Ghana is undertaking a comprehensive review of its fiscal regime in the upstream petroleum industry as part of plans to make oil exploration and production more attractive to investors.
This is due to the energy transition which is limiting investment in the oil and gas sector across the world.
The West African nation began commercial oil production in 2010 and produces around 150,000 barrels per day from three oilfields.
In 2018, the country organised the first licensing bid round for six oil blocks and it attracted several international oil companies but could not hit a deal as most of the International Oil Companies(IOCs) pulled out in a move that surprised most industry watchers.
With lessons learned from the bid rounds, Ghana has revised its notes and taken several steps including investing in seismic data acquisition, to guide investors and engaging potential investors in direct negotiations.
Currently, Ghana has six oil blocks available for grabs and the upstream regulator says three of the blocks are for direct negotiations while the remaining three are for farm-in.
Addressing industry players at a two-day data management workshop in Accra on November 16 &17, 2023, the Chief Executive Officer of the Petroleum Commission, Egbert Faibille, outlined some of the issues that have arisen following the implementation of the existing fiscal regime.
He mentioned nuisance Front- End Load Elements, complex additional oil entitlement, size fits all regime, fixed and regressive royalty, strict ring-fencing rules, uncapped cost recovery, and difficulties in administration as some of the issues.
To address the challenge of the non-flexible and regressive nature of Ghana’s royalty regime, Mr. Faibille said a two-tier royalty rate scheme has been proposed.
He explained that the two-tie scheme adopts some carefully calibrated flexible and progressive sliding scale royalty rates which are, at the same time, sensitive to risk factors such as water depth, production volume and crude oil price.
“As opposed to a fixed royalty scheme, a sliding scale royalty scheme is progressive and incentivizes fixed development of all sizes, water depth, and in volatile price environment without having to re-negotiate fiscal terms. These two royalty schemes are proposed to replace AOE,” Mr. Faibille told the gathering.
Mr. Faibille said his outfit had forwarded their proposal to the Ministry of Energy for discussion and the way forward.
Source: https://energynewsafrica.com