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Abstract
In August 2016, the Ghanaian Parliament marked the advent of a new era for the country's nascent petroleum industry with the enactment into law of the Petroleum (Exploration and Production) Act (Act 919). Act 919 is considered to represent a major milestone in the legislative history of the upstream oil and gas industry in Ghana. The main objective of this article is to assess the new statute's fitness for purpose through a critical examination of its regulatory aspirations and its underlying legislative presumptions. The discussion is set against the historical background of petroleum exploration and production in Ghana.
Notes
1 Petroleum Commission, Ghana - Resource - Exploration History; at: www.petrocom.gov.gh/exploration-history.html accessed 12 November 2016.
2 Ibid, 2.
3 Ibid.
4 Ibid.
5 Ibid, 3.
6 See further AJ Banful, ‘Ghana's Present Legal Framework for Upstream Petroleum Production’ in K Appiah-Adu (ed), Governance of the Petroleum Sector in an Emerging Developing Economy (Gower 2013) 145–62.
7 PNDC 64, s 2(2)(b).
8 Section 2(2)(c) and (d).
9 Section 2(2)(e).
10 Section 2(3)(a–f).
11 See www.tullowoil.com/operations/west-africa/ghana/ten-field accessed 13 November 2016.
12 See generally, Republic of Ghana: 2015 Annual Report on the Petroleum Funds www.mofep.gov.gh/sites/default/files/reports/petroleum/2015%20Annual%20Report%20on%20the%20Petroleum%20Funds.pdf accessed 17 November 2016.
13 Act 815, ss 25–26.
14 Sections 29–40.
15 Section 9.
16 Section 10; see further FK Otoo, ‘A Review of Ghana's Heritage Fund under the Ghana Petroleum Revenue Management Act 2011 (Act 815)’ (2015) 39 Journal of Law, Policy and Globalisation 1.
17 See further F Ayensu, ‘Managing Ghana's Oil Revenue: Ghana Petroleum Funds (Gpfs)’ (2013) 1(2) Asian Journal of Humanities & Social Sciences 148.
18 See further ‘Stabilisation Fund Reaches All-time Low, Faces Collapse’ Business and Financial Times of Ghana (Accra, 16 November 2016) https://asokoinsight.com/news/stabilisation-fund-reaches-all-time-low-faces-collapse-ghana accessed 18 November 2016.
19 See n 1 above.
20 See www.tullowoil.com/operations/west-africa/ghana/jubilee-field accessed 17 November 2016.
21 Ibid.
22 Ibid.
23 JG Cooke and DL Goldwyn, Africa's New Energy Producers: Making the Most of Emerging Opportunities, Center for Strategic and International Studies, (Washington DC, January 2015), p.4. ISBN- 978-1-4422-4062-9.
24 Ibid.
25 See Ghana National Petroleum Corporation: Operations; www.gnpcghana.com/operations.html accessed 18 November 2016.
26 For a full list of the Commission's functions, see Act 821, s 3(a–n).
27 Act 821, s 3(h).
28 Section 3(g).
29 Section 3(a).
30 Section 3(c).
31 Section 3(b) and (j).
32 As seen above, Art 2.4 of the MPA provides that the GNPC shall have a ten per cent initial interest in all petroleum operations on a carried interest basis. Under current petroleum agreements, such as the TEN project, the GNPC's participating interest is 15 per cent (n 11 above).
33 See www.resourcegovernance.org/blog/ghanas-petroleum-exploration-and-production-bill-steps-forward-room-improvement accessed 2 December 2016.
34 Ibid.
35 These parts have headings but are not numbered in the Act. The author's numbering here is for the purposes of analytical convenience.
36 Section 2: ‘Object of the Act’.
37 To this effect, s 32 includes provisions on the utilisation of associated natural gas. Section 33 complements this by incorporating restrictions on gas flaring. See also Art 14 of the MPA, which outlines special provisions for natural gas.
38 Section 34.
39 Section 23(1) mirrors the provisions of Art 4 of the MPA on a minimum exploration programme.
40 Section 23(2).
41 Section 4. See further K Appiah-Adu and NK Appiah-Adu, ‘Towards Good Governance in Ghana's Petroleum Sector’ in Appiah-Adu (ed) (n 6 above) 79–88; and PRP Heller, ‘Civil Society and the Evolution of Accountability in the Petroleum Sector’ in Appiah-Adu (ed) (n 6 above) 89–108.
