Parts of Ghana’s Petroleum Exportation and Production Act of 2016 have been found to be inimical to the attraction of petroleum investors into Ghana’s oil and gas sector.
The Petroleum Commission says the 15% Carried Participation Interest enshrined in the act is a turn-off for many investors as it’s making Ghana uncompetitive in the world of oil and gas.
Carried Participation Interest means the government, in Ghana’s case through the Ghana National Petroleum Commission (GNPC) owns a share in an oil project but does not have to pay upfront the value of the share for the exploration and setting up.
Instead, the private company covers all those costs. Once the project starts making money after establishment and the government begins to earn its share of the profits, the carried interest is then gradually paid back using its earnings.
This arrangement, experts believe is a way for countries to benefit from their oil resources without having to take on big financial risks at the initial stages.
But the Chief Executive Officer (CEO) of the Petroleum Commission, Egbert Fabile says Ghana’s 15% Carried Participation Interest is very high compared to other oil-producing countries across the world.
Speaking at the Media Launch of the maiden Africa Oil Week on Wednesday, November 13, 2024, the CEO argued that these oil-producing countries are doing an average of 10% Carried Participation Interest hence resulting in the loss of Ghana’s potential investors to these competitors.
“In our case, if you look at Section 10, Subsection 4, 5 thereof of the Petroleum Exploration and Production Act of 2016, Act 919, it states that in Ghana the states carried participation interest is 15%. So if you bring $1, the investor will know that 15% of that $1 will never be gotten back. When you look around; Cote d’Ivoire, Namibia, Angola, Nigeria, Guyana, and all the rest – they are hovering around Carried Participation Interest of 10%,” the Petroleum Commission boss argued.
“So if you go to the market with these people as competitors, if you are an investor, where will you want to go?” he quizzed.
He therefore revealed that to attract more investors who are turned away by the “high” Carried Participation Interest”, the Commission in collaboration with GNPC and the Ministry has initiated processes to amend the laws and fiscal framework to enhance the competitiveness of Ghana.
“The Petroleum Commission, GNPC, and the Ministry of Energy have been very hard at work, trying to come up with various permutations to engender and promote reforms in our legislative or regulatory or fiscal regime framework,” Egbert Fabile announced.
In the midst of this consideration, experts also argue that a reduction in the Carried Participation Interest of Ghana would mean the country would own a smaller share of the profits from its own oil resources. This could lead to less revenue for the government, which might impact funding for important public projects like healthcare, education, or infrastructure.
In addition, it could also reduce the country’s influence over how these oil projects are run, making it harder to ensure that environmental and labor standards are upheld. In the long run, it might limit Ghana’s ability to benefit fully from its own natural resources, leaving more profits in the hands of foreign companies.
