IES urges government to review Petroleum Agreements amidst drawbacks in oil sector

Following the refusal of US-based Exxon Mobil to extend its contract for exploration in Ghana, the Institute for Energy Security is calling on the government to review Petroleum Agreements and adequately ensure that the state oil company is resourced.

A statement by the Institute, available on JoyNews indicates that the IES has suggested a downward review of royalties and other tax rates. The IES argues that this would serve as an incentive for stakeholders and parties in the upstream sector.

Concerns abound over what appears to be a decline in the fortunes of the oil industry in Ghana, following the exit of Exxon Mobil and a conspicuous delay by Aker Energy in submitting its development plan for the Pecan field.

According to the IES, the government would be able to solve the looming crisis by reconsidering its stance on “up-front payments”, captured in the Petroleum Agreements in the form of technology transfer and training

“These upfront payments, which the oil companies are expected to make within 90 days and before undertaking Seismic surveys, is serving as a disincentive to the oil companies, particularly the smaller ones. If the up-front payments that go as high as US$7 million be reviewed downwards, the savings could serve as a free cash flow to the oil companies to deploy into their operation”, the statement indicated.

The IES has also recommended that the government’s influence on the GNPC be reduced. It argues that this would enable more focus on the hydrocarbons and equip the GNPC to step in where the international oil companies drag their feet or quit.