Ghana Lacks Safeguards For Regulating Oil Industry

Ghana has failed to implement key contracting and environmental safeguards for the country's fledgling oil and gas industry, a coalition of transparency groups said in a report.

The West African nation hasn't publicly disclosed contracts with companies including U.K.-based Tullow Oil Plc (TLW), operator of the country's offshore Jubilee field and continues to negotiate exploration contracts in private rather than through open tenders, according to the Civil Society Platform on Oil and Gas in Ghana, which is sponsored by Oxfam America, World Bank and the Revenue Watch Institute.

'Ghana must follow the examples of Liberia, Peru and Ecuador which disclose their contracts regularly on government websites,' the report said, adding that with closed-door negotiations and wide latitude for government negotiators, there is a risk of corruption.

Ghana began production from Jubilee last year and output is expected to reach 120,000 barrels per day, this year.

Companies including Switzerland-based Vitol Group, Houston-based Vanco Energy Co. and Rome-based Eni SpA (ENI) are among those with exploration permits in the area around Jubilee.

Ghana's environmental agencies aren't able to properly monitor the industry, as was demonstrated by their response to the spill of oil-based drilling mud by Kosmos Energy Ltd. in 2009 and 2010, the report said.

A government committee recommended Kosmos pay a GH¢40 million ($26 million) fine for the discharge, even as it said Ghana's environmental agency didn't have 'adequate equipment or capacity' to probe spills.

Ghana and Kosmos, which is a partner in the Jubilee field and is backed by private equity firms Blackstone Group LP (BX) and Warburg Pincus LLP, settled the matter along with a number of other disputes in December.

President John Atta Mills declined to provide details of the settlement at a press conference in January or say whether Kosmos had paid a fine.

The group praised the passage of an oil revenue management bill by Ghana's Parliament last month. That bill requires the publication of oil earnings in newspapers and establishes a savings fund to cushion the country against price shocks and establishes a public oversight committee.

—Source: Bloomberg