The Africa Centre for Energy has observed that government’s expected revenue from corporate taxes from oil companies is likely to materialize this year.
According to expectations from this year’s budget, government is looking to rake in about $55 million. So far the Jubilee Partners have paid an amount of $40.2 million to government as corporate tax for 2012.
A statement Africa Centre for Energy said “We however strongly believe that the 2013 projections of corporate taxes at US$55million is the most reasonable so far, and a significant improvement in forecasting considering that the GNPC’s equity financing requirement in Jubilee has considerably reduced from US$124.63 million in 2012 to US$71 million in 2013. In fact, the capital cost of GNPC in Jubilee is expected to be fully retired this year, consistent with the other Jubilee partners unless an unexpected loss carry-forward occurs”.
The Government has projected in the 2013 Budget Statement that total receipts from oil will be US$581.7 million based on projected oil production of 83,341 barrels per day and a crude oil price of US$94.36 per barrel. Thus, an estimated crude oil volume of about 6 million barrels will be lifted by the Government and the GNPC as the country’s share of petroleum.
The projections for the first time also include expected gas revenues as a result of gas production from the Jubilee fields which will likely commence in the last quarter of 2013.
An Energy Economist and Executive Director of the Africa Centre for Energy, Mohammed Amin Adam opined that “$300 million dollars we [Ghana] should have taken in corporate taxes 2011 we didn’t get, as if government didn’t know that the companies were going to recover their costs, in 2012 $150 million dollars we didn’t get and if you look at the budget, minister said one of the reasons for the high budget deficit for 2012 included shortfalls in corporate taxes of which corporate taxes from oil companies is half of the shortfall”.
He added that “this year we are projecting $55 million and I am confident we can achieve that because I have looked at the figures in terms of how much capital cost is left to be recovered. The gross capital cost left to be recovered is about $971 million dollars and of this, the GNPC share in respect of the 3.75 paid interests they hold is about $36 million”.
The Centre has however raised some concerns with some projections in the 2013 budget. It says these issues must be addressed to protect the sanctity and spirit of the Petroleum Revenue Management Act 2011 (Act 815).
The projections of gas revenues of about US$9 million are quite vague and could conceal important determinants of the Benchmark Revenue. Unlike crude oil, government failed to provide information on the estimates of gas production and gas prices, a development which raises uncertainties about the revenue potential of natural gas.
Government’s plan to use part of the Annual Budget Funding Amount (ABFA) to set up an Infrastructure Fund to facilitate Ghana’s access to the capital market creates an additional Fund which is alien to the Petroleum Revenue Management Act. The only Funds allowed under the law are the Petroleum Holding Fund, the Stabilization Fund and the Heritage Fund. Although the setting up of an Infrastructure Fund is laudable, it requires an amendment to Act 815.
Allocation of the ABFA
The allocation of the ABFA for the expenditure and amortization of oil and gas infrastructure loans as one of the four priority areas selected by the Minister in accordance with Section 21(5), is not only inconsistent with the law, but a wrong application of revenues meant for socioeconomic development to finance oil and gas infrastructure.
In our view, the financing of oil and gas infrastructure is adequately provided for in Section 7 and 3(b) of Act 815. This includes allocation to finance the equity cost of development and production of the National Oil Company; and a further allocation of not more than 55% of the net carried and participating interests for other investments. Thus, the ABFA can only be applied to infrastructure financing outlined in Section 21(3) of Act 815, which does not include oil and gas infrastructure.