The upstream petroleum industry in Ghana was energised with the commercial discovery of oil in the Jubilee Field in 2007.
The Jubilee Field straddles the Deepwater Tano and West Cape Three Points basins some 70km offshore of Ghana and 130km southwest of the port city of Takoradi.
The field was estimated to have recoverable reserves of up to 1bstb (billion of stock tank barrels). As of June 2016, the Jubilee Field was estimated to have recoverable reserves of 455mmstb (million stock tank barrels) and 456bscf (billions of standard cubic feet).
Subsequently, further exploration led to the discovery of TEN Fields, Ghana’s second major oil development, which was brought onstream and produced its first oil in August 2016.
The field holds recoverable oil reserves of about 240mmstb, gas reserves of about 360mmscf (millions of standard cubic feet), and is estimated to produce about 80,000 barrels per day at peak.
The TEN project takes its name from the three offshore fields under development: Tweneboa, Enyenra and Ntomme, which are situated in the Deepwater Tano block, about 60km offshore of western Ghana. Drilling in the field was previously halted owing to a maritime dispute between Ghana and the Ivory Coast.
The ruling delivered on the dispute by the International Tribunal of the Law of the Sea in September 2017, however, did not affect the field and drilling is, therefore, expected to commence in 2018.
In January 2015, Ghana took a major step towards the realisation of energy and power security with the signing of an agreement for the development of the Offshore Cape Three Points integrated oil and gas project, estimated to cost about $7 billion, which is being undertaken by ENI Spa in collaboration with Vitol Energy.
The project is expected to develop the Sankofa and Gye Nyame fields to provide sufficient gas to operate Ghana’s thermal power plants for 20 years.
Oil production from the field commenced in 2017 and the fields are expected to commence gas production in 2018. As of June 2016, the field was estimated to hold oil reserves of 204mmstb and gas reserves of 1,107bscf.
The upstream sector deals mainly with exploration, drilling, production and transportation of crude oil. The downstream sector comprises refining, storage, importation, transportation, distribution and marketing of petroleum products.
Both sectors are regulated by a number of laws. The commercial aspects of Ghana’s oil industry relate mainly to the marketing and distribution of crude oil and crude oil products as well as the development and sale of natural gas.
Downstream petroleum business operations have been dominated by indigenous Ghanaian oil marketing companies for several decades. Most of these companies have been dominant players in bulk storage, transportation and the retail of petroleum products.
The marketing and distribution of oil products is largely in the hands of private oil marketing companies. These include Total, Oando, Engen, Goil and small private operators.
The marketing of Ghana’s crude oil entitlement abroad has been awarded to Vitol SA and Cirrus Oil Services after they carried out a marketing process and obtained the best commercial terms for Ghana. They have marketed Ghana’s first cargo to Sun International, a subsidiary of Sunoco Inc.
The recent oil discovery has brought to the fore additional investment and business opportunities in the petrochemical and natural gas industry. However, indigenous companies currently lack the required capacity to take advantage of these opportunities.
The development and sale of natural gas is the next major commercial component of the oil sector. Significant quantities of natural gas are expected to be produced from the Jubilee Field and the Sankofa and Gye Nyame oilfields. It is estimated that 1,000scf of gas will be produced with each barrel of oil from the Jubilee Field alone. This ‘associated gas’ will be processed to extract natural gas liquids and liquefied petroleum gas.
At the peak of phase I of the Jubilee production, about 80 to 100MMscf will be available to Ghana. Monthly revenues from the natural gas liquids to be recovered under the project are estimated at more than US$30 million. The Ghana National Petroleum Corporation has so far been managing all aspects of the gas commercialisation initiative, including commercial arrangements, financing and project management.
The National Gas Development Taskforce has also been established to review all aspects of the gas commercialisation project, including its technical, commercial, economic and financing options, and to make recommendations on the most efficient and viable ways of bringing the project to fruition.
The cost of the infrastructure required to commercialise the natural gas from the Jubilee Field has been estimated to be more than US$1 billion. The project has been delayed.
However, the Gas Development Taskforce has submitted its report to the government for implementation. It is expected that full-scale development and gas production will commence on the basis of the findings of the Gas Development Taskforce.
Energy mix
What percentage of your country’s energy needs is covered, directly or indirectly, by oil or gas as opposed to nuclear or non-conventional sources? What percentage of the petroleum product needs of your country is supplied with domestic production?
Approximately 70 per cent of Ghana’s energy needs are covered by oil as opposed to other sources of energy. Petroleum is used in the form of diesel fuel, fuel oils, petrol, kerosene, LPG and natural gas for transportation and power generation.
Present consumption of petroleum products is in the region of 950,000 tonnes per year. Ghana’s oil discovery also led to the need to increase local refining capacity to meet both domestic demand and exports.
