Business News of 2014-05-10

Ghana will lose $30bn oil cash if… - GIGS

Ghana stands to lose an estimated $30 billion, in terms of revenue accrued from the exploration and production of oil, in the next 20 years, if Parliament goes ahead to pass the current Petroleum Exploration and Production Bill, the Ghana Institute of Governance and Security (GIGS), a local think-tank, has warned.

The current bill, according to the GIGS, would condemn the citizenry, particularly the future generation, into perpetual economic doom by denying the country a revenue shortfall of $30 billion under the Modern Concession Agreement (MCA) contained in the 2013 Petroleum Exploration and Production Bill. Ghana’s adoption of the Modern Concession, the GIGS argues, would make it difficult for her to derive the full maximum benefits from the oil and gas resources, if the bill is passed in its current form to include the fiscal provisions and others unfavourable sections it contains.

The International Monetary Fund (IMF) and World Bank have both projected conflicting figures of US$20.269 billion and US$19.390 billion respectively as the estimated profits Ghana is expected to accrue in the next 20 years from the projected 2 billion barrels of oil at the Jubilee Field, the value of which is in excess of over US$160 billion.

However, the GIGS contends that Ghana can cut a far better deal, which, it said, could earn the country over US$50 billion within the same period, if the political leadership would opt for the Pure Production Sharing Agreement (PSA), instead of the current Modern Concession, which is a hybrid of concession and the PSA.

Speaking at a workshop organised by GIGS for students of the Kumasi Polytechnic yesterday, Mr. Solomon Kwawukume, Head of Research, Oil and Gas at GIGS, disclosed that the country had so far accrued just US$1.77 billion of revenue in the last three years of oil exploration at the Jubilee Fields, as against that of US$7.590 billion by foreign companies operating at the field.

He noted that if Ghana had adopted the pure Production Sharing Agreement, which, he said, was currently being implemented by neighbouring Nigeria, the country’s share of the revenue over the past three years of exploration would have gone as high as US$4.3 billion, instead of US $1.77 billion, at the end of 2013.

The workshop is part of efforts by the GIGS to demystify Ghana’s oil exploration and production, and to advocate for a more transparent approach to the process, in order to retain maximum benefits from the sector.

The think-tank is also advocating for changes in the current Petroleum Exploration and Production Bill 2013, to reflect modern trends prevailing elsewhere in other countries that have accrued greater benefits from the resources.

Mr. Kwawukume pointed out that if political leaders and technocrats were to throw away their self-interests, and be bold enough to adopt the pure PSA, Ghana, with revenue accruing from the Jubilee Fields alone, would experience a great transformation.

“We believe adopting pure PSA, with its additional revenue accruing to Ghana, government would have enough resources to undertake the massive infrastructural development the country needs. Provision of potable water to every community, construction of all-weather motorable roads, provision of classrooms and educational facilities, affordable rentable accommodations, extensions of health facilities, and all other things that would impact on the social wellbeing of the Ghanaian, would not be a problem to government,” he emphasised.

Mr. Kwawukume further observed that the government can afford to reduce the level of taxes on all commodities, including petroleum products, and that the multiplier effects of reducing petroleum taxes alone, would be tremendous, and hold the potential of enhancing the standard of living of Ghanaians.

The Executive Director of the GIGS, Mr. David Agbe, also said the organisation’s aim was to demonstrate, and prove to Ghanaians and the whole world, how US$50 billion could be earned in 20 years under the Production Sharing Agreement.

“We have observed that the adoption of the current prevailing system -Modern Concession, a hybrid between the concession and Production Sharing Agreement – is not in the best interests of Ghana; we need to rise up against such [a] cut-throat agreement, and save the country from future economic doom,” he noted.

Meanwhile, the GIGS has made a presentation of 160 copies of books on the country’s oil resources, authored by Mr. Solomon Kwawukume, to the management of Kumasi Polytechnic, towards the proposed Oil and Gas Course being introduced by the school.