Petroleum and other minerals ownership Ghana’s legal foundations for the ownership of petroleum and other minerals are firmly established within the constitutional framework of 1992.
This legal regime, particularly Article 257, Clause 6, is reinforced by Section 1 of the Minerals and Mining Act, 2006 (Act 703) as amended and Section 1 of the Petroleum (Exploration and Production) Act, 2016 (Act 919).
According to the provisions, the ownership of oil, gas, and other mineral resources lies with the people of Ghana.
The custodianship is entrusted to the President, who assumes the responsibility and rights on behalf of the citizens and constitutional and legislative alignment ensures a clear delineation of ownership rights, establishing the foundation upon which subsequent legal frameworks operate.
The ownership rights outlined in the 1992 Constitution, the Minerals and Mining Act, 2006 (Act 703) and the Petroleum (Exploration and Production) Act, 2016 (Act 919) set the stage for a comprehe
nsive regulatory framework governing the oil, gas, and mineral sectors in Ghana.
The regulatory aspects encompass licensing, operational arrangements, and sector development, ensuring a structured and responsible approach to resource utilization.
Furthermore, the frameworks are instrumental in shaping the relationships between key stakeholders, including the state, Petroleum Commission as the Upstream Petroleum sector regulator, Ghana National
Petroleum Corporation as the national oil company, Minerals Commission, international oil companies (IOCs), and the citizens of Ghana.
By vesting ownership in the citizens, with the President as the custodian, the regulatory frameworks emphasize the need for responsible resource management and the generation of socio-economic benefits for the general populace.
Role of President
The pivotal role of the President of the Republic, as the custodian of the resources goes beyond a mere legal formality. It signifies a commitment to ensuring that the exploitation and util
ization of these resources translate into sustainable socio-economic benefits for the citizens of Ghana.
Impliedly, citizens cannot afford to go hungry while having these resources. Article 174, Clause 1, empowers the Parliament to enact legislations necessary for regulating and taxing income derived from petroleum and other mineral operations. This legislative authority, combined with the ownership rights enshrined in the Constitution and supporting acts, creates a legal framework that places citizens’ interests at the forefront.
In essence, the ownership structure, guided by legal provisions, establishes a pathway for the responsible and equitable utilization of petroleum and mineral resources, aligning with Ghana’s broader socio-economic development goals.
Regulatory Frameworks Governing the Petroleum and Minerals Sectors in Ghana
The current legal regime and regulatory frameworks governing the oil, gas, and other minerals sectors in Ghana are rooted in the 1992 Constitution. Article 257, Clause 6 of t
he Constitution, supported by the Petroleum (Exploration and Production) Act, 2016 (Act 919), establishes that oil, gas, and other mineral resources belong to the people of Ghana.
The President, as the custodian of these resources, holds the right and responsibilities on behalf of the citizens.
The exploitation and utilization of resources are expected to be managed to ensure sustainable socioeconomic benefits for the Ghanaians. Parliament, empowered by Article 174, Clause 1, enacts legislations to regulate and tax individuals and income earned from petroleum and other minerals operations.
The elaborate legislations governing resource exploration, development, production, and relinquishment include the Minerals and Mining Act, 2010 (Act 703), Petroleum
(Exploration and Production) Act, 2016 (Act 919), Ghana National Petroleum Corporation
(GNPC) Law, 1983 (PNDCL 64), Income Tax Act, 2015 (Act 896), and Petroleum Revenue
Management Act, 2011 (Act 815), among others. The Minerals and Mining Act, 2006 (Act
703), serves as the principal law regulating minerals and mining activities in Ghana.
It reaffirms that mineral resources within the economic zone of Ghana are the property of the Republic of Ghana, held in trust for the Ghanaian people. The act, as amended, outlines licensing and permit grants, including operational arrangements, for sustainable and efficient utilization.
The Petroleum (Exploration and Production) Act, 2016 (Act 919), governs the exploration and production of oil and gas, replacing PNDCL84 of 1984. It establishes ownership of petroleum resources in the Republic of Ghana, vested in the President on behalf of the people.
The law mandates that no entity, other than the GNPC, engages in petroleum exploration, development, and production without a petroleum agreement with the GNPC and the Republic.
The law provides for a contractual period of 25 years, subject to renewal for petroleum agreements between the state and IOCs.