At present, less than 50 per cent of domestic demand is met by the Tema Oil Refinery (TOR). To bring refining capacity to acceptable levels, there is a need to expand the capacity of TOR to improve its operations.
Ghana does not currently depend on nuclear or other non-conventional sources of energy to meet its energy consumption requirements, although there have recently been suggestions of nuclear power generation.
Government policy
Does your country have an overarching policy regarding oil-related activities or a general energy policy?
The Ministry of Energy has the overall responsibility for providing policy direction within the energy sector of the national economy. It has an additional responsibility for the formulation and implementation of general policies relating to the energy sector. In 2006, it formulated Ghana’s energy policy, the Strategic National Energy Plan, which spans a 20-year period. The policy seeks to respond to the country’s energy vision needs with 10 broad objectives.
The Strategic Energy Plan is intended to achieve, inter alia, the following objectives:
- establish an optimal blend of increasing demand, investment in generation and transmission, and energy efficiency;
- optimise the conjunctive use of commercial grid electricity and imported fossil fuel and renewable energy such as wood fuels, which constitute over 60 per cent of Ghana’s energy usage; and
- broaden the sources and types of energy supply and integrating them into high-quality service for the growth of the economy.
The policy framework has also been formulated to take account of the existing socioeconomic and environmental policies, and the links between the energy sector and other sectors of the economy.
Pursuant to this broad objective, the Energy Commission has been established as the lead agency to coordinate the general policies relating to the energy sector.
The Energy Commission performs functions relating to the regulation, management, development and utilisation of energy resources.
Additionally, it grants licences for the transmission, wholesale supply, distribution and sale of electricity and natural gas, refining, storage, bulk transportation, marketing and sale of petroleum products. The Energy Commission also regulates the licensing regime for the distribution of gas.
Also, Ghana has a national energy policy, which was formulated in February 2010. The national energy policy provides a concise outline of the government’s policy direction in order to contribute to a better understanding of Ghana’s energy policy framework.
Among others, the national energy policy serves as a guide to key stakeholders and institutions in the energy sector highlighting the definition and implementation of key activities in respect of their mandates.
The national energy policy covers a broad spectrum of issues and challenges relating to the following areas:
- the power subsector;
- the petroleum subsector;
- the renewable energy subsector;
- waste to energy;
- energy efficiency and conservation;
- energy and the environment;
- energy and gender; and
- managing the sector’s future.
In formulating the policies and laws regulating a specific subsector such as petroleum operations, due regard is given to this broad regulatory and strategic framework. The specific laws that have been promulgated to regulate the oil industry include the Petroleum (Exploration and Production) Act 2016 (Act 919) (which repealed the Petroleum (Exploration and Production) Law 1984 (PNDCL 84)), the National Petroleum Authority Act 2005 (Act 691), the Income Tax Act 2015 (Act 896) and the Ghana National Petroleum Corporation Act (PNDC Law 64). In July 2011, the Petroleum Commission Act 2011 (Act 821) also came into being.
Registering a licence
Is there an official, publicly available register for licences and licensees? Is there a register setting out oilfield ownership or operatorship, etc?
Under the new Petroleum Exploration and Production Act, the Petroleum Commission, as part of its regulatory function, is required to establish and keep a register of all petroleum agreements, licences, permits and authorisations of the upstream oil companies it registers. Presently, the register is electronic and is available on the Petroleum Commission’s website. Anyone may access the register at no fee.
The register is maintained by the Petroleum Commission and contains information on petroleum agreements signed by the Ghanaian government as well as the contract areas covered by each petroleum agreement.
The register also contains information on who the operator of each contract area is, the other contracting parties, the interest held by the operator and each party in the contract area, and the current phase of operations, among others.
Legal system
Describe the general legal system in your country.
Ghana operates a legal system based on the common law system. The 1992 Constitution of the Republic of Ghana has put in place stable democratic institutions and has created an environment that respects the rule of law.
In recent times, the government has demonstrated increasing respect for the rule of law. This can be seen in its compliance with decisions handed down by the courts and findings of commissions of inquiry that have found some government officials at fault.
However, there has been speculation about some cases involving politicians, in which investigations have been fraught with undue delays. These cases have created the perception of interference by the government.
The people of Ghana also generally obey the country’s laws and abide by court decisions. This was demonstrated in the recent election petition case.
Ghana has entered into a number of bilateral investment treaties with other countries, most of which contain dispute resolution provisions. The Alternative Dispute Resolution Act 2010 (Act 798) (the Arbitration Act or Arbitration Law) regulates domestic arbitral proceedings.