42 For example, through local incorporation and joint venture partnership between foreign companies and indigenous Ghanaian enterprises: s 70. See also the JV Guidelines, 2016; www.petrocom.gov.gh/assets/JV%20Guidelines.pdf; accessed 11 July 2017.
43 See ss 61–67 and s 71. Also relevant in this regard are the Petroleum (Local Content and Local Participation) Regulations, 2013 (LI 2204).
44 Section 60, in line with similar provisions in Art 21 of the MPA on employment and training of Ghanaian citizens in the upstream petroleum sector.
45 Petroleum (Local Content and Local Participation) Regulations, 2013 (LI 2204), reg 4(2).
46 See JV Guidelines, Art 4.3.
47 Established under the Petroleum Revenue Management Act 2011 (Act 815).
48 Section 56.
49 Section 10(3).
50 Section 10(6).
51 MPA 2000, Art 26(2). See further C Amankwah, ‘Issues of Stability in Ghana's Model Petroleum Agreement’ (2014) 2(1) UKLSA Legal Issues Journal 1.
52 Section 20(2).
53 See further A Mensah, ‘The Norwegian Petroleum Experience: A Model for Ghana?’ (Master's thesis, Norwegian University of Life Sciences 2012).
54 A Disch, O Rasmussen and J Asamoah, Oil for Development Ghana, 2010-2014: Moving Towards a ‘Second Generation’ Programme? A Review of Norway's Support to the Petroleum Industry in Ghana (NORAD Collected Reviews, Norwegian Agency for Development Cooperation 2015). See also, Organisation for Economic Co-operation and Development (OECD), ‘Breaking the Mineral and Fuel Resource Curse in Ghana’ in Development Co-operation Report 2012 (OECD 2012).
55 See www.chathamhouse.org/publication/oil-gas-good-governance-guidelines-2015 accessed 14 December 2016. Although seemingly vague at first sight, Precept 3 needs to be read in conjunction with other complementary provisions that incorporate the ethos of these benchmarks, as well as other ethical aspects and values considered as prerequisites for good oil industry practice.
56 Sections 5 and 11.
57 Section 9(5).
58 Section 9(7–8).
59 Section 14(1).
60 Section 10(3–4).
61 Section 10(6).
62 Section 12.
63 Section 11.
64 Section 13.
65 Section 15.
66 Section 16.
67 Section 17.
68 Section 18.
69 Section 19.
70 Section 20.
71 Section 21(5).
72 Section 21(7).
73 Section 25(2).
74 Section 25(7–8).
75 Section 27.
76 See s 27(4–14) for full details of what has to be included in the plan for development and operation.
77 Under Art 6.2(ii) of the MPA, the Chairperson of the JMC shall be designated by the GNPC from among the members of the JMC. As stipulated under Art 6.3(viii), the JMC shall further establish subcommittees including, inter alia, the technical, the audit and the accounting subcommittees.
78 Article 6.5(iii) of the MPA.
79 Section 29(1–3).
80 See also Art 11 of the MPA; see further Petroleum (Exploration and Production) (Measurement) Regulations, 2016 (LI 2246); and Guidelines to Petroleum (Exploration and Production) (Measurement) Regulations, 2016 (published February 2017).
81 See generally, FM Sasraku, ‘Petroleum Economics – Ghana's Petroleum Tax Regime and Its Strategic Implications’ in Appiah-Adu (ed) (n 6 above) 163–74.
82 Article 10.1 of the MPA prescribes a royalty rate of 12.5 per cent. See also J Amoaka-Tuffour and J Owusu-Ayim, ‘An Evaluation of Ghana's Petroleum Fiscal Regime’ (2010) 4 Ghana Policy Journal 7.
83 PNDC 188, s 6.
84 Act 896, First Schedule, para 3(1).
85 See also Art 12 of the MPA.
86 Section 86.
87 Section 88.
88 Section 89.
89 See Art 10.1(b) and 10.2 of the MPA for further provisions on additional oil entitlement.
90 See also Art 17 of the MPA for further provisions on safety and environmental protection. See further, S Aning, ‘Oil and Gas Issues: The Environment, Health and Safety, and Community Engagement’ in Appiah-Adu (ed) (n 6 above) 233–50.
