the consolidated fund how do you supervise how that money is being spent.”

Djantua says government is voted into power to serve the people, so it has to be open about how oil money is being spent. If it fails to do so, Ghana could join the ranks of other African oil producing nations – where proceeds are unaccounted for and little of it benefits the average person.

Listen to report on Ghana's oil industry