Four Methods to Drive a Successful First Oil Licensing Round in Ghana

Since Ghana discovered commercial quantities of petroleum in 2007 and started production in 2010, there has been a strong government focus on sector and extractives revenues management. This focus intensified after the passage of the Exploration and Production Law in 2016. Indeed, since 2017, there has been special emphasis on issues such as licencing processes, contract transparency, transfer pricing and beneficial ownership in public policy discussions.

According to the Exploration and Production Law, the country’s Petroleum Commission must keep a public register of all petroleum licenses, agreements, authorizations and permits and make this information open to all. The commission is required by the local content regulations to provide public access to such information. Per the regulations, local content refers to the percentage of Ghanaian produced materials, personnel, financing, goods and services rendered to the petroleum industry and which can be measured in monetary terms.

A separate government upstream strategy—currently in a draft stage and unavailable online—targets creating an environment for sustainable development and ensuring facilitation and promotion of women’s participation in oil and gas exploration and production.

Another important element of the law is that it makes provisions for open and competitive bidding processes.

Having established a bid and licensing rounds committee in May, the country’s preparation for the bid round began last month. This development makes other countries’ bidding round experience particularly relevant to Ghanaians.

A recent workshop led by NRGI and Open Contracting Partnership aimed to help Ghana’s Ministry of Energy conduct a transparent and successful bid round, homing in on the recent experiences of Mexican and Lebanese petroleum regulatory authorities to determine how can Ghana make the most out of the process. There were four clear pointers for Ghana.

Invest in quality technical data. Ghana needs to know its own geology better than any company that wants to invest, Westwood Global Energy Group president and NRGI advisory council member Keith Meyers said. Meyers pointed to additional ideal bid round conditions like easy access to technical data, clear and simple bidding criteria, fair, reasonable and stable contracts, and competitive fiscal terms. Apart from strengthening the country’s negotiating position, it can also help to plan the licencing round. The data around the projects should also be accessible. Ghana’s current physical data room can be housed on a dedicated website or the Petroleum Commission website to allow companies to pay and access information on the blocks.

Level the playing field. There should be transparent, clear and simple regulations, and bidding criteria and licencing processes known to all potential parties. Ghana can follow examples of best practices by publishing specific criteria and other relevant information on the website of the Ministry of Energy or create a dedicated website that integrates petroleum and environmental regulations and other relevant information. This reduces the abuse of authority and favoritism by public officials since all stakeholders will have access to the same information at the same time.

Build and construct transparency measures. In preparing for the first licencing process, the country needs to build investor and public trust. Information that is important to investors and public should be published and easily readable and accessible. Information on beneficial owners of companies, information on all pre-qualified companies, reasons for selecting one company over the other, and the decision-making process—along with the actors making those decisions—should be known. The publication of this information should be timely and easily understandable. Apart from building investor and public trust, transparency also has the power to attract competent companies.

At the workshop, Lebanon’s delegation focused on the fiscal regime, transparency measures and local content. For instance, a portal has been created to exchange information and receive feedback from stakeholders. The winning bid is declared through press conference. In addition, there is a draft law to empower citizens to sue officials suspected of corruption or abuse of the system.

Mexico’s presentation centred on major transparency initiatives such as integrating fiscal, environmental, energy and other relevant data on one website and livestreaming the bid openings and announcements of the winners for public consumption and transparency.

Engage with civil society. Mexico’s presentation emphasized continual consultation with civil society. Ghana’s Ministry of Energy promised to share information on the timelines and deliverables on the licencing round, receive stakeholder input into the upstream strategy and forge a sustainable partnership with civil society to ensure maximum transparency of the licencing process. These commitments should be holistic and should cover the entire upstream sector. After the workshop, the ministry updated civil society on the bid round process, sought input on the draft petroleum upstream sector strategy, and also responded to questions.

Read more about NRGI’s contract transparency work in Mexico.

Edna Osei is an Africa Associate with the Natural Resource Governance Institute (NRGI). Ishmael Ackah is a technical advisor at Ghana’s Ministry of Planning.