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ADDRESS CHALLENGES OF PETROLEUM LAWS

…Group demands

The Civil Society Platform on Oil and Gas is demanding that urgent steps are taken to address potential challenges that confront the Petroleum Revenue Management and the Petroleum Commission laws to ensure the efficient and effective governance of the petroleum sector.

The demand was made at a workshop to disseminate the findings of its analysis of the challenges that confront the effective deployment of the laws in Accra recently.

The Group argues that, even though the passage of the Petroleum Revenue Management and the Petroleum Commission laws constituted a major step towards the efficient management of the emerging industry and revenues derived thereof, Ghanaians know too well that whether or not the objects of the policy being pursued by the laws are met, will to a very large extent depend on the smooth and efficient application of the laws themselves. This, it says, means all ambiguities, lacunas, and potential barriers to implementation must be identified and remedied through regulations, rules, procedures, institutional re-alignment and re-tooling.

Presenting the findings and recommendations of the study, Bishop Akolgo, who represented the team of consultants that carried out the analysis, stressed on the need to reverse the negative trends of mismanaging the country’s natural resources by ensuring that policies and laws that govern the natural resource sector stand the test of time and promote backward and forward linkages between the resources and the rest of the national economy. He explained that even though managing revenues efficiently is important, it is the linkages that will enhance local participation, value addition, and benefit maximisation.

Mr Akolgo proceeded to present highlights of what the consultants considered positive aspects of the Petroleum Revenue Management, (Act,2011), stating among others that: The Act provides a clear description of the purposes of the Stabilisation and Heritage funds; a conservative range of investment instruments; mandatory auditing and reporting. It also maintains a strong theme of transparency; and encourages public access to information about petroleum revenue management.

In spite of the positives, the consultants identified several gaps, weaknesses and potential barriers to implementation.

Touching on the Petroleum Holding Fund (PHF) receipt, Mr Akolgo noted that Sections 4 and 8 of the PRM Act do not provide for a reference price or achieved price, as GNPC terms it, to be able to know the size of income that goes into the PHF. Meanwhile, section 6 provides for indirect payments to government but since this is added to the total revenue received from the fund, according to the manner of disclosure procedure, such payments are difficult to figure out. In addition, the Law allows companies to hide funds owed to the state through dubious accounting systems and tax havens to avoid payment of tax on profits made. Capital gain tax was also not provided for in the Petroleum Income Tax Act 1987 (PNDCL 188).

On the Heritage Fund, he said Section10(4) gives the sitting government the power to attack and empty the fund through majority parliamentary support to misappropriate the fund before the time set by the Act for its utilisation.

Mr Akolgo prompted the house that the Annual Budget Funding Amount Section 21(5) provides latitude of discretion to the Minister which should be closed in order not for him to embark on what he described as political projects.

The presenter, on the stabilisation fund (section 23(3)) said this section empowers the Minister to use his discretion to spend, even in settlement of debts, which the law failed to stipulate which type of debt to be settled. He noted that the challenge is that the Minister, with the support of his majority as practiced by our parliament, may get excess funds transferred to the contingency fund for his or party benefit.

On exceptional expenditures, the specific fund from which communities affected by petroleum activities to be compensated as well as the method of compensation were not clearly stated in the Law, Mr Akolgo pointed out.

On the Investment Advisory Committee (IAC), he noted that the Minister has too much room to operate according to Sections 25 and 38 of the Act, (Act 815). This renders the IAC ineffective because the decision or advice of the committee may favour the political interest of the Minister, who appoints the members. Additionally, the advice on guidance of the IAC is not binding on the Minister, which worsens the situation. Again, the Act did not make any provision as to when the minister may declare a situation ?urgent? or limit the Minister as to how far the urgency should go.

Regarding the issue of transparency the presenter cited section 49(1) of the Act which requires that management of petroleum revenue and savings shall always be carried out to the highest internationally accepted standards of transparency and good governance, and points out a contradiction of this provision by section 49(3) which mandates the minister to withhold information based on his own discretion. Such information shall not be made available to the public unless after 3 years.

Also, Mr Akolgo observed that, the establishment of Public Interest and Accountability Committee (PIAC)(Sections 51-57) though a welcome novelty, the law does not clearly define its authority as well as responsibility to operate as independent body, to carry out investigations on its own or as an urgent command of law makers. Where to obtain information for its work is also a challenge.

The presenter also pointed out the absence of restriction to check conflict of interest as a lacuna that must be bridged by regulations, rules and procedures to the law.
Mr Bishop Akolgo made the following recommendations:

1. That, there is the need for either a regional or global spot reference price. Added to his recommendations is that indirect payments from the hydrocarbon resources and their treatment and reporting format be separated.

2. That, Ghana Revenue Authority needs adequate capacity to be able to verify tax returns and not to transfer the mining sector weakness to the petroleum sector operations.

3. That, there is the need for dividend agreement with GNPC.

4. That, there is the need to limit the Minister?s power to withhold information from the public, committees and anybody who needs them.

5. The PIAC needs to be empowered to investigate issues on its own including power to query officials when necessary.

6. That the law should clarify roles and responsibilities among the agencies, such as the Petroleum Commission, EPA, GNPC and MoE.

Other recommendations he made were the specification of public reporting requirement to the public, parliament or the executive; removal of the power of the Minister to nominate and compensate committee members; and lastly, the need to develop regulations to supplement and strengthen the transparency and access to information provisions of the Act.

The Civil Society Platform on Oil and Gas is a coalition of Ghanaian civil society groups and individuals working to ensure that Ghana escapes the resource curse trap as the country joins the club of oil producers.

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Reporting Oil and Gas project was launched on 4th June 2009atTakoradi, Western Region, Ghana by Penplusbytes (PPB – www.penplusbytes.org) with the vision of providing a one stop online information and knowledge about Ghana’s oil and gas sector
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