Business News of 2014-08-01

Ghana loses $30 billion over bad oil deal

The Ghana Institute of Governance and Security (GIGS) has revealed that Ghana stands to lose over $30 billion from expected revenues in the exploration and exploitation of its oil resources for the next 20 years if parliament goes ahead to approve the Petroleum Exploration and Production Bill 2013 in its current form.
The local think thank noted that the fiscal provisions and other inimical sections contained in the Bill modeled on the Hybrid Modern Concession(HMC) when enforced will amount to selling off the sovereignty of Ghana and pave way for economic suicide in the name of attracting foreign investments.
In a press release copied to The Republic, Mr. Solomon Kwawukume, a senior research officer at GIGS explained that under the hybrid arrangement, Ghana can not increase its stake from her share of the oil resources without paying heavily for it.
According to him, under the HMC, a very small percentage of carried interest is given to the host government which manifested in Ghana getting only 3% to 10% in the old contracts with the foreign oil companies even though it has been increased to 15% in the draft Bill.
“Why should we make a law to limit our interests, birth rights and Constitutional ownership in our natural resources, God has bestowed upon us?”, he quizzed.
“Under this Modern Concession, Ghana is being made to contribute towards daily operating costs which we consider as a rip-off”, GIGS bemoaned and added that : “ Since there is no provision in PNDC Law 84 to back this sort of bizarre arrangement which defies all international practice, the draft Bill makes provision to capture this abnormality . Section 10(b) (11) of the Draft Bill. Ghana therefore within the next 10 years would have to pay US$ 1.8 billion to the lead operator Tullow for participating in the project”. The country has paid over US$ 140 million as daily operating cost to Tullow Oil since oil production started over 3 years ago.
The GIGS proposed that the country should rather adopt the Production Sharing Agreement (PSA) which focuses on how profits of the oil sales are shared between the host government and foreign oil companies.
The Institute described as “misleading and brainwashing” of Ghanaians by comments from the World Bank, IMF, Oxfam America, Revenue Watch Institute with their local surrogates of about 135 CSOs, think thanks and NGOs which indicate that the Modern Concession model contained in the Petroleum Exploration and Production Bill is best for Ghana.
“Ghana is being used as experimental guinea pig in Africa because our investigations revealed that the newly emerging African countries into oil and gas have resisted the Modern Concession and signed onto Production Sharing Agreement. For example, Kenya, Uganda, Togo, Liberia, Sierra Leone and Tanzania who are also frontier nations yet to start producing resisted the Modern Concession and signed onto the Production Sharing agreement. WHY GHANA?
“We believe the introduction and application of pure Production Sharing Agreement would be in the best national interest with the nation fully benefitting from her oil and gas resources. For example if Ghana was operating under Production Sharing Agreement , the country would have earned over US$ 4 billion at the end of December 2013 and at the end of 31st March 2014, Ghana should have earned over US$ 5 billion”, it observed.
It also stated that the current economic challenges that the country is experiencing would not have occurred if Ghana had adopted the Production Sharing Agreement when it entered into agreements with foreign oil companies to start oil exploration , as close to US$5 billion as Ghana’s share of the oil proceeds so far would have been ejected into the economy.
The GIGS noted that under the Hybrid Modern Concession, Ghana, since oil exploration and exploitation started 3 years ago, has earned only US$1.8 billion while the foreign oil companies made away with US$7.590 billion . By March 31, 2014 Ghana earned US$2.089 billion leaving the foreign companies a whopping US$8.448 billion. “If our political leaders and the technocrats were to throw away their self-interests and be bold enough to adopt the PSA, Ghana, with revenue accruing from the Jubilee Fields alone would experience a great transformation. Ghana would earn over US$50 in 20 years as against the US$20 billion and US$19 billion estimated by the IMF and the World Bank respectively”, it observed.
The Institute stated that the Production Sharing Agreement is progressive in practice, fairer and ensures for the equitable fiscal arrangement in the sharing of oil revenue which is the practice in over 75 countries across the world and could not understand why the country is “moving away from progressive Production Sharing Agreement law to exploitative Modern Concession law”
In an interview with The Republic, the Executive Director of GIGS, Mr. David Agbee has called on President John Mahama to as a matter of urgency withdraw the Bill and invite independent international experts to review it in conformity with the Production Sharing Agreement to make Ghana benefit fully from the oil finds.
“We also demand a review of all existing contracts and agreements so far entered into by the independent international experts 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 consonance with UN Charters and Resolutions on Natural Resources”, he suggested.
Source: Romeo Adzah Dowokpor/The Republic
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