Graphic Business News

Public bidding for oil licences - Experts laud open process

By: Jessica Acheampong
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Two players in the energy sector have lauded the adoption of the open and competitive bidding process for the award of oil contracts in the upstream petroleum sector.

According to them, the country is now in a better position to make the most in fiscal terms, translating into more revenue for the sector and a bigger economy.

They said competing for the oil blocks would ensure that the country attracted the best companies with the needed financial muscle and technical competencies to do exploration and production sustainably.

They were sharing their perspectives on the maiden Ghana Oil and Gas LicensingRound for the upstream oil and gas sector which was launched yesterday.

The Executive Director of the Africa Centre for Energy Policy, Mr Benjamin Boakye, said: “It is an important step in Ghana’s oil and gas industry. We are now getting the framework for anyone interested to openly bid for the blocks in a transparent manner.”
“With this system, you declare your block and those interested can bid for it and you get an array of companies with the financial and technical capacities who will offer the best returns,” he said.

An energy sector policy analyst, Dr Steve Manteaw, said: “When you make companies compete for blocks, you get the best in fiscal terms. Once you get the right companies with the technical competencies to do the work, you get better terms for the country and, therefore, more revenue flows into the economy,” he said.
 
He said the process would also eliminate rent-seeking tendencies in oil block allocation.

“A lot of times, when you give the minister a discretion to negotiate on behalf of the country, what happens is that you expose the minister to corruption and companies in the negotiation process may want to bribe their way through to get good fiscal terms,” he said.

Maiden licensing round
A Licensing Round Bid Evaluation and Negotiation Committee chaired by the Chief Director of the Ministry of Energy, Mr Lawrence Apaalse, was inaugurated in May this year with a mandate to oversee Ghana’s maiden licensing rounds.

The round has three oil blocks up for acquisition through an open and competitive bidding process.

Two of the blocks were given out through direct negotiation while the remaining one would be given to the national oil company, the Ghana National Petroleum Corporation (GNPC).
The purpose of the licensing round is to enable the government  to transparently invite, negotiate and enter into petroleum agreements with competent and capable companies who will explore for, develop and produce oil in an efficient, safe and cost-effective, sustainable and mutually beneficial manner.

The licensing round is being done in accordance with provisions of the Petroleum Exploration and Production Act, 2016, Act 919.

Approach
Dr Manteaw, however, faulted the approach by the government to announce the bid evaluation committee, explaining that it would result in the same challenges that direct negotiation presented.

“The fact that we are doing open and competitive bidding is a good thing and must be encouraged. It is a good thing to do as a matter of principle, but the way we are approaching it is a bit problematic,” he said.

He added that the members of the committee could become the target of companies who would want to get the contract and, thus, expose them to corruption.

“Even ahead of the bidding round, we have publicly announced the bid evaluation committee chaired by the chief director of the Ministry of Energy. When you do that ahead of the bidding, then again you are coming back to the same problem that direct negotiation presents, which is exposing them to rent-seeking and corruption.

“Anybody who wants to win that competition may want to target the members of the bid evaluation committee, influence them so they can actually win the bid.

Those are the downsides of the approach. We shouldn’t have actually announced the bid evaluation committee ahead of the bidding round,” he said.

Mr Boakye, however, disagreed with this assertion, explaining that the committee was established to work on the modalities for the licensing process. —