It is now time to consider the ?FINDINGS FROM THE REPORT.? This is also the last instalment of the series.
FINDINGS FROM THE REPORT
i. In determining Benchmark Revenue the Government used conservative estimates based on international crude oil prices presumably since there is no historical data as yet for the Jubilee field.
ii. The enactment of Act 815 mid-year led to the Benchmark Revenue being determined in July 2011 during the presentation of the supplementary budget for 2011, thereby revising the first projection of petroleum revenue for that year as estimated in November 2010 prior to the passage of the law. The late determination of the Benchmark Revenue was therefore done as a special case considering the operational challenge of Act 815 in its first year of implementation.
iii. The Committee did not find any evidence that the requirement for the opinion of an international expert to be consulted was followed in the determination of the 2011 Benchmark Revenue.
iv. Ghana?s lifting of crude oil was consistent with the Petroleum Agreements reflecting a royalty of 5% of gross production and a carried and participating interest of 13.75% of net production. Lifting of crude oil in 2011 spilled-over into 2012 in accumulated stocks of 649,138 barrels of oil, being about 2% of total Ghana share for 2011. The accumulated stock by the end of December 2011 was not lifted until 3rd January, 2012. This translated into revenue overspill of US$72,463,275 million (at the realised crude oil price of US$111.63 per barrel).30 Crude oil liftings are done in parcels of around 950,000 barrels per lifting and the variance of 265,224 barrels taken on the 3rd of January should be regarded as Ghana?s share of production in the first quarter of 2012.
v. There were wide disparities in petroleum revenue for 2011 between the forecast and the outturn. All the revenue streams fell short of their forecast with the exception of carried and participating interests. Corporate taxes in particular were not collected due to capital cost recovery provided for in the Petroleum Income Tax Law 1987 (PNDC Law 188).
vi. The forecasting methodology as specified in the Act 815 was strictly not being complied with, reportedly due to lack of historical price data on jubilee crude oil. In forecasting corporate taxes, the Ministry of Finance and Economic Planning also failed to consider the advice of the GRA on the tax-paying position of the oil companies which then raised problems of institutional coordination. Further, the Ministry?s reliance on negotiating corporate taxes with oil companies based on moral suasion is not in tune with established international practice.
vii. Efforts have been made by the GRA to build on the capacity of its officers particularly those in the Petroleum Tax Unit. However, enhancing technical capacity must remain a priority in the areas of tax assessment and cost auditing for the new upstream petroleum sub-sector.
viii. Ghana is managing to sell its share of the production in a timely manner following liftings; payment for crude oil sales did not exceed a week from the date of lifting. In the case of the third lifting, cash payment had been received before the physical lifting of crude oil. The Committee therefore did not find any revenue gains or losses resulting from the time lag between oil lifting and cash payment.
ix. The final value of the Petroleum Holding Fund, according to provisions in the law for it to be net of equity financing and amounts to be ceded to the national oil company, came to GHS 354,240,632. This value conflicts with the provisions given in the First Schedule which accompanies Section 17 which sets out the methodology for the determination of the Benchmark Revenue. Under section 6, the Petroleum Holding Fund is described as gross receipts from all components of petroleum revenue listed in that section. This is further confirmed by the methodology to be used in establishing the Benchmark Revenue in Section 17 (First Schedule). Section 7, however, truncates the amount by setting aside the amounts designated to be paid to the national oil company thus creating some amount of confusion over the determination of the Benchmark Revenue.
x. Considering the fact that the Jubilee field holds estimated recoverable reserves of about 800,000,000 barrels of crude oil, it is right to conclude that the finding costs of Jubilee reserves is about US$6.92 per barrel making the Jubilee project a competitive one. The average worldwide finding cost for Financial Reporting System Companies (FRSC) is US$18.31 per barrel of oil equivalent to 31.
xi. The GNPC followed the provision of the Public Procurement Act in the procurement of a marketing contract for Ghana?s share of crude oil. Vitol/Cirrus, the marketing contractors were selected through a competitive process. Vitol is also the marketer for Tullow Oil?s share. The price realised by the GNPC for Ghana?s crude oil from its marketing agreement was relatively higher than that of the other Jubilee partners. Ghana?s realised average crude oil price of US$113 per barrel was slightly higher than Tullow Oil?s realised average price of US$112 per barrel for the same period.
xii. For the 2011 period under review, GNPC submitted its programme of activities to Parliament through the Minister for Energy in 2010 as part of the 2011 national budget process, as was the practice before the enactment of Act 815. However, after the passage of Act 815 it is reported that the GNPC?s presentation of its programme of activities was done separately in accordance with the law during the presentation of the 2012 national budget. It is to be noted, however, that GNPC has not provided the Committee with a report on the use of funds (GHS 315,390,698) received to cover its activities in 2011.
xiii. The GNPC did not pay dividends to the Government for 2011 because the corporation needed to plough back its profits to recover significant investments and operating costs associated with its participating interest.
xiv. GNPC?s share of Equity and Operating costs were fully disclosed to all relevant Government of Ghana agencies including the Ministry of Finance and Economic Planning, the Ministry of Energy, Bank of Ghana, Ghana Revenue Authority and the Securities and Exchange Commission. The Company?s accumulated equity cost as at 31st December, 2011, was US$165.8million out of which US$134.48million had been settled from its share of Jubilee proceeds.32
xv. The selection of the priority sectors for spending the ABFA was guided by the Ghana Shared Growth and Development Agenda, a medium term development framework which puts greater emphasis on road infrastructure and agricultural modernisation. The Minister therefore complied with sections 18(2) and 21(2) d of Act 815. However, this was not aligned to a long-term national development plan, as required under Act 815 because of the absence of such a long- term plan plan.
xvi. Government allocated more than 70% of the Annual Budget Funding Amount for capital expenditure, an important requirement of Act 815. Petroleum revenues provided significant fiscal relief for Government to finance important development projects. Without petroleum revenues, there would have been a negative growth in roads investments and a worsening growth for agriculture investments.
xvii. The Government of Ghana has signed a loan agreement with China Development totalling US$3 billion which was collateralised against the Annual Budget Funding Amount.
xviii. There was a compensating error in the transfers to the Ghana Heritage Fund and the Ghana Stabilisation Fund deviating from the provisions prescribed in Act 815. The Ghana Heritage Fund was under-declared by GH?9 million whilst the Ghana Stabilisation Fund was over-declared by the same amount.
xix. The Investment Advisory Committee and the Minister of Finance and Economic Planning have not provided any investment advice or Investment Guidelines respectively for the investment of Ghana Petroleum Funds. The Committee is of the view however, that since the Investment Advisory Committee was recently inaugurated and thus barely started its work, the types of investments made by the Bank were appropriate under the circumstances.
xx. The Minister of Finance and Economic Planning is yet to sign the Operational Management Agreement with the Bank of Ghana for the operational management of the Ghana Petroleum Funds. Therefore the current role played by the Bank in the investment of the Ghana Petroleum Funds was done outside of such an agreement.