91 Also relevant in this regard are provisions of the MPA such as Art 24 on dispute resolution/arbitration; and Art 25 on assignment of rights under the petroleum agreement.
92 A Fatouros, ‘The Administrative Contract in Transnational Transactions: Reflections on the Uses of Comparison’ in Ius Privatum Gentium: Festschrift für Max Rheinstein (Tubingen University Press, 1969) vol 1 259; and P Leboulanger, Les contrats entre Etats et entreprises étrangères (Economica, 1985).
93 A de Laubadere, Traité élémentaire de droit administratif (Revue international de droit comparé, Paris, France, 1981) vol II 1156; see also C Turpin, ‘Public Contracts’ in Encyclopaedia of Comparative Law (Martinus Nijhoff, 1984) 24.
94 T Riad, ‘The Applicable Law Governing Transnational Development Agreements’ (SJD dissertation, Harvard Law School 1985) 6. See also M Hammerson and A Martinez, ‘Royalty and Tax Regime’ in E Pereira (ed), The Encyclopaedia of Oil and Gas Law vol 1: Upstream (Globe Business Publishing, 2014) 7–32.
95 See further T Wälde and G Ndi, ‘Fiscal Regime Stability and Issues of State Sovereignty’ in J Otto (ed), The Taxation of Mineral Enterprises (Graham & Trotman/M Nijhoff 1995) 63–89.
96 See T Machmud, ‘Production Sharing Contracts in Indonesia: 25 Years’ History’ (1993) 11 Journal of Energy & Natural Resources Law 179; see also K Bindemann, ‘Production Sharing Agreements: An Economic Analysis’ (Oxford Institute for Energy Studies 1999) 1.
97 MPA, Art 9.
98 Bindemann (n 96 above) 13–46; see also A Blake and C Roberts, ‘Comparing Petroleum Fiscal Regimes under Oil Price Uncertainty’ (2006) 31(2) Resources Policy 95; see further A Ovcharova, ‘Production Sharing Agreements’ in Pereira (ed) (n 94 above) 33–50.
99 N Mustafayer, ‘Production-Sharing Agreements in the Petroleum Industry of Azerbaijan’ (2015) 8(4) Journal of World Energy Law & Business 362.
100 See further R Brown, ‘Choice of Law Provisions in Concession and Related Contracts’ (1976) 39 Modern Law Review 625; E Paasivirta, ‘Internationalization and Stabilization of Contracts versus State Sovereignty’ (1989) 60 Brit Y B Int’l Law 315.
101 There is a vast body of literature on the internationalisation of petroleum and mineral development agreements and the use of stabilisation clauses to ensure long-term contractual stability, of which, see, for example, T Wälde and G Ndi, ‘Stabilizing International Investment Commitments: International Law versus Contract Interpretation’ (1996) 31(2) Texas International Law Journal 215; see further G Delaume, ‘Contractual Waivers of Sovereign Immunity: Some Practical Considerations’ (1990) 5 ICSID-Rev-FILJ 232; and S Sagar, ‘“Waiver of Sovereign Immunity” Clauses in Contracts: An Examination of Their Legal Standing and Practical Value in Enforcement of International Arbitral Awards’ (2014) 31(5) Journal of International Arbitration 609.
102 S Tordo, ‘Fiscal Systems for Hydrocarbons: Design Issues’ (2007) World Bank Working Paper No 123. See also K Blinn and others, International Petroleum Exploration and Exploitation Agreements: Legal, Economic and Policy Aspects (2nd edn, Barrows 2009).
103 For a discussion of some of the key characteristics of hybrid petroleum regimes, see H Sullivan, ‘Hybrid Agreements’ in Pereira (ed) (n 94 above) 63–70.
104 D Kankam and I Ackah, ‘The Optimal Petroleum Fiscal System for Ghana: An Analysis of Available Alternatives’ (2014) 4(3) International Journal of Energy Economics and Policy 400.
