Opinions Mon, 19 Dec 2011

Ghana Making Big Losses On Oil Lifted So Far.


On Monday, November 21, 2011 the Minister of Finance and Economic Planning published the Petroleum Receipts and Distribution Report for the period ending 30th September,2011 and cursory look and analysis of the report should send shivers down the spine of Ghanaians, because the report portrays the worst of things to come.

Unfortunately, most Ghanaians and even the most learned do not have the time, analytical mind and knowledge to properly evaluate these figures and draw conclusions for themselves. For proper understanding and discussion, I intend to prove my assertion that Ghana lost heavily at the end of the third quarter 30th September, 2011 under the Royalty Tax System Ghana has adopted.

Below is a reproduction of a part of the report which I intend to use for my analysis

There have been three liftings of oil by GOG/GNPC and its partners in the first three quarters of 2011. Receipts from all three liftings are included in the Table below:

Srn Item Unit Quarter 1 Quarter 2 Quarter 3 Quarter 4

1 Total volume of Lift Barrels 4,627,701 5,970,237 6,966,962 17,564,900

2 o/w GOG/GNPC Barrels 995,259 994,691 990,770 2,980,720

3 o/w Partners Barrels 3,632,442 4,975,546 5,976,192 14,584,180

4 GOG/GNPC Lift 1st 2ND 3rd

5 Date of GOG/ GNPC Lift d/m/y 9th March,2011 25TH June,2011 3rd August, 2011

6 Reference Price per barrel US$ 112.604 115.476 110.37

7 Market Price per barrel US$ 112.804 116.276 110.67

8 Marketing Cost per barrel US$ 0.08 0.08 0.08

9 Gross Receipt from GOG/ GNPC Lifting* US$ 112,189,575.52 115,579,115.44 109,569,254.30 337,337,945.26

10 o/w Royalties US$ 31,055,938.00 31,994,219.00 30,330,589.00 93,380,746.00

11 o/w Carried & participating Interest US$ 81,133637.52 83,584,896.44 79,238,665.30 243,957,199.29

Also needed for my analysis is the GNPC publication of 10th July, 2008 which gave total State shares as 38209 barrels out of every 100,000 barrels produced. The breakdown is as follows. Royalty 5% = 5000 barrels, Carried Interest 10% = 8500 barrels+, Additional Interest 3.75%=2475 barrels,+ Corporate Tax 35%=22,234 barrels.+

+Note: Production Cost = 10,000 barrels per day, Development Cost Recovery = 10,500 barrels per day taken into account reduced total barrels due to Ghana. These worked out to represent 38.20 effective percentage shares to the state. Posted price per Barrel = US$60.00.

Firstly, a quick glance through the report immediately tells you that something has gone wrong.

While volume of lift is increasing, GOG/GNPC shares remain constant; indeed rather showed slight decreases.

There were 29% and 50% increases in volume over the Quarter 1 in Quarter 2 and Quarter 3 respectively. Logically, it stands to reason that as volume of lift increases over the period, GOG/GNPC volume of lift should also show corresponding increases but not to remain constant. GOG/GNPC volume of lift has been understated by 601,978 barrels valued US$ 66,620,905.30.

Ghanaians need explanation to this abnormal situation which defies any mathematical logic from the Minister of Finance and Economic Planning, GNPC and Minister of Energy.

Is there any thing Ghanaians do not know which accounted for this situation? What went wrong?

Secondly, applying the parameters published by GNPC to the total volume of lift of 17,564,900 barrels so far produced and sold Ghana should have received a total of 6,709,792 barrels representing 38.20% but only had 2,980,720 barrels representing 16.96% made up of Royalties, carried and participation interests.

Ghanaians would like to know the level of GOG participating Interest for a proper understanding, evaluation and assessment of the report.

Was there a change in the formula for computing total state shares published by GNPC on 10th July 2008?

What is missing from the report is Corporate Income Taxes of 22,234 barrels which is built up into the 38,209 barrels as total State share out of every 100,000 barrels under the Royalty Tax System.

The long formula for working out the total State shares was formulated and devised by the foreign oil companies. I am surprised they are now going back on it, holding the country to ransom and flexing their muscles not to honour what they themselves came up with.

Ghana is being denied the built up tax element of 3,729,072 barrels that has accrued so far, and by direct implications windfalls valued at US$ 189,063,950.00 Ghana was expected to earn from it. The total value Ghana lost, however is US$ 412,696,398.00,

due to manipulation of the formula by the FOCs to their advantage. The argument the FOCs are putting up, though it is true, is Corporate Taxes are only paid on taxable profits after the final accounts are prepared. But, in this case Corporate Taxes were computed and designated in barrels of oil as an exception to the rule, to forestall future disputes over Corporate Tax settlements. Settlements of Corporate Taxes take up, two to three years or more to conclude if a dispute should arise, which from hindsight would be happening. These are major problems associated with the Royalty Tax system. Some fellow Ghanaians are out supporting them out of ignorance. Ghana is being short changed.

Thirdly, if Ghana had adopted the Production Sharing Agreement and applying the GNPC parameters to the total volume of lift of 17,564,900 barrels, Ghana would have received a total of 8,729,754 barrels made of up of Royalties 878,245 barrels and profit oil - 7,851,509 barrels all valued at US$ 963,502,949 as against the US$ 337,337,945.26 received under the Royalty Tax System during the period ending 30th September, 2011.

Those who called me fake, when I first announced to the world that Ghana was to receive 38.20% shares which I found not equitable in March, 2010 should now tell Ghanaians, what Ghana is expected to receive in the wake of these manipulations. Is it the 42.20% or the 53.75% they claimed? The great mathematicians from Kwame Nkrumah University of Science and Technology must now be called upon to work out the true figure, as threatened by a high official of the Ministry of Finance and Economic Planning in March 2010, when I called upon him to discuss the oil revenue sharing issues with him, after the conference at the Accra International Conference Centre on 21st March, 2010.

Fellow Ghanaians, the morning shows the day.

This marks the beginning of the exploitation of another valuable natural resources of ours once more, by the British and the U.S.A with the connivance and compliance of some local leaders, just as they did to gold and other minerals for several decades – not to mention the valuable human cargo our ancestors supplied to them less than two centuries back - to the detriment of our country and which is still going on, that we have been complaining about every passing day. Do we have to sit down and cross our legs and fold our arms helplessly? Ghanaians, it is time we demand a fair and equitable share of our natural resources. It is not late yet.

Ghanaians wake up!!!



Columnist: Kwawukume, Solomon