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Blows Over Jubilee Oil

  • SOURCE: | Editor
  • The raging battle over who keeps watch over expected cash from Ghana’s Jubilee
    Oil Field, who uses it and when, entered another phase over the weekend, with a
    new entrant, Vice President John Mahama, throwing punches at opponents to
    government’s attempt to amend the Petroleum Revenue Management Bill, in order to
    allow for Government to collateralize the revenue for investment.

    Referring to Clause 5 of the Bill, which forbid collateralizing the oil revenue,
    The Vice President questioned the Minority, New Patriotic Party (NPP) for
    supporting this clause, saying it did not make sense, and craving the indulgence
    to borrow George Bush’s phrase, ‘that’s absolutely, excuse my language, George
    Bush; Baloney!”
    Mr. Mahama, who was addressing members of the Tertiary Educational Institutions
    Network (TEIN) of the ruling National Democratic Congress (NDC), explained that
    the bill was drafted with assistance from the Norwegians, who had subsequently
    clarified the point that they introduced the Heritage fund at a time they
    already had their major infrastructure laid.

    He called for support for the intended amendment in order to deal with Ghana’s
    infrastructural deficit, which he said the World Bank had put at 1.6 billion
    dollars annually, as it would be foolish to stash the money away even as the
    country begged for infrastructural development such as roads.
    The Bill which was introduced by the Government, had a dose of the World
    Bank/International Monetary Fund (IMF) influence, which required in clause 5,
    titled: Prohibited Use of Petroleum Account,that:

    (1) The assets of the Petroleum Account shall not be used to provide credit to
    the government, public agencies, private sector entities or any other person or
    entity and shall not be used as collateral for debts or other liabilities of any
    other entity.
    (2) There shall not be any borrowing against petroleum reserves by government.
    Already the VEEP has caught fire, as half-a-dozen of minority NPP members have
    swiftly countered his argument, questioning its basis, since the controversial
    clause was introduced to the House, in the first place, by the Executive.

    Minority Leader, Osei Kyei Mensah Bonsu, Joseph Adda, MP for Navrongo Central,
    K.T. Hammond, MP for Adansi West, Kennedy Adjepong, MP for Assin North, Dan
    Botwe, MP for Okere Constituency have all described the Veep’s comments as
    unwarranted.

    In a sharp rebuttal on Monday, the Minority Leader questioned the basis for the
    Vice President’s harsh words, since the original Bill before Parliament was
    introduced by the Executive, of which the latter was a key part.

    Dan Botwe also shared the same position, saying if the Veep’s position were to
    be taken seriously, then the government was more deserving of the harsh words
    since the clause in the original position he was criticizing was introduced by
    Government.

    Kennedy Adjepong described the Veep’s criticism of opponents to the proposed
    amendment as a fallacy of Argumentum Ad Hominen (a situation where one attacked
    the personality of his opponent rather than the issues involved in the
    argument).

    Mr. Kwame Jantuah, a member of the Convention People’s Party (CPP) and also of a
    civil society coalition on oil and gas, said there was no justification for
    collateralizing the oil money, since the country would have continued with its
    developmental programmes without oil money, anyway.

    Dr. Paa Kwesi Nduom, a former Minister for Energy under the NPP regime and CPP
    Presidential candidate for the 2008 elections would rather have 20% of the
    revenue being set aside in the heritage fund instead of the proposed 10%.
    He said the Norwegians and Americans have institutions that worked and therefore
    there was no basis for comparing what pertained there with Ghana’s. Mr. Jantuah
    said even though the oil revenue would give respite, “We shouldn’t use it to
    collateralize any loan,” he emphasized, saying the money should be invested in
    profitable developmental projects.”
    Kwesi Pratt, a member of the Socialist Forum and Managing Editor of The Insight
    newspaper, as well as Dr. Sam Mensah an investment consultant, on the other hand
    have both described as unreasonable the stance against collateralizing the oil
    revenue, considering the infrastructural deficit that confronts the nation.
    DEBATE IN BORROWED TIME
    Meanwhile, the tango between the Minority and majority over whether to
    collateralize or not to collateralize the Jubilee oil cash in Parliament
    continued fiercely on Monday, ending with the Minority Leader, calling for a
    time-out in the form of postponement, to allow for further consultations.
    The Minority leader’s call which was concurred by the majority leader, after
    the two had disagreed over the proposed amendment, has left the Petroleum
    Revenue Management Bill still hanging, with first oil scheduled to flow on
    December 15, 2010. See Page 13 for the other sections of the Bill that deal
    with the Oil Revenue Management. The Business Analyst