105 Bindemann (n 96).
106 Z Ghadas and S Karimsharif, ‘Types and Features of International Petroleum Contracts’ (2014) 4(3) SE Asia Journal of Contemporary Business, Economics & Law 33.
107 J Xiong, Y Zhao and G Zhao, ‘Oil and Gas Regulation in China: Overview’ (Thomson Reuters 2014). The royalty hybrid regime in China was replaced in November 2011 by a new resource tax system.
108 See Art 10.2 of the MPA for detail of the sharing formula.
109 See, for example, Ghana Extractive Industry Transparency Initiative https://eiti.org/ghana accessed 12 June 2017.
110 In s 38(2), under ‘contractor’ and ‘rentals’.
111 Natural Resource Charter (Natural Resource Governance Institute 2014) http://resourcegovernance.org; see also the Chatham House Guidelines for Good Governance in Emerging Oil and Gas Producers, 2015 www.chathamhouse.org/sites/files/chathamhouse/publications/research/2016-07-13-guidelines-good-governance-2016-marcel.pdf accessed 11 July 2017.
112 See, for example, I Amundsen, ‘Can Ghana Avoid the Resource Curse?’ in Appiah-Adu (ed) (n 6 above) 109–44.
113 See P Arthur, ‘Avoiding the Resource Curse in Ghana: Assessing the Options’ in M Schnurr and L Swatuk (eds), Natural Resources and Social Conflict: Towards Critical Environmental Security (Palgrave Macmillan 2012) 108–27.
114 R Auty, Sustaining Development in Mineral Economies: The Resource Curse Thesis (Routledge 1993). See also A Venables, ‘Using Natural Resources for Development: Why Has It Proven So Difficult?’ (2016) 30(1) Journal of Economic Perspectives 161; and M Ross, ‘The Political Economy of the Resource Curse’ (1999) 51(2) World Politics 297.
115 Among studies that have found weak empirical support for the resource curse thesis, see T Havranek, R Horwath and A Zeynalov, ‘Natural Resources and Economic Growth: A Meta-Analysis’ (2016) 88 World Development 134; see also R Torvik, ‘Why Do Some Resource-Abundant Countries Succeed While Others Do Not?’ (2009) 25(2) Oxford Review of Economic Policy 241.
116 J Sachs and A Warner, ‘Natural Resources and Economic Development: The Curse of Natural Resources’ (2001) 45 European Economic Review 827.
117 Cf K Attafuah, ‘Managing the Political and Social Expectations from Ghana's Oil and Gas Resources’ (2010) 4 Ghana Policy Journal 110; see also J Asafu-Adjaye, ‘Oil Production and Ghana's Economy: What Can We Expect?’ (2010) 4 Ghana Policy Journal 35.
118 Cf J Useem, ‘The Devil's Excrement’ Fortune Magazine (February 2003) 1–3.
119 See S Brooks and M Kurtz, ‘Oil and Democracy: Endogenous Natural Resources and the Political “Resource Curse”’ (2016) 70 International Organization 279; see also T Caselli and A Tesei, ‘Resource Windfalls, Political Regimes and Political Stability’ (2015) 98 Review of Economics and Statistics 573; M Ross, ‘Does Oil Hinder Democracy?’ (2001) 53(3) World Politics 325; N Jensen and L Wantchekon, ‘Resource Wealth and Political Regimes in Africa’ (2004) 37(7) Comparative Political Studies 816.
120 See generally, C Bell and S Wolford, ‘Oil Discoveries, Shifting Power, and Civil Conflict’ (2015) 59(3) International Studies Quarterly 517.
121 Cf T Palley, ‘Lifting the Natural Resources Curse’ (2003) 80(12) Foreign Service Journal 54 et seq.
122 Cf O Bermúdez-Lugo, ‘The Mineral Industry of Ghana’ 2013 Minerals Yearbook (US Geological Survey) https://minerals.usgs.gov/minerals/pubs/country/2012/myb3-2012-gh.pdf accessed 11 July 2017.
124 M Ross, ‘What Have We Learned about the Resource Curse?’ (2015) 18 Annual Review of Political Science 239.
125 Cf J-P Stijns, ‘Natural Resource Abundance and Human Capital Accumulation’ (2006) 34 World Development 1060.