The Arbitration Law does not regulate foreign arbitral proceedings. However, it provides the framework for the enforcement of foreign arbitral awards. Arbitration proceedings are considered foreign when they are undertaken outside Ghana under a system of law other than the laws of Ghana. To be enforced, a foreign award is required to satisfy the following conditions:
- the award was rendered by a competent authority under the laws of the country where the award was made;
- a reciprocal agreement exists between Ghana and the country in which the award was made;
- the award was made under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (New York Convention) or under any other international convention on arbitration ratified by parliament;
- the party has produced the original award or a certified copy thereof and the agreement pursuant to which the award was made or a duly authenticated copy;
- there is no appeal pending against the award in any court under the law applicable to the arbitration; and
- six years have not elapsed since the judgment was delivered either at first instance or on appeal, whichever may be the case.
The anti-bribery and anti-corruption legislation in force in Ghana consists of a framework of rules and procedures for public services on the one hand and private sector businesses on the other, with sanctions applicable. A number of laws in Ghana provide for combating bribery and corruption.
In July 2006, the government of Ghana passed the Whistle Blower Act to encourage Ghanaian citizens to volunteer information on corrupt practices to appropriate government agencies. In December 2006, the Commission on Human Rights and Administrative Justice issued guidelines on conflict of interest to public sector workers.
In 2010, the Economic and Organized Crimes Act was enacted to establish the Economic and Organized Crimes Office (EOCO). EOCO replaced the Serious Fraud Office and has additional powers to investigate and prosecute corruption cases.
EOCO is tasked to monitor, investigate and prosecute offences involving money laundering, human trafficking, prohibited cyber activity, tax fraud, corruption and other matters. In 2018, the Office of the Special Prosecutor Act, 2017 (Act 959) was established as a specialised agency to investigate and prosecute specific cases of alleged or suspected corruption and corruption-related offences involving public officers and politically exposed persons in the performance of their functions as well as persons in the private sector involved in the commission of alleged or suspected corruption and corruption-related offences.
The Criminal Offences Act 1960 (Act 29) provides for sanctions for corruption in general. Under the Criminal Offences Act, both demand and supply sides of corruption are criminal. The sentence on conviction for corruption under the Criminal and other Offences (Procedure) Act 1960 (Act 30) is a prison term not exceeding 25 years.
Regulation overview
Legal framework for oil regulation
Describe the key laws and regulations that make up the principal legal framework regulating oil and gas activities.
Oil activities are regulated by a number of laws and regulations. The Energy Commission Act 1997 (Act 541) established the Energy Commission, which has the mandate to grant licences for the transmission, wholesale supply, distribution and sale of electricity and natural gas, refining, storage, bulk distribution, marketing and sale of petroleum products.
The National Petroleum Authority Act 2005 (Act 691), established the National Petroleum Authority (NPA), which has been mandated to regulate, oversee and monitor activities in the petroleum downstream industry and to establish a unified petroleum price fund. It has the additional responsibility of granting licences for the supply, bulk storage, transportation and retailing of petroleum products.
The Petroleum Commission Act 2011 (Act 821), sets up the Petroleum Commission for the regulation and management of the utilisation of petroleum resources. This Act takes away the hitherto regulatory functions of the Ghana National Petroleum Corporation (GNPC).
The Petroleum Commission is responsible for registering and issuing permits to firms active in the upstream petroleum industry.
The Petroleum (Local Content and Local Participation) Regulations (Local Content Regulations) passed in 2013 regulates local content in the upstream sector. The Petroleum Commission (Fees and Charges) Regulations, 2015 (LI 2221) regulates granting of permits and licence fees.
The Ghana National Petroleum Corporation Act 1983 (PNDCL 64), established the GNPC, which is responsible for the development, production and disposal of petroleum.
The Petroleum (Exploration and Production) Act 2016 (Act 919) is the primary legislation for the regulation of exploration, development and production of oil and gas resources in Ghana.
The object of the law is to provide for and ensure safe, secure, sustainable and efficient petroleum activities in order to achieve optimal long-term petroleum resource exploitation and utilisation for the benefit of Ghanaians.
The Petroleum (Exploration and Production) (Health Safety and Environment) Regulations 2017 (LI 2258) provides the basic health and safety requirements to be complied with by parties involved in the upstream industry.
The Petroleum (Exploration and Production) (Data Management) Regulations 2017 (LI 2257) provides for the reporting and management of petroleum data obtained from the conduct of petroleum activities within Ghana.
The Petroleum (Exploration and Production) (General) Regulations 2018 (LI 2359) provides the necessary processes involved in the exploration, development and production of oil and gas resources.
The Petroleum Revenue Management Act passed in 2011 addresses how petroleum revenues are collected, spent and invested.
The Public Interest and Accountability Commission, established by the Petroleum Revenue Management Act, is mandated to oversee petroleum revenue management and allocation.
