The Institute of Economic Affairs (IEA) is calling on President John Dramani Mahama to immediately halt plans to extend Tullow Oil’s petroleum licence until 2040.
IEA says instead of the government extending the licence of Tullow, it must rather initiate a comprehensive restructuring of Ghana’s oil and gas governance framework. The economic policy think tank insists that simply extending the current arrangement risks compounding long-standing issues of unfairness, fiscal loss, and weak oversight.
The think tank’s intervention follows reports that the government has signed a Memorandum of Understanding (MoU) to extend Tullow’s licenses in the West Cape Three Points and Deepwater Tano blocks, which were originally set to expire in 2036.
A statement published by the IEA vehemently disagrees with this move by the government, describing the decision as lacking “good faith, transparency, probity, and accountability, and is at odds with the Government’s own promise to reset governance in the extractive sector.”
The IEA, in its statement, enumerated at least 5 key reasons why it opposes the extension of the oil giant.
Arbitration Losses and Unresolved Tax Disputes
The IEA pointed to a troubling pattern of disputes between Tullow and the Ghana Revenue Authority (GRA). It cites a USD 320 million tax assessment for the 2012–2016 period, which Tullow refused to pay and successfully challenged in international arbitration.
The arbitration ruling not only cleared Tullow but forced Ghana to pay substantial legal and arbitration fees totaling over USD 1 million, with 5% interest annually until paid.
A separate ongoing dispute over USD 387 million in tax liabilities related to disallowed interest deductions between 2010 and 2020, which Tullow has also taken to international arbitration.
Colonial-Era Petroleum Agreement
IEA criticizes the current concession-style agreement as a relic of colonial-era resource exploitation that no longer serves Ghana’s best interest. The institute advocates converting the agreement into a service contract model, where the state retains ownership and hires private firms to operate on a fee basis, as practiced in Norway, Qatar, Dubai, and Abu Dhabi.
“We must not compound existing problems by embedding them into future agreements,” the IEA cautioned. “A reset is long overdue!”
Comparative Evidence from Norway and the UK
Drawing from global best practices, the IEA cited stark contrasts that both the UK and Norway started offshore oil production in the 1960s and have produced similar volumes of oil.
By 2014, however, Norway earned nearly three times more per barrel, USD 29.8, compared to the UK’s USD 11, thanks to state participation, higher taxes, and better fiscal frameworks.
Norway’s sovereign wealth fund, now worth over USD 1.4 trillion, was built on this efficient strategic resource governance.
Loss of Bargaining Power if Extended Prematurely
The IEA argues that Ghana, having matured as a petroleum producer, now possesses stronger technical, legal, and market leverage to renegotiate contracts on better terms. Extending Tullow’s license now, with 11 years remaining, would lock the country into outdated, one-sided terms that limit long-term national benefit.
Lack of Transparency and Procedural Integrity
The Institute also questioned the opacity of the negotiations leading to the MoU, warning that Ghana must learn from past errors and apply strict governance, accountability, and stakeholder inclusion in all petroleum negotiations going forward.
The think tank believes that President Mahama’s 2024 landslide election victory gives him a powerful mandate to reset the petroleum sector and correct historic imbalances.
It is therefore urging the government to halt the extension immediately and convert Tullow’s remaining contract years into a service agreement.
Moreover, the government must institute a transparent, accountable renegotiation process guided by global best practices and reposition Ghana to maximize value from its depletable natural resources.
“In the spirit of intergenerational equity and sustainable development, we owe it to ourselves and future generations to steward Ghana’s resources with courage and foresight,” the statement concluded.
This call from one of the renowned think tanks in the country sets the stage for renewed national dialogue on how Ghana manages its endowment of natural resources.
