Learn from Ghana… Demand approval for all subcontracting agreements to avoid exploitation

Learn from Ghana… Demand approval for all subcontracting agreements to avoid exploitation – Oxfam America

Mar 07, 2019 News

When it comes to costs being incurred by oil companies, transparency advocates for the extractive sector are of the view that Governments and their relevant authorities have the right to know every detail.
This “right” however, must be protected with rigid provisions in contracts and laws. Pointing this out was Oxfam America. The entity is a confederation of 20 independent charitable organizations, which seek to fight some of the factors that lead to poverty, one of them being the poor governance of extractive wealth.
To lend credence to its argument, Oxfam showed how the hands of Ghana’s Petroleum Commission were tied when it came to verifying, much less reducing costs charged upon the African country, since it had no legal basis for access to subcontracting agreements from oil and gas companies.

Oxfam America Director, Ian Gary

Oxfam noted that it is common for drilling rigs to experience mechanical downtime. It said that typically, the drilling subcontractor must be compensated by the oil operator for nonproduction time if it exceeds one percent in a given year for example.
The Federation continued, “…Because Ghana’s Petroleum Commission could not access these drilling service agreements, it was unable to confirm the terms and conditions of compensation. Assuming a rig is down for 10 percent of the year, at US$100,000 to US$200,000 a day, the cost could be as high as US$7 million.”
The transparency advocate added, “However, the Commission had no information on the extent to which the companies had been reimbursed for nonproduction time by the oil operators. To overcome this challenge, the Commission now requires approval of all subcontracting agreements.”
It is along this vein that Oxfam America urges all first-time oil producers like Guyana to demand the approval of all subcontracting agreements as well as ensure that it introduces and enforces, clear, comprehensive, standardized reporting and documentation requirements in relation to those subcontracting arrangements.
It said, too, that the government should also establish systems to catalogue the information so it can be used for risk assessment. (Kiana Wilburg)

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