Fair-Trade Oil Share – Ghana Critique of Petroleum Commission’s (Part 1) “Presentation to the Council of State” “Overview: Ghana’s Oil and Gas Fiscal Regime”, of 27 Feb 18 GHANA GHANA GHANA GHANA OIL OIL OIL OIL FTOS-GH DIASPORA EXECUTIVE COUNCIL (DEC) Analytical Support Group (ASG) GhanaHero.Com & Associates 6 Apr 18 Contact: professor.lungu@yahoo.com 1
Fair-Trade Oil Share – Ghana Outline (Part 1) • Dedication ………………………………………………………………….….. 3 • Organizing Principles of this Review …………………………….... 4 • Markers …………………………………………………………………………. 5 • Introductory Points of Order …………………………………………. 9 • What Oil Companies Are Reporting ……………………………….. 14 • Review of Feb. 2016 “Overview” to Parliament …………….. 16 • Review of Feb. 2018 “ Presentation to Council of State ” … 24 • On Royalties and Ghana’s Petroleum Agreements ………… 33 • On Production Sharing Agreements (PSAs) …………………… 36 • Major Omissions & Admissions by PC …………………………… 40 • Five Questions to Ask of Petroleum Commission ………….. 42 • Summary / Conclusions of the Critical Review ……………… 43 • 9 DEC/ASG Recommendations to Gov. of Ghana …..……… 45 • Credits …………………………………………………………………….…… 46 • Sources & Reckons ..………………………………………………….…. 47 Your’s Your’s 2
Dedication T his critique by the Fair-Trade Oil Share Ghana (FTOS-Gh) Campaign/Diaspora Executive Council, (DEC), of the "Presentation" by the Petroleum Commission (PC) to the Council of State (CoS) in February of this year, and the earlier one presented to the Parliament of Ghana in 2016, is dedicated to the memory of Dr. Prosper Yao Tsikata, one of the Campaign’s more prolific writers and strongest supporters. Dr. Tsikata died Sun., 18 Mar 18, at Valdosta State University, Georgia, USA, where he was Professor of Health Communications. Professor Tsikata earned a M.S. in Communication and Development, Journalism & Public Relation, Applied Social Research, and a Ph.D. in Health Communications. In a brief but moving tribute to Dr. Tsikata on Ghanaweb titled "Gone but not forgotten", Rosetta wrote: " Condolences to the family! Prayer for healing and strength to you all . God Bless. Prosper was kind, always had a smile on his face, polite and concerned about people he came in contact with on a daily basis. He's being missed at work. ” Afroman added: "... We need fighters of such caliber to move forward as a nation and continent ...". Rest in Peace, Yao Tsikata! And many thanks for making Ghana and the World a better place than you found it (FTOS-Gh/DEC- ASG… Dr. A. Dotse & Prof Lungu, on behalf of all Diasporans). READ MORE: (1) http://www.blakkpepper.com/2018/03/celebrated-scholar-dr-prosper-yao-tsikata-dead/ (2) http://www.vsuspectator.com/2018/03/20/beloved-vsu-professor-passes-away/ (3) https://www.ghanaweb.com/GhanaHomePage/NewsArchive/Shock-as-US-based-Ghanaian-Professor-Prosper-Yao-Tsikata-passes-on- 3 635948/ .
