Gov’t to use competitive bidding to stop idle oil blocks ownership

A Deputy Minister of Energy, Dr Mohammed Amin Adam has said that the government will now use the open and competitive bidding process for oil blocks in the country.

He added that this is to reduce the number of inactive oil blocks in the country and only issue licenses to companies with the relevant capacity. He added that this is a lesson the government has learnt from the past.

The Deputy Minister explained further that it is estimated that out of the about 17 oil blocks given out between 2013 and 2016, 13 are without any exploration activity and as a result, are not able to meet their obligations.

“I can tell you between 2013 and 2016, the companies that were given oil blocks were supposed to have spent up to US$980 million in meeting their obligations. As I speak to you, they spent only US$92 million. It means they were companies that were not evaluated properly.”

“But if you evaluated them properly, you would have known that they did not have the money or capacity to undertake oil activities in Ghana. But, sadly, those were the companies that were given blocks,” he added.

To prevent such incidents from occurring again, companies that wish to own oil blocks would be pre-qualified through a certain criteria before they were allowed to bid.

“We will pre-qualify them based on a criteria that will ensure that the companies that will eventually tender for the blocks are companies that have the strength and the track record. We do not want the situation where what we call ‘sweet case companies’ will come in as we have seen in the past. They are given oil blocks and they do nothing on the block and do not meet their obligations,” Dr Amin Adam said.

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Subsequently, the companies which meet the pre-qualification criteria would then be given the opportunity to tender for the blocks.

“We have to learn from that painful experience of giving out oil blocks and not getting oil discovery from those contracts and this is why our focus is to pre-qualify companies and get those that have the capacity to participate in the industry,” he said.

Before Ghana’s open and competitive bidding was launched, the country operated on a first-come-first-served system of awarding oil and gas exploration and production rights. This went on for about a decade.