Ghana Oil Revenue Leaks Date published: August 4, 2014 By Stephen Odoi-Larbi (stevelarbi404@gmail) BuahFlaws in Ghana’s management of its natural resources continue to hurt the economy, as oil contracts signed between the country and foreign oil companies have denied the country over US$2 billion of revenue since production of oil in commercial quantities began three years ago. The country is further expected to lose US$30 billion in the next seventeen years, the Ghana Institute of Governance and Security (GIGS) has warned. Oil from the Jubilee Fields is estimated to hold about two billion barrels, with a face value of US$160 billion, excluding the value of the associated gas, which is about five billion cubic feet. Out of the US$160 billion, Ghana, according to the IMF and World Bank, is expected to earn US$20 billion and US$19 billion in twenty years respectively. But, a Senior Research Officer at GIGS, Solomon Kwawukume, in exclusive interview with The Chronicle, said the estimated value of Ghana’s interest in the oil find could be tripled if the country amends its contracts with the foreign oil companies. According to him, the Modern Concession Agreement (a hybrid system between the old Concession and Production Sharing Agreements), under which all oil contracts were signed, does not give the country value for money, since the agreements were tailored to suit the British, Americans and other foreign interests. “If our political leaders and technocrats were to throw away their self-interests and be bold enough to adopt the pure Production Sharing Agreement, Ghana, with revenue accruing from the Jubilee Fields, would experience a great transformation. Ghana would earn over US$50 billion in 20 years, as against the US$20 billion and US$19 billion estimated by the IMF and the World Bank respectively,” argued Mr. Kwawukume, who is also the author of Ghana’s Oil and Gas Discoveries: Towards Full Maximum Benefits. Contract agreements in the oil and gas industry are based on fiscal arrangements, namely Concession, Joint Ventures, Production Sharing and Service Agreements, including the hybrid (Modern Concession Agreement) system designed by the World and the Americans as an antidote to the Production Sharing Agreements. Unlike the old traditional Concession Agreement, where only Royalties and Taxes are paid to the host government, the hybrid system (Modern Concession Agreement) allows the host government some participating interests, for which payment has to be made towards capital, development costs, as is the practice under the Joint Ventures and Production Sharing Agreements. Ghana, under the Modern Concession, according to GIGS, “is being made to contribute towards daily operating costs”, a situation it described as a rip-off. As at March 31, 2014, under the prevailing system, the country has earned about US$2.089 billion, while the foreign oil companies got a whopping sum of US$8.448 billion. According to Mr. Kwawukume, the total investment of about US$4 billion, which the country also contributed to in the production of the black gold, has fully been recovered in three years, but argued that the prevailing condition has not been in the best interests of the people of Ghana. Ghana is on the verge of consolidating the Modern Concession Agreement into law to regulate its Upstream Oil Industry. A Bill to that effect – Petroleum Exploration and Production Bill, 2013 – has been drafted and received Cabinet approval. It is yet to be laid before Parliament for approval into law. However, Mr. Kwawukume, in a sharp comment on the Bill, said: “The passage of this Petroleum Exploration and Production Bill in its current form, with the fiscal provisions and other unfavourable sections it contains, would amount to surrendering our sovereignty and Constitutional ownerships and birth rights over our oil and gas resources wealth to British and Americans and other foreigners once again, the manner we treated our gold and other minerals in the name of investment in the past and up to today.” He added: “If the Bill is passed into law, it would amount to an economic suicide committed by the leaders of Ghana.” Mr. Kwawukume averred that under Section 10 (b) (II) of the Draft Bill, Ghana, within the next ten years, would have to pay over US$1.8 billion to the lead operator, Tullow, for participating in the project. This, he noted, would place a huge financial obligation on the country, and also prevent it from increasing its stake in the oil resource. “This will create inequalities in sharing the oil revenue,” noted Mr. Kwawukume, an Accountant by profession. He has, therefore, called on President John Mahama to ensure that the nation derives maximum benefits from its oil find, by adopting the Production Sharing Agreement, which is a progressive, fairer and equitable fiscal arrangement in sharing oil revenue. Under such a fiscal regime, he said, Ghana would have earned over US$5 billion at the end of March 31, 2014. The Researcher has also called on the President to withdraw the Bill, and as a matter of urgency, invite independent international experts to review the draft bill to fall in line with the Production Sharing Agreement. That notwithstanding, Mr. Kwawukume called on President Mahama to ensure that independent experts review existing contracts and agreements so far entered into by the country, to reflect the Production Sharing Agreement fiscal regime to uphold and protect the ownership rights of the people of Ghana, as enshrined in Article 257, Section 6 of the Constitution of the Republic of Ghana, and in consonant with UN Charters and Resolutions on Natural Resources. thechronicle.gh/ghana-oil-revenue-leaks/
Posted on: Wed, 06 Aug 2014 20:17:38 +0000