There is the need to review most of Ghana’s oil contracts which were signed as far back as 2005 to reflect current economic situations, a Senior Fellow of the Institute of Economic Affairs, (IEA) said on Monday.
Professor John Asafu-Adjaye, said the review should cover oil production, which started in 2010.
Prof Asafu-Adjaye was briefing the media on the outcome of a two -day capacity building workshop organised on the theme: “Making Ghana’s Oil and Gas Resource Count,” which was held in Accra last week by the IEA in partnership with the Centre for International Private Enterprise and STAR-Ghana, a multi-pooled donor funded organisation.
Members of the Public Interest and Accountability Committee (PIAC), the Commission on Human Rights and Administrative Justice (CHRAJ), and the Parliamentary Select Committee on Mines and Energy attended the workshop and deliberated on the entire fiscal regime regulating Ghana’s oil and gas industry drawing on international best practices and experiences.
Various think-tanks presented papers on the industry ranging from oil agreements, Ghana’s fiscal regime, impact assessment and monitoring transparency and accountability in oil and gas industry using the Petroleum Transparency and Accountability index (PTRAC) as well as advocacy strategy for the public interest and Accountability Committee.
Prof Asafu-Adjaye said participants at the meeting agreed that lessons should be learnt from the current contractual arrangements for the jubilee field and applied to gain more favourable terms in future resource contracts.
“There needs to be an equivalent increase in favourable contractual arrangement to mirror the decrease in exploration risk now that oil has been discovered.”
Participants called for improvement in the decision-making process relating to the approval of resource contracts and emphasised the need to strengthened institutions charged with monitoring the oil and gas sector through adequate funding and capacity building.
Members also stressed the need to balance objectives in designing a fiscal regime to attract new investors and also ensure that appropriate revenue is captured.
The participants recommended that future contract negotiations should require more favourable terms including the application of the thin capitalisation rules to the petroleum industry, less lenient relinquishment rights, more appropriate corporation tax regimes and a review of local content requirements to emphasise supply by Ghanaian entities.
Prof Asafu-Adjaye said members called for the current revenue windfall tax regime to be reviewed to about 20 per cent while the capital gains tax applicable to the oil and gas industry should also be appraised.
The members asked that Ghana should be made an attractive option for investment to build the oil industry.
“However a target should be set at which point a shift to a revenue capture fiscal regime should be adopted.
In the medium to long term, assistance should be given Ghanaian firms as stipulated in the Local Content Policy to acquire technology and skills to enter into the extraction industry.
Participants said oversight institutions like Parliament, CHRAJ and PIAC should be encouraged to use the P-TRAC Index as a tool to enhance the quality of monitoring and decision-making while the relevant state agencies responsible for managing the revenue for oil and gas sector should make necessary information freely available to PIAC.
They called for model guidelines to be developed for use by the Environmental Protection Agency which should make better use of cross agency or cross organisational discourse and use of experts to enhance the review of environmental impacts.
Participants asked government to conduct and publish baseline studies against which potential adverse impacts from mining operations could be measured.