Upstream Natural Gas Contracting Processes Lack Transparency-Imani

By Jonathan Donkor

THERE is insufficient transparency in the upstream contracting process for natural gas in Ghana as required by international best practice, a study by think tank, IMANI Africa has revealed.

It established that some processes including the award of rights to international oil companies, were shrouded in secrecy rendering stakeholders incapable of monitoring and making inputs.

As a result of this, high gas price could obstruct the desired power generation, lead to high electricity tariffs and negatively affect the citizenry and industry, according to the study report launched in Accra, yesterday.

Titled, "Effect of upstream gas contracting on electricity tariffs and inclusive growth-the case of the Sankofa-Gye-Nyame Gas Project", it was done in collaboration with the Ghana Oil and Gas for Inclusive Growth (GOGIG).

It was conducted between last year and June this year, with the objective of accessing the transparency of the upstream natural gas contracting process in the country with international best practices as yardstick and evaluating the impact on gas price, electricity and inclusive growth.

The Sankofa-Gye-Nyame field is part of the Offshore Cape Three Points (OCTP) Oil gas fields. It is estimated to hold 150 million barrels (mmbl) of oil and 1.45 trillion cubic feet of gas. Oil and gas production started in 2010.

A gas sale agreement was signed between the government and OCTP partners including ENI Ghana at a gas price of $9.8 metric million British Thermal Unit (mmbtu).

Presenting the report, a research assistant at IMANI, Dennis Asare said an assessment of the contracting process for the project showed that it was not sufficiently transparent.

He said the competitive bidding was not employed as required by the PNDC Law 48, one of the main statues for managing upstream petroleum, while there was no clear public justification for the direct negotiation.

He said there was no update on the process while the gas sale agreement and other key documents were not published as compared with international best practices.

If there was maximum transparency in the contracting process, he said the country would get optimal gas price that would reduce cost of power generation, lead to reduced electricity tariffs and improve social inclusion.

Some of the indicators of international best practices in the contracting process, Mr Asare listed to include openness in contracting process, negotiation process and fiscal considerations.

Continuing the presentation, Ms Barbara Andoh, a Research Associate at IMANI said the study also found that the provision of subsidies to certain categories of consumers had negative impact on the power sector debt which the citizens ended up paying through taxes.

She recommended amendments of various contracting provisions in the petroleum sector to mandate the public disclosure of key documents and procedures to make the regime be in line with international standards.

Reacting to issue during the open forum, Mr Alex Mould, who was the Chief Executive Officer of the Ghana National Petroleum Corporation (GNPC) when the Sankofa contract was signed, denied the limited transparency claim.

He said due diligence was done by the corporation in collaboration with the World Bank and other stakeholders in the industry in the interest of Ghanaians and that the project had had positive economic impacts.

His submission was corroborated by the current GNPC Manager, Development and Production, Victor Sunu-Atta and Mr Baluri Bukari, the Local Content and Sustainability Manager of ENI, one of the Sankofa Project partners.

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