Policy Analyst and Co-Chair of the Ghana Extractive Industry Transparency Initiative (GHEITI), Steve Manteaw is urging the Ghana National Petroleum Corporation (GNPC) to play an active role in the exploration of oil and gas.
According to him, such a role in resource extraction will enable the national oil company to make more revenue, which will help strengthen the value of the depreciating local currency, the cedi.
Countries that have made a lot from their hydrocarbon resources, he emphasized, are playing very active roles.
Manteaw said, “All over the world, countries that have been able to optimize benefits from their resource extraction are those that are not playing the role of spectators. They are active participants in the extraction, either directly through a state vehicle or indirectly through the private sector, and also have a shareholding in the companies that extract the resource.
The consequences of not playing an active role, he stressed, will result in the local currency becoming weak against major trading currencies.
“If we continue as Ghana to be spectators in the extraction of our hydrocarbons, then, of course, all the value that is created by foreign companies will be repatriated out of the economy and our cedi will never gain strength against the dollar and other major trading currencies. So, the way to retain greater value is to be an active participant, “he added.
BP p.l.c., a British multinational oil and gas company, and ExxonMobil are playing active roles in the extraction of their country’s hydrocarbons.
These companies also go out of their jurisdictions to generate more revenue outside the country and repatriate all the profits back to their home countries to retain the value of their respective currencies.
The Ghana cedi has depreciated by 35 percent against the U.S. dollar this year, making it the second worst-performing currency in the world after Sri Lanka’s rupee.
According to a currency performance ranking by Bloomberg in August, the cedi dropped 1.1 percent to trade at about GH9/$1, posting the worst decline since March 29, 2019.
Like Nigeria’s naira, the Ghana cedi has suffered persistent depreciation against major trading currencies, especially the U.S. dollar.
The fall in the currency is due to high demand for foreign exchange as it overtook supplies during a period when high debts and low investor confidence have made it impossible for Ghana to access the international capital market for borrowing.
Exploration for oil and gas led to the establishment of the GNPC in 1983 as the country’s national Oil Company (NOC) by Provisional National Defence Council (PNDC) Law 64, to support the government’s objective of providing an adequate and reliable supply of petroleum products and reducing the country’s dependence on crude oil imports through the development of the country’s own petroleum resources.
The Petroleum Exploration and Production Law, 1984 (PNDC Law 84), was subsequently enacted to provide the regulatory framework for the exploitation of the country’s hydrocarbon resources.
The law establishes the contractual relationship between the state, GNPC, and prospective investors in upstream petroleum operations. It also grants GNPC the right of entry into any open acreage to undertake exploration activities.
Ghana, however, discovered oil in commercial quantities in 2007 and commenced actual production in November 2010.
Under the country’s Petroleum Revenue Management Act (PRMA), Act 815, section 7(3), the government is required to provide financial support to the GNPC for 15 years from the date of the promulgation of the Act in 2011 to 2026 to be weaned off to stand alone.
According to the 2019 report of the Ghana Extractive Industry Transparency Initiative launched this year, the national oil company received a total of 279.23 million U.S. dollars from the government for its operations. Enditem
