sharing in governance of extractive industries
The Chairman of Petroleum Commission of Ghana Prof Ivan Addae Mensah, has asked the Public Interest and Accountability Committee, (PIAC) to collaborate closely with the Petroleum Commission to enhance their quarterly reports and findings on the management of Ghana’s Petroleum revenues. This, he stressed will give them a more accurate reflection of the happening in the oil and gas sector.
Prof Addae Mensah, who, for the second time chaired the launching, made these observations during his closing remarks. Adding that relying on Ghana National Petroleum Corporation (GNPC) and the exploration companies or investors alone to monitor, evaluate, ensure compliance, and write their reports to inform the nation about the sector’s revenue streams will not give them the needed total factual and revealing picture of the Oil and Gas. Petroleum Commission has made some recommendations that will be helpful and beneficial to PIAC he told them.
PIAC is a Statutory Committee established under Section 56 of the Petroleum Revenue Management Act 2011 (Act 815) with the mandate of monitoring and evaluating compliance with the Act by the Government of Ghana and other relevant institutions in the management and use of petroleum revenues. It’s also mandated to provide the space for public debate on the spending prospects of petroleum revenues in line with development priorities and finally providing an independent assessment on the management and use of revenues from the oil and gas sector.
Contributing, the African Regional Coordinator of Natural Resource Governance Institute (NRGI), Emmanuel Kuyole, was worried that PIAC is not able to conduct effective public education for the ordinary man to understand the happenings in the sector. PIAC agreed with NRGI that enough has not been achieved in advocacy. There were calls for the state to renegotiate with exploration companies since the risks are now known and the state should get better deals.
The unacceptable financial constraints still persisting is the biggest challenge PIAC faces in its job as the Ministry of Finance (MoF) still does not recognize the importance of the PIAC. And so its budget is treated with disdain. Its secretariat is still not equipped to enable it to visit fields to ascertain actuals on the ground. The 2014 Annual Report is the 7th which should have been published on 15th March 2015 but again the Committee could not because of this same resource constraints. It is pathetic that the U.K’s DFID and the German GIZ continual support led to the release of the report. It is widely believed that this development is deliberate as the Ministry would wish that it had a free hand to spend the oil and gas revenues as wished.
Findings for 2014
In a press release, PIAC captured total Jubilee oilfields in 2014 of 37, 201,691 barrels of oil, an increase of 4.5% over the previous production. These bring a total of production of 124,517510 barrels since 2010. A total of 55,758.04 million standard cubic feet (mmscf) of natural gas was produced from Jubilee field in 2014 out of which 1,906.37 mmscff (representing 3.42%) was exported to the Atuabo Gas Processing Plant for processing into derivatives such as LPG and Condensates. The rest used to meet the energy needs of the FPSO, re-injected or flared.
The release to the media revealed that the total cost of production for Jubilee field the year under review was US$430,991,334 which translates to an average production cost of US$11.59 per barrel compared to the 2013 total and average production cost of US$345,474,395 and US$9.71 per barrel respectively. The Ghana Group lifted 7, 681, 120 barrels representing 20.77% of total liftings. Total actual petroleum revenue received in 2014 was US$ 978.02 million (GH¢ 2, 772.13) million compared to the projected revenue of US$777.0 million (GH¢1,709.40 million). This brings to US$2.811 billion the total revenue that has been received by Government of Ghana from the Petroleum sector since commercial production of oil commenced in November 2010.
Oil Revenue Allocation
The actual revenue allocated in the year under review as follows: GNPC – US$ 180.71 million (18%), Annual Budget Funding Amount (ABFA) US$ 409.07 and the Ghana Petroleum Funds (US$388.23 (40%). In accordance with the Provisions of Act 815 that 4 priority areas of the economy be selected by the Minister of Finance to be funded with the ABFA funds, the following were selected Expenditure and Amortization of loans for Oil and Gas Infrastructure with Gh¢ 163.08million (US$56.12 million), Roads and other Infrastructure Gh¢215.69million (US$72.59 million), Agriculture Modernization Gh¢ 170.62million (US$57.43 million) and finally the famous Capacity Building priority this time was allocated nothing the release also reported. It added that at the end of 2014, total standing in the Ghana Petroleum Funds was US$535,559,264 made up US$286,664,044 in the Ghana Stabilization Fund and US$248,915,220 in the Ghana Heritage Fund.
Presenting the report, Prof Paul Kingsley Buah-Bassuah, recommended that Saltpond and the MoF /GNPC must resolve the discrepancies in the production and liftings figures from Saltpong field so as to help determine the actual royalties that ought to have been paid as well as establishing the true performance/state of affairs at the Saltpong field.
That there is the urgent need for a critical appraisal of the viability of the continuous operation of the Saltpong field against the backdrop of low crude oil price. With crude oil price projected to hover around US$52 in 2015 has been further weakened considering that Saltpond produced a barrel of crude oil at a costs of US$ 31.22 in 2014.
Finally Oronto/Stone Energy should be compelled by Ghana Revenue Authority as a matter of urgency to pay the outstanding surface rental invoice in addition to penalty for default as specified in section 3 (4) of the Petroleum Revenue Management Act.
Soon Ghana will be in a good position to renegotiate her shareholding with some of the companies engaged in the exploration for better deals Prof Buah-Bassuah responded. He was answering questions pertaining to Ghana’s fair share of the oil. He says a new formula for sharing has been reached and will apply in subsequent agreements. He said the 2015 report is likely to capture less revenue streams for Ghana.
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