Here are some frequently asked questions about conducting oil and gas activities in Ghana. Kimathi & Partners has compiled and provided ready answers for such questions.
Main legislation governing petroleum exploration and production activity in your country.
Petroleum exploration and production activities are regulated by a number of laws in Ghana:
The government, regulatory and/or oversight bodies principally responsible for regulating oil and gas activities.
The Minister of Petroleum (the “Minister”) provides the overall policy direction in the management of oil resources in Ghana. The Attorney General, under the Ministry of Justice, assists the minister in the negotiation and drafting of the petroleum agreements (the “Petroleum Agreement”) and the required laws and regulations regulating the oil and gas sector.
The Petroleum Commission (“Commission”) regulates and manages the utilisation of petroleum resources in Ghana. It also coordinates the policies put in place by the minister. In regulating the utilisation of petroleum resources, the commission has the authority to make regulations, issue permits and carry out necessary inspections and audit related to the activities of petroleum companies operating in the upstream and midstream sectors.
The Environmental Protection Agency (the “EPA”) is responsible for the enforcement of the environmental laws of Ghana. The EPA ensures that the exploration and development of oil and gas is undertaken in an environmentally friendly manner.
The Ghana National Petroleum Corporation (the “GNPC”) is responsible for the development, production and disposal of petroleum. The GNPC is required to ensure that Ghana obtains the greatest possible benefits from the development of petroleum resources. The GNPC participates in petroleum operations on behalf of Ghana under the Petroleum Agreements with contractors.
The National Petroleum Authority (the “NPA”) is also given a broad mandate to regulate, oversee and monitor activities in the downstream petroleum industry. In particular, it sets prices and supervises the bulk storage and transportation of petroleum products.
What are the registration requirements for becoming a licensee of an oil and gas production sharing contract/ licence/concession (“Licence”) in your country? For instance, is it necessary to incorporate a subsidiary or register a branch?
Under section 4(2) of the Local Content Law, a foreign company must incorporate a subsidiary company and afford an indigenous Ghanaian company at least five per cent equity participation in the subsidiary company.
In practice, most foreign companies register a branch office during the process of negotiating the Petroleum Agreement with the government and then incorporate subsidiary companies before commencing petroleum operations in accordance with the law.
The main fiscal/legal model granting rights to explore and produce oil and gas
Legal
Under the Petroleum Exploration Law, all petroleum existing in its natural state within the jurisdiction of Ghana is the property of the Republic of Ghana and is vested in the President on behalf of and in trust for the people of Ghana. The minister is empowered, under the law, to represent the Republic of Ghana in negotiating for and entry into a Petroleum Agreement.
The Petroleum Exploration Law gives the GNPC the authority to engage in the exploration, development and product of petroleum within the jurisdiction of Ghana without a Petroleum Agreement. Any other person who intends to engage in the exploration, development or production in the petroleum upstream sector is required to enter into a Petroleum Agreement with the government and the GNPC.
The Petroleum Agreement extensively specifies the terms and conditions for the grant of the petroleum rights, the duration of the rights and the royalties to be paid to the government. It also specifies other important terms which must be aligned with government policy.
Fiscal
Corporate Tax: The Petroleum Exploration Law provides the fiscal model for granting rights to explore and produce oil and gas in Ghana. Under the Petroleum Exploration Law, a contractor is required to pay corporate tax in accordance with the laws of Ghana, except exempted under a Petroleum Agreement. Under the Income Tax Act of Ghana, 2015 (Act 896), petroleum companies are subject to corporate tax at the rate of 35 per cent.
Royalties: Contractors are required to pay royalties to the government in respect of any petroleum produced in Ghana. The percentage of royalty payable by the contractor is negotiated by the contractor and the government in the Petroleum Agreement.
Rent: The Petroleum Exploration Law also provides that the contractor is required to pay annual rental charges in respect of the area to which the Petroleum Agreement relates, during the initial exploration period (and any extensions) unless otherwise exempted from such payments under a Petroleum Agreement.
Permit fees: The contractor is required to register with the commission in order to obtain a permit to undertake petroleum operations. The fees to be paid in order to obtain a permit are assessed by the commission. The permits are required by the commission to be renewed every year. – GB
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