    Page 13
    Management of the Petroleum Reserve Accounts expenses

    11.(1) The Bank of Ghana shall deduct reasonable management expenses from the
    petroleum receipts of the Petroleum Reserve Account by direct debit.
    (2)The deduction shall be in accordance with the best international practices
    and as provided for in the Operations Management Agreement.

    Allocations and disbursements

    Establishment of the Stabilisation Fund
    12. (1) There is hereby established the Stabilisation Fund
    (2) The objects of the Stabilisation Fund are to
    (a) cushion the impact on or sustain public expenditure capacity during periods
    of revenue shortfalls whether caused by a fall in the petroleum price or through
    production changes; and
    (b) cushion the economy from the impact of unanticipated petroleum revenue
    shocks and safeguard macroeconomic stability.

    Establishment of the Heritage Fund
    13. (1) There is hereby established the Heritage Fund.
    (2) The object of the Heritage Fund is to use part of the savings as investment
    to

    (a) generate an alternate stream of income to support public expenditure in the
    long run; and

    (b) provide a heritage for future generations of citizens from savings derived
    from excess revenue.

    Funds in the Stabilisation and Heritage Funds
    14. The funds in the Stabilisation and Heritage Fund collectively referred to
    as the Petroleum Funds shall be denominated in United States Dollars or any
    other convertible currency approved by the Minister for the sole purpose of
    saving and investing part of the petroleum revenue.

    Transfers and allocation into the Petroleum Funds
    15. The transfers into the Petroleum Funds from 2011 shall be as follows:
    (a) where petroleum revenues collected in each quarter exceed one-quarter of
    the estimated annual budget funding amount of the financial year, as determined
    by the allocation and disbursement formula from the Petroleum Account,, the
    United States Dollar equivalent of the excess revenue shall be transferred from
    the Petroleum Account to the Petroleum Funds;
    (b) the transfer and any subsequent transfer shall be made no later than the
    end of the month following the quarter in respect of which the excess revenue
    was calculated; and
    (c) A minimum of eighty percent of the aggregate of the excess revenue shall be
    deposited into the Heritage Fund and the balance shall be deposited into the
    Stabilisation Fund each financial year.

    Outflows from the Stabilisation Fund
    16. (1) Where the petroleum revenue collected in the first two quarters of each
    financial year falls below one-half of the estimated annual budget funding
    amount by at least ten percent for that financial year withdrawals may be made
    from the Stabilisation Fund as follows, whichever is the lesser amount:

    (a) either seventy-five percent of the estimated amount of the shortfall of
    petroleum revenues for that year; or
    (b) thirty percent of the balance standing to the credit of the Stabilisation
    Fund at the beginning of that year.
    (2) The amount withdrawn shall be deposited into the Consolidated Fund within
    twenty-four hours after the withdrawal.
    (3) Transfer out of the Stabilisation Fund shall only be done for the purpose
    of alleviating shortfalls in the national revenue and in accordance with
    subsection (1).
    (4) The real rate of return from the Stabilisation Fund shall be treated as
    part of the current year’s petroleum income in the First Schedule to determine
    the Annual Budget Funding Amount.

    Additions and withdrawals from the Heritage Fund
    17. (1) Additions to the Heritage Fund shall be according to the rule specified
    in section 15.

