Report Scores Aspects of Ghana’s First Oil Licensing Round As Weak

FPSO Atta Mills

Accra, Ghana, May 7, 2020//-A Civil Society Licensing Round Monitoring Group report has scored aspects of Ghana’s First Oil Licensing Round as weak.

The report released today via a virtual event scored Direct Negotiations and Public engagements of the First Oil Licensing Round as weak.

The scoring which was done by adopting the grading scale in Natural Resource Governance Institute’s (NRGI’s) Resource Governance Index (RGI) scored Direct Negotiations and Public engagements as 55% and 50% respectively.

However, the entire process cumulatively scored 70% which is interpreted as Satisfactory on the adopted grading scheme.

Thematic areas that were rated as good were adherence to procedural requirements under competitive bidding and the compliance with the calendar of events under the licensing round.

The analysis shows that compliance with the competitive tendering requirements of the licensing round was significantly better than that of the direct negotiations.

The results show little effort by Ghana’s Ministry of Energy to engage the public beyond the mechanical application of the law.

Good practices in other countries serve as examples for Ghana to improve public engagement on subsequent licensing rounds.

Beyond the approach to score the process, the report discusses other observations which include the decline in the level of interest shown by investors during the early periods of the bid process.

While government cites inadequate data and size of the blocks as reasons companies lost interest, engagements with some industry watchers and companies reveal that fiscal terms stipulated in the invitation to tender did not compensate for risk, according to the report.

Also, while the licensing process was ongoing (competitive tendering and direct negotiation), the Ministry opened an escape window for companies to negotiate outside the licensing round process.

“Although the selection process met the timelines set by the Ministry, the actual negotiations of petroleum agreements are yet to be concluded five months after the deadline. This portends corruption risks and could negatively impact on future investor interest. Civil society monitoring to some extent played a watchdog role over the process”.

Speaking the at virtual launch of the report, Nafi Chinery, the West Regional Africa Manager at NRGI noted: “The competitive bidding is expected to generate optimal returns for Ghana as it is likely to provide avenues for highly competent and qualified companies to bid, and therefore achieve relatively higher market values for all stakeholders, and crucially for Ghana”.

Unlike direct negotiation, an open competitive bidding process is subject to public monitoring and oversight and potentially reduces rent-seeking practices that usually characterize the open door approach to contracting, she said.

“Competitive bidding reduces information asymmetry among companies, as well as provides citizens comprehensive information for oversight and monitoring purposes. It is worth noting that, this was an initial step towards the implementation of open contracting standards and processes in Ghana”, Ms Chinery explained.

The purpose of this report is to document and evaluate the licensing round process based on transparency, to use it as a reference document for engaging government to ensure transparency in future licenses process

Recommendations

The report recommended to the government to start issuing reconnaissance licences to gather quality data to aid future bidding rounds.

The cost for such an activity will be recovered from data fees during competitive tendering. Liberia used this approach to acquire data which enabled them to carry out competitive tendering.

It added that the government must publish disaggregated information on bidders and their respective blocks they are prequalified for.

“Disclosures on beneficial ownership must be made publicly available during the prequalification stage. This allows for citizens to monitor the bidding process and to identify politically exposed persons in the contract process”, the report further suggested.

“Government must ensure that direct negotiations are done only where peculiarities that point to a specific company to optimise the resources are established.

Government must make deliberate efforts to engage the public beyond the requirement of the law. It is recommended that such engagements must have feedback systems to encourage citizens to share information that might be relevant for the licensing round and by extension, the national interest”.

Background 

Ghana’s first oil bid and licensing round, launched in October 2018 was conducted in accordance with applicable laws and international standard practices.

Six blocks were made available for the licensing round; three blocks to be awarded through an open and competitive bidding process, two through direct negotiations and one to be solely operated by Ghana National Petroleum Corporation (GNPC), the national oil company.

The significant compliance with the legal provisions of the licensing round provide opportunities for sustained investor confidence in future licensing rounds.

Quality of data and fiscal terms counts in sustaining investor interest beyond the initial expression of interest. In the case of Ghana, out of 60 applications received from 16 companies, only three companies progressed to submit bids after prequalification.

African Eye Report

 

 

 

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