To ensure effective operational arrangements, legislative instruments
such as minerals and mining agreements and petroleum agreements are signed between the state and consortiums of operators. Petroleum agreements define terms and conditions for specified contractors (IOCs), the state, and related authorities like GNPC and Petroleum Commission (PC). These agreements cover contract periods, parties, obligations, capital contributions, required investments, taxes, metering, accounting, allowable deductions, pre-emption rights, and more.
The Ghana National Petroleum Corporation (GNPC) Law, 1983 (PNDCL 64), established GNPC as a body corporate to undertake exploration, development, and production of petroleum.
GNPC, as the national oil company, is tasked with promoting the orderly and planned development of Ghana’s petroleum resources, ensuring maximum benefits for Ghana and its citizens.
GNPC collaborates with the Petroleum Commission and operators to train Ghanaian citizens, develop national capabilities in petroleum operations, and ensure environmentally responsible petroleum
Similarly, the Petroleum Commission Act, 2011 (Act 821), establishes the Petroleum Commission to regulate petroleum activities, separating regulatory functions from operational roles, especially as GNPC was previously both an operator and regulator.
This separation aimed to enhance effective regulation in the petroleum industry. Resource Use Policy Efforts and Instruments in the Petroleum and Other Minerals Sectors In line with legislative objectives, auxiliary legislations, such as local content and participation regulations, are promulgated to promote linkage and spill-over effects within the economy.
The Petroleum (Local Content and Local Participation) Regulations, 2013 (L.I. 2204), and Minerals and Mining (Local Content and Participation) Regulations, 2020 (L.I. 2431), aim to involve Ghanaians in upstream petroleum and mining activities, enhancing their standard of living.
These regulations are based on Grossman’s (1981) ideology of domestic content protection and preference, striving t
o achieve local content targets in the oil and gas value chain.
Beyond operational arrangements, fiscal systems play a crucial role. The Income Tax Act, 2015 (Act 896), addresses taxation of petroleum and minerals income, while the VAT Act, 2013 (Act 870), and its regulations manage value-added tax (VAT) related to minerals and petroleum activities. The Customs Act, 2015 (Act 891), regulates customs duties and levies on minerals, petroleum products, and other goods and services.
In support of social exchange and resource dependency theories, Ghana enacted the Petroleum Revenue Management Act, 2011 (Act 815), providing regulatory frameworks for the collection, allocation, and management of petroleum revenue in a responsible, transparent, accountable, and sustainable manner for the benefit of Ghana’s citizens.
Beyond the operational arrangements and related regulatory and fiduciary functions that resource frameworks provide for as suggested by the foregoing discussions, it important to now dwell on the key f
rameworks that provide for the fiscal systems and their impact on resource rents.
For instance, Income Tax Act, 2015 (Act 896) provide for the taxation of petroleum and other minerals income taxation as well as other incomes of persons engaged in these activities.
Additionally, VAT Act, 2013 (Act 870) and its regulations are responsible for collection and administration of value added tax (VAT) in respect of minerals and petroleum activities as well as other goods and services supplied in Ghana.
Furthermore, Custom Act, 2015 (Act 891) regulating the customs duties and levies in respect of importation and exportation of minerals and petroleum products, and other goods and services. Key Objectives of Legal Frameworks for Petroleum and Other Minerals in Ghana.
These natural resources, especially oil, are seen as strategic commodities that heavily impact the economies of both producing and importing countries due to the volatility in the oil market.
This commodity is also regarded as a major foreign exchange
earner for producing countries. Equally, it heavily affects the domestic budgets of importing countries as they spend huge sums of their national income on importing the commodity.
In the past, nations have gone to war because of the strategic nature of this international commodity. The study of the transition in man and the world’s economic development reveals great improvements. This has been accompanied by an energy transition from the use of wood to using coal, and currently oil and gas as the major sources of energy in the world.
As the world now largely depends on oil and gas, the nation that possesses this commodity is regarded as a strategic nation and the envy of other nations.
Considering the strategic nature of oil and gas production, disturbances in the oil industry have serious consequences on economies across the globe. For instance, the world’s economy has already experienced about four major shocks in the oil industry affecting national economies: a) in 1973, the first oil shock due to the
Arab embargo leading to the quadrupling of oil prices; b) from 1978 to 1981, the second oil shock leading to the tripling of oil prices due to the Iran revolution and the Iran/Iraq war; c) in 1988, the third oil shock occurred due to the collapse in oil prices as a result of Saudi Arabia’s oil policy; and d) the 2008 oil price surge, which disrupted many developing economies.
