New oil blocks : Gov't must review capital requirement for local participation - PIAC

By Justice Kofi Bimpeh
Oil and Gas sector
Oil and Gas sector

Public Interest and Accountability Committee, PIAC is calling on the government to review the capital requirement for local participation in the oil and gas sector.

According to PIAC, the current requirement is making it difficult for local companies to participate in the sector.

Speaking to Joy FM, Chairman of the Public Interest and Accountability Committee Dr Steve Manteaw said the government must review downward the requirement for indigenous companies that want a stake in the oil blocks which are being allocated.

" Common sense tells me that we may have to revise that 5% threshold, we are not under any obligation to imposed a threshold that we know we cannot meet as part of the pre-qualification or as part of the award process for a contract in the oil and gas sector, it's for..... how we do target setting in this country most of the times they appear as guesswork because if we had done proper due diligent it should have become known to us long ago that the 5% capital requirement for Ghanaian participation was overly too high and we could have actually target that perhaps within the first ten years we will be aiming at 2% and beyond when companies have been equipped enough we now move the threshold to about 5%".

Under the current capital requirement, local players are expected to provide 5% capital before they are allowed to partner with an international firm to acquire a block.

Low interest in oil blocks

The Energy Ministry has attributed the low interest in the first oil blocks bidding round to the lack of comprehensive data on Ghana’s oil blocks as well as the small size of the blocks.

Out of the three blocks put up for the first bidding round, four companies expressed interest in one block, only one company expressed interest in block 2 while no company showed interest in the last block.

Deputy Minister, Mohammed Amin Adam said the government has done its assessment on the responses it received from the companies and has taken steps to address them.

“Basically, two major issues emerged, the first one is that the data that we already have on those blocks was not comprehensive enough and therefore they didn’t have enough data to enable them to make commercial decisions so we have to improve on the quality of the data,” he stated.

According to him the second issue that came up was the size of the acreage, which he said was too small for most of the companies compared to the offers they get from other oil-rich countries.

“For some of them, their exploratory strategies require them to operate in larger acreages and there are a number of countries that will give larger acreages to companies. If they compare what they get as per their strategies with what they were offered, our acreages or blocks were smaller in size and therefore it was inconsistent with their strategies”