By: Prof Lungu
We will admit that we had never heard lot about Lawyer Kobina Tahir Hammond, NPP MP for Adansi Asokwa. That is, until we read the extraordinary, Ghana-centered, report and responses to questions to/from the Select Committee on Mines and Energy in the Parliament of Ghana over the course of 6 July, 14 July, and 28 July of this year. Mr. Hammond, Minority spokesperson on Energy, sits on the Select Committee and the report and exchanges were presented to the committee by the Ghana Institute of Governance and Security (GIGS), a concerned group.
WHICH GHANAMAN WILL REJECT $62 BILLION AND GRAB $52 BILLION INSTEAD?:
While Mr. Hammond and Members of Parliament have tax payer-funded bureaucrats to support the work of their committee(s), the members of GIGS, for public service reasons, "...not for any private profit motive but for the good of all generations present and future..." have been devoting considerable amount of time and energy trying to communicate to Lawyer Hammond. They have been telling Mr. Hammond and the NDC Deputy Minister For Energy and Petroleum, Mr. Benjamin Dagadu that $62 billion for oil from Ghana's Jubilee Oil Field is superior to $52 billion over 20 years.
As represented by Mr. Solomon Kwawukume, an expert in the Oil and Gas field, GIGS has been telling Mr. Hammond, Mr. Dagadu, and the powers at Parliament that at the present time, the globally acceptable contract for deriving income from oil owned by a state (i.e., Ghana), is the Production Sharing Agreement (PSA)(Note 1), On the contrary, the so-called Ghana Hybrid System, is operationally not even a "hybrid" in the true sense of the world when applied to evaluation of alternative plans.
Sadly, after numerous presentations to Parliament and responses to many questions, Mr. Hammond and some of his colleagues in Parliament are still not listening!
IF TEXAS, MALAYSIA, & KAZAKHSTAN CAN HAVE GOLD-STANDARD PRODUCTION SHARING AGREEMENT (PSA), SO CAN GHANA!
Our own cursory independent review of the PSA showed us that when Mr. H. T. Hammond, on 15 March, 2015, accused the lead operator on the Jubilee Oil Field, Tullow Oil, of defrauding the country because "...the company wants to use profits from Ghana to reduce their 2 billion dollar losses arising out of their operations in other jurisdiction...", he was by default addressing the non-PSA deficiency of existing royalty/tax service contracts that potentially allow Tullow Oil (and other Oil companies) to transfer losses to locations outside Ghana's Jubilee Oilfield, and even outside Ghana.
Why?
Because production cost for the PSA contract is normally tied directly to wells "across lease and unit lines to encourage further development, prevent waste, prevent the drilling of unnecessary wells, increase ultimate recovery of hydrocarbons, and protect correlative rights."
But, the last we heard, instead of asking representative of GIGS at what stage a PSA that accrues $62 billion to Ghana in 20 years (instead of $52 billion) ought to be implemented, Mr. Hammond was instead asking GIGS where in mid-1990-era P/NDC laws a PSA was ever mentioned.
That is preposterous, if we must be charitable to Mr. Hammond!
The question for Mr. Hammond is this: Is it responsible on the part of a government agency (or private corporation) that tells tax payers (share holders) they will never implement any generally acceptable rules, technologies, process improvements, or procedures that are consistent with current industry practices, unless they were codified in 20-plus year old laws enacted by a regime long discredited, in part?
Further, by the same token, can Mr. Hammond tell Ghana where in mid-1990-era P/NDC law a Ghana Hybrid System is codified as the standard for oil contracts for Ghana?
Nonsense, you will agree!
Perhaps, it will not be surprising to many Ghanaians and Ghana supporters that Mr. Hammond's tolerance for corruption, and his intolerance of the Freedom of Information (FOI) bill, seem unsurpassed by his own marks.
Read more in our next installment on these same pages!
NOTES:
1. Production Sharing Agreement (PSA)(Note 1), : "... Production Sharing Agreements recognize that drilling wells across lease and unit lines will encourage further development, prevent waste, prevent the drilling of unnecessary wells, increase ultimate recovery of hydrocarbons, and protect correlative rights. Production Sharing Agreements describe the method by which interest owners will share in production from the wells. Production Sharing Agreements generally affect only production from a well that crosses leases or units..." (Jowers and Olmstead, 2013).
2. "...PSAs were first used in Indonesia in the 1960s. They were signed between IOCs and Pertamina, the state oil company of Indonesia. What is characteristic of these contracts is that the parties concerned share the production of the hydrocarbons produced and leave title to the unproduced oil with the state. Today, the PSA continues to be used in relationships between IOCs and some resource-rich states (or their SOEs) for the exploration, development and production of hydrocarbons. The fundamental principle of these types of contracts is the notion of shared production. Given the time-scale of oil field developments, PSAs are often signed for a period of 25 to 30 years, although they can cover longer periods..." (IIED, 2012).
3. Our thanks to Andy K for making information and data available to us at www.GHanaHero.com.
SOURCES:
1. Ghanaweb. Feature Article, Petroleum bill a very bad deal for Ghana, 22 August 2015, Andy K / Solomon Kwawukume, Snr. Research Officer, GIGS.
Ghanaweb. I’m sorry – KT Hammond begs, 7 December, 2013, (www.ghanaweb.com/GhanaHomePage/NewsArchive/I-m-sorry-KT-Hammond-begs-294396).
2. CitiFMOnline. Don’t sack any Ghanaian technical staff, Petroleum Ministry warns Tullow, 18th March, 2015, (www.citifmonline.com/2015/03/18/dont-sack-any-ghanaian-technical-staff-petroleum-ministry-warns-tullow/#sthash.9ZM0JBg7.dpuf).
3. Rober D. Jowers and Mickey R. Olmstead. Drafting Production Sharing Agreements. 39th Annual Ernest E. Smith Oil, Gas and Mineral Law Institute, The University of Texas School of Law, 22 March, 2013, Houston, Texas.
4. International Institute for Environment and Development (IIED). How to scrutinise a Production Sharing Agreement: A guide for the oil and gas sector based on experience from the Caspian Region, 2012. London, United Kingdom.
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We are more than talk. We are data-driven! Prof Lungu is based in Washington DC, USA.
NPP MP K. T. "Hybrid" Hammond Wants $52B, Not $62B, For Ghana (1) ©25 Aug 15.
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