However, interestingly, the upstream industry (the exploration, development, and production of oil) usually brings with it issues of conflicting interest among the major stakeholders in the industry, namely the government of the host nation (which has a commercial interest and at the same time has the responsibility of protecting its citizens from the hazards of petroleum production), the International Oil Company (IOC) (which has invested huge capital in petroleum production at risk and expects early returns on investment), and the communities hosting the project (whose health and vocation may be at risk as well as the environment at l
arge, including the future generations that must be protected).
To balance the conflicting interests of the major players, host countries are required to formulate essential legal frameworks for the efficient and sound management of petroleum production activities within their countries.
The primary purpose of designing a legal framework for oil and gas operations is to control the exploration, development, and production of oil and gas and to guarantee the investments of the IOC while still protecting the interests of the local community.
Fundamental Issues Addressed by the Legal Frameworks for Petroleum and Other Minerals in Ghana to balance conflicting interests among major stakeholders, ensure efficient exploration, development, and production of petroleum and other minerals, and protect the interests of the local community, most legal regimes fundamentally seek to address the procedures for licensing and granting permits to operate within the sectors.
These legal frameworks cover exploration periods,
efficient and sustainable development, and production of resources in accordance with good international practices that support optimal rent to the state, job creation, and the socioeconomic development of Ghana.
Furthermore, the legal frameworks provide systems for participating in economic activities and sharing the financial benefits resulting from oil, gas, and other minerals production between the host government and the investing International Oil Company (IOC).
The fiscal regimes mandate the utilization of national goods and services, contingent upon their availability, payment of royalty, income tax, and transfer of assets to the locals.
These instruments also stipulate the financial obligations of the investing IOC, including audit and monitoring as outlined in the frameworks.
Additionally, the frameworks establish standards for environmental protection and the health and safety of the communities hosting the petroleum project.
They also outline sanctions, redress mechanisms, and appeal systems
in cases of defaults, disputes, impasses, etc., as the case may be.
In summary, Ghana’s legal framework for petroleum and mineral ownership is intricately woven into constitutional provisions and legislative acts, prominently including the 1992 Constitution, Act 703, and Act 919. These legal instruments collectively establish the ownership structure, operational guidelines, and fiscal relationships governing the interaction between the Ghanaian state and international oil companies (IOCs). The regulatory landscape is further shaped by local content and participation regulations, along with fiscal instruments such as the Income Tax Act and VAT Act, contributing to the formulation of comprehensive resource use policies. Ghana’s legal frameworks effectively oversee the entire spectrum of activities encompassing the exploration, development, and production of petroleum and minerals. Throughout this study, the strategic significance of these resources is underscored, emphasizing the need for well-balance
d legal structures capable of addressing conflicting interests. While fiscal regimes play a crucial role in supporting economic development, the study advocates for continuous adaptation to meet the evolving demands of the global landscape.
In conclusion, the study sheds light on the dynamic and multifaceted nature of Ghana’s legal frameworks governing the petroleum and minerals sector.
The constitutional and legislative underpinnings, coupled with fiscal instruments and regulations, collectively contribute to a robust governance structure.
The study underscores the critical importance of these legal frameworks in navigating the complexities of resource ownership and utilization.
It is emphasized that ongoing adaptations are imperative to align with the ever-changing global landscape and emerging challenges.
The conclusions drawn from this analysis reinforce the notion that Ghana’s legal frameworks are pivotal in ensuring sustainable and responsible resource management, providing a foundatio
n for continued growth and development.
Contributions to Resource Use Policy and Linkage and Spill-over Effects Arguments This paper significantly contributes empirical insights into the effectiveness of Ghana’s legal frameworks in achieving resource use policy objectives. By emphasizing the importance of linkages and spill-over effects through the lens of local content regulations, the study aligns with resource dependency theories.
The findings affirm that a well-crafted legal framework not only facilitates resource extraction but also ensures that the benefits permeate through the local economy, promoting broader socio-economic development.
The arguments presented support the broader discourse on the interplay between legal structures, resource policies, and their tangible impact on local communities.
Despite its substantial empirical and theoretical contributions, this study has inherent limitations that warrant consideration.
The context-specific nature of the research restricts its gen
eralizability to other settings. The reliance on existing legislative texts introduces the potential for biases, emphasizing the need for future research to employ diverse methodologies for a more comprehensive understanding.
Acknowledging these limitations is crucial for refining future research agendas and ensuring a nuanced understanding of the complexities associated with resource governance in Ghana and beyond.
Source: Ghana News Agency