    (2) Withdrawals from the Heritage Fund shall be according to the withdrawals
    rule in section 20.

    (3) The rate of return on investment from the Heritage Fund shall be treated as
    part of the current year’s income in the First Schedule in determining the
    Annual Budget Funding Amount.

    Payments into the Petroleum Reserves Account
    18. An obligation to make a payment into the Petroleum Account; the
    Stabilisation Fund

    or the Heritage Fund shall not be discharged until the entire amount has been
    deposited, integrally and unconditionally, into the respective earmarked
    receipts accounts.

    Adjustments and reconciliations to petroleum reserves accounts
    19. (1) No later than February 15th of each year, commencing 2012, the Minister
    shall reconcile the actual total petroleum receipts and the estimated annual
    budget funding amount of the immediate preceding year and shall submit a written
    report to Parliament after audit by the Auditor-General. The report shall
    include the following information:
    (a) the annual budget funding amount for the immediately preceding two years;
    (b) the estimated sustainable income for the current and immediately preceding
    two years or calculated according to the Second Schedule;
    (c) the actual inflows and outflows of the Petroleum Account for the current
    year;
    (d) the balance of actual receipts over the Annual Budget Funding Amount;
    (e) recommendations for the reconciliations and adjustments needed to account
    for any deviations so the
    (i) inflows and outflows relating to the Petroleum Funds match the actuals of
    the year;
    (ii) Petroleum Account balance shall be reset to zero.
    (2) The report shall be published in the Gazette and two state owned
    newspapers, no later than March 1 of the same year.

    Allocation and disbursement from the Petroleum Account
    20. (1) Disbursement from the Petroleum Account shall only be made
    (a) for fixed collection expenses;
    (b) for management expenses of the Petroleum Reserve Account; and
    (c) to the budget and the Petroleum Funds.

    (2) No later than September 1st of each year, the Minister shall determine
    (a) the benchmark revenue using the formula set out in the Second Schedule; and
    (b) the estimated sustainable income according to the formula set out in the
    Second Schedule.
    (3) For the year 2010, the annual budget funding amount, the amount of
    petroleum revenue to support the budget shall be what the Minister recommends
    out of the 2010 petroleum receipts, if any.
    (4) For the period 2011 to the year when there shall be no more petroleum
    production, the annual budget funding amount shall be seventy percent of the
    benchmark revenue as calculated and certified according to the First Schedule.
    (5) From the year marking the end of crude oil production
    (a) the annual budget funding amount from petroleum resources shall be equal to
    the sum of royalties from gas operations, if any, corporate income tax on gas
    commercialisation, dividends from the national oil company and the real income
    or earnings on the Petroleum Funds as calculated and certified by …; and
    (b) the income or earning on the Petroleum Funds shall be equivalent to the
    real rate of return on the balance of the Petroleum Funds on December 31 of the
    previous fiscal year.

    Transfers from the Petroleum Account

    21.(1) Transfer from the Petroleum Account to the Consolidated Fund for budget
    funding shall be in quarterly installments of one-quarter of the annual budget
    funding amount or as the Minister may recommend.
    (2) The total amount withdrawn from the Petroleum Account for budget support
    for any fiscal year shall not exceed the appropriation amount approved by
    Parliament for that fiscal year in accordance with section 20.
    (3) Transfers from the Petroleum Account by the Bank of Ghana in any fiscal
    year shall only take place after publication of the budget in the Gazette
    confirming the appropriation amount approved by Parliament for that fiscal year.
    (4) The key decision parameters in the formulas in the First and Second Schedule
    and for 2010 shall be reviewed every three years with the first review to occur
    in 2014.
    (5) The review shall be conducted by the Minister in consultation with the Bank
    of Ghana and the Board.
    (6) The review shall be subject to ratification by a resolution of Parliament
    supported by the votes of not less than two-thirds of the members of Parliament.
    http://www.ghanaweb.com/GhanaHomePage/NewsArchive/artikel.php?ID=198635

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