Ghana Sets Up Own Oil Company

Ghana's government, led by Jerry Rawlings, recently took another step along its nationalist economic path, this time in the vital sector of energy.

The government is creating a national petroleum corporation and a national energy board "to handle all petroleum contracts, concessions and other related matters," the Ghanaian Times reported on October 13. "A new comprehensive petroleum law" is also in the works, which will govern the operations of foreign oil companies in the country, the newspaper said.

To help in establishing this new energy policy, the Rawlings government has hired Tanzer Natural Resource Associates, a New York consulting firm that advises Third World countries on how to maximize their energy resources and minimize their dependence on foreign firms (see MM, May 1980).

"We will be doing general advising on the structure for setting up the state oil company," says Steven Zorn, a partner in the Tanzer firm. Zorn says that the group will assist in the "drafting of the petroleum legislation" and will come up with "wording for a model contract between the state oil company and the foreign firms." In addition, Tanzer Associates will conduct "training courses for state oil company personnel," says Zorn.

"Setting up a national oil company is a logical thing to do," says Zorn. "Most countries do it. The only surprising thing is that it has taken Ghana so long to do it."

The national oil company "may do some of its own exploration and development," says Zorn, pointing out that this "would be a big help" to Ghana because the country is "spending one half of its total export earnings on oil."

The government has decided to increase its role in the oil sector because it felt it couldn't depend on foreign companies to provide the country with its needs. "Some of these oil companies are not doing enough to find oil and to start developing it," says Richard Horseley, information officer at Ghana's embassy in Washington. "They hang on and do nothing,"

Three U.S. firms hold exploration contracts in Ghana: Phillips Petroleum, Texas Pacific, and Agri-Petco International. Of these, only AgriPetco, a small Oklahoma-based company, is currently producing oil.

"Certainly the Rawlings government is not happy with the results" of its oil contracts, says Zorn. Rawlings is upset "with the degree of exploration" being carried out, "particularly with Phillips near the Ivory Coast," says Zorn. The government will be seeking "more drilling commitments and tighter timetables" from the companies.

Moreover, Ghana may be letting its oil go at a cheap price. "Royalty and income tax" rates in the existing contracts "are not comparable to what's being negotiated elsewhere," says Zorn. Ghana gets only a 12.5% royalty rate, where many countries are receiving 20%, he explains.

The government most likely will not break its existing contracts, however, says Zorn. "Most of the contracts come up for renewal or expire this year. The government will let them run their natural term, then if companies want to stay, the government will renegotiate the contracts."

So far, the oil companies say they aren't alarmed by the new energy policy of Ghana. "We're taking a "wait-and-see" attitude, says Ed Morse, director of international affairs for Phillips. Earlier this year "we were told by one of the PNDC (Rawlings' ruling party) cabinet members that the government would grandfather clause the existing companies," Morse adds, "but that cabinet member no longer is in power, so the situation is somewhat in flux."

"We shouldn't be affected" by the policy says Harper High, president of Agri-Petco. The company's contract "expires in the year 2005," says High. "I feel rather secure." In June, High says, the government agreed to "honor the contract."