The Petroleum Revenue (Amendment) Act, passed in 2015, amends the Petroleum Revenue Management Act 2011, and provides for the allocation of funds to the Ghana Infrastructure Investment Fund for the purposes of infrastructure development, the provision of the composition of the Investment Advisory Committee and other related matters.
Expropriation of licensee interest
Are there any legislative provisions that allow for expropriation of a licensee’s interest and, if so, under what conditions?
Yes. Pursuant to section 21(7) of the Petroleum (Exploration and Production) Act 2016 (Act 919) (the Petroleum Exploration Law), if an oil company does not make a commercial discovery of petroleum within seven years of being given an exploration licence, the petroleum agreement will terminate, irrespective of the duration stipulated in the agreement. The Petroleum Exploration Law provides, in the relevant part, that a petroleum agreement entered into in Ghana is valid for a total period of not more than 25 years.
However, where a discovery of petroleum is made in the last year of the exploration period, and an extension is necessary in order to enable a determination to be made on whether the discovery is a commercial discovery, or under exceptional situations, the Minister may, in consultation with the Petroleum Commission, extend the exploration period.
Under section 71(5) of the Petroleum Exploration Law, where there is war or any other emergency affecting energy supplies, the Minister of Energy may compel an oil company to sell all or part of the quantity of petroleum it produces to the Republic of Ghana or an agency of the republic. The Minister may also compel the oil company to sell a percentage of its entitlement to the country to meets its domestic market requirements. However, any compulsory sale would be done at prevailing market prices.
Revocation or amendment of licences
May the government revoke or amend a licensee’s interest?
Generally, the licence would specify the conditions on which the government may revoke the licence. Further, the Minister of Energy, under the Petroleum Exploration law, has the power to postpone or suspend petroleum activities on a field, where the Minister believes such postponement or suspension is in the national or public interest.
On the occurrence of an accident or an emergency that leads to loss of life or personal injury, among others, the Minister may, acting on the advice of the Petroleum Commission, order that petroleum activities on the field be suspended to a certain extent or that the licensee may continue carrying out petroleum activities subject to the imposition of some conditions.
Also, where a natural resource is discovered in a contract area, the Minister may, acting in consultation with the relevant authorities and any affected person, order that petroleum activities in the area be postponed.
Regulators
Identify and describe the government regulatory and oversight bodies principally responsible for regulating oil exploration and production activities in your country. What sanctions for breach may be imposed by the regulatory and oversight bodies?
The Ministry of Energy provides the overall policy direction in the management of the oil sector in particular. The Attorney General’s Department, under the Ministry of Justice, is also responsible for drafting the required laws for regulating the oil sector.
The Environmental Protection Agency (EPA) is responsible for the enforcement of the environmental laws of Ghana. The EPA ensures that the exploration and development of oil is undertaken in an environmentally friendly manner.
The GNPC is the state oil company and it is responsible for the development, production and disposal of petroleum. The GNPC is not a regulatory or oversight body and may undertake development, production and disposal of petroleum alone or in a joint venture with a private contractor.
The Petroleum Commission reports to the Ministry of Energy and has an obligation to ensure that the contractor satisfies its obligations with respect to minimum expenditure and work programme requirements. Nevertheless, the GNPC is relied upon by the Petroleum Commission for the performance of the technical side of these regulatory functions.
Generally, breach of the legal requirements under the laws regulating the sector is criminal and the sanction for such a breach may only be imposed by a court of law after a person is convicted of the breach by the court.
The sanctions that may be imposed by the court include fines and terms of imprisonment up to one year for each breach, or both.
The Petroleum Commission also has the power to expunge the name of any person registered to conduct petroleum activities from the Petroleum Register, where the person fails to comply with local content requirements even after being notified by the Commission to remedy the breach.
Also, the regulatory bodies have the power, in accordance with the law, to levy administrative fines for non-compliance with the law or the terms and conditions of a permit or licence.
Government statistics
What government body maintains oil production, export and import statistics?
With respect to upstream operations, the law establishing the GNPC makes it mandatory for international oil companies to maintain data relating to oil exploration and production. Also, the Petroleum Commission, under the Petroleum Commission Act, has the duty to receive and store petroleum data, manage a national petroleum repository and, at the request of the Minister, undertake reconnaissance exploration including data acquisition.
This data is deemed the intellectual property of the Ghanaian government and the international oil company cannot deal with this data without government consent.
In the downstream sector, the NPA has been mandated to regulate matters relating to export and import statistics. Petroleum marketing companies are required to submit data on import and export statistics to the NPA.
Kimathi & Partners Corporate Attorneys – Akua Pinamang Addae, Kafui Kwabla Quashigah, Kimathi Kuenyehia, Sr and Sefakor Kuenyehia
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