Fair-Trade Oil Share – Ghana Organizing Principles of this Review • This critical review of the 2nd work product (in 2 years), of the Petroleum Commission (PC) on the appropriate fiscal system for Ghana’s Oil establishes “Markers” for sovereign independence and “Points of Order”. • The Feb. 2018 “Presentation” to the Council of State ( CoS) generally recycles the “Clarification Meeting” presentation to Parliament of Feb. 2016. Therefore, we thought it was important to look at both products in crafting a response the average Ghanaians and Members of the CoS could easily understand, aided by some perspectives on history of the discourse and impartial lenses. • We provide insight into Oil Company outlook on Ghana’s Oil, points about Production Sharing Agreements (PSA), Errors and Mis-statements by the PC; and five (5) questions to be asked of the PC by the CoS and others. • This critical review found misapplication of royalty collection regime and aggravating loss of oil revenues totalling $136,300,000.00 during 2007-2016, and counting. Ghana should with immediate effect collect from oil companies those uncollected/underpaid royalties in the amount of $136,300,000.00, with interest. NOTE: Beyond under payment of royalties, this review does not cover other under- payments (e.g. corporate income taxes (CIT)), by the oil companies. That matter is addressed by the FTOS-Gh/PSA Campaign in other papers, documents, reports, and official complaints. Your’s Your’s 4
Fair-Trade Oil Share – Ghana Marker (I) To reasonably succeed at wise “Revenue Management”, Ghana must first demand its Fair Share of Oil Revenues, to begin... Your’s Your’s 5
Fair-Trade Oil Share – Ghana Marker (2) Your’s Your’s 6
Fair-Trade Oil Share – Ghana Marker (3)
Fair-Trade Oil Share – Ghana: Marker (4) FALLACY: A common fallacy among many Ghanaians is that Ghana does not spend a pesewa on petroleum exploration, development, or production. Therefore, the Oil Companies are entitled to what they take. This is false. In their 2013 report, PIAC reported that during 2011-2013 alone, GNPC spent no less than $401,942,000 on those activities. This amount excludes expenses for “Staff Costs”, and “General Operational, Administrative, and Capital Expenditures”, etc. GNPC Expenses Directly Related to Petroleum Exploration, Development, and Production (2011 - 2013) USD ($) Jubilee Equity Financing Cost 334,577,757.00 Projects Other than Jubilee, TEN, Sankofa, Gye Nyame 20,707,003.00 TEN Project Cost 3,027,153.00 Gas projects related Costs 33,707,403.00 TOTAL 392,019,316.00 Your’s Your’s 8
Fair-Trade Oil Share – Ghana Introductory Point of Order ACCESS: Some dey enjoy! Some dey suffer, brutal! ‘POVERTY… prevalent in Ghana’ BIG MEN: (Ghana) - Brad Pitt sponsored film followed a group of American “explorers” at Dallas-based oil company Kosmos Energy during 2007 - 2011 “with unprecedented, independent access” (Big Men, directed by Rachel Boynton). *** (See Movie About Ghana!) 9 Your’s
Fair-Trade Oil Share – Ghana Introductory Point of Order (contd.) Petroleum Commission (PC) is Facilitating a Rigged System: •The PC’s statement, “State guarantees contractor stability of terms and conditions of Petroleum Agreements” is patently servile because it does not imply “fair trade”: – Production Sharing Agreements (PSA) can do same. • “Guaranteed minimum Government Take” through the payment of an ad- valorem royalty" (page 7)” is in practice a ruse: – PSAs also feature “Royalty”, from “Gross Production” – As we will show, PC is wrongly applying the principle, as evidenced in their latest “Presentation to the Council of State” (2018). Your’s 10
Fair-Trade Oil Share – Ghana Introductory Point of Order (contd.) Ghana Upstream Summary | 31 Jan 18 • “…The Jubilee field, discovered in 2007, was significant not only because of its size but because it opened a new Cretaceous hydrocarbon play along the West African Transform Margin (WATM). The WATM extends 1,200 kilometres from Ghana…”. (https://www.woodmac.com/reports/upstream-oil-and-gas- ghana-upstream-summary-980468) Your’s Your’s 11
Fair-Trade Oil Share – Ghana Introductory Points of Order (contd.) What Wood Mackenzie Says of… Ghana’s Petroleum Fiscal Regime (A Concession!) Ghana Upstream Fiscal Summary | 24 August 2016 • “…All licenses in Ghana are governed by concession terms. The main elements are royalty, income tax and an additional profits tax (called Additional Oil Entitlement, or AOE) which is based on rates of return. Specific terms exists for deepwater developments, with lower royalty and AOE rates. Following the significant Jubilee discovery, the Ghanaian government has made slight fiscal changes to recent petroleum agreements...". (https://www.woodmac.com/reports/upstream-oil-and-gas-ghana-upstream-fiscal- summary-16121612). Your’s Your’s 12
Fair-Trade Oil Share – Ghana Introductory Point of Order (contd.) As Ghana Spins, World Class Discoveries Are Yielding Marginal Revenues for the Nation: Ghana’s Oil is “World Class Asset” to Oil Companies Only: • “World class discovery” (Jubilee Field and other assets) are yielding “World Class Financial Paybacks” to Oil Companies alone • “World Class Financial Payback” has eluded Ghanaians because Petroleum Commission is implementing a Concession system, without bonuses, ring fences, cost ceilings; misapplying “Royalty” • Government has failed to seek assistance from sources ready to assist Ghana improve on Oil Revenue Collection, choosing instead to focus “Revenue Management”, a “Trojan Horse” • Oil Company “Social Responsibility” programs are pithy compared with revenues never collected. Your’s Your’s 13
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