I write in relation to a news report that was carried by most newspapers in the country with specific reference to pg. 7 of the B&FT on Tuesday. August 20, 2013 with the caption “Ghana clinches 79% oil deal”.
In that report, it was captured that
“Cabinet last week approved a new oil deal between the Ghana National petroleum Corporation (GNPC) and ACNE Petroleum Ghana Limited, which deal grants Ghana a total stake of 79%” — and further went on to state: “Ghana’s 79 percent share of the sale of oil and gas from the block comprises 10 percent royalty, five percent from domestic gas, 10 percent from exported gas, 10 percent carried interest, 15 percent participatory interest and 35 percent corporate tax.”
I am unhappy about the way the government has gone about painting a picture that the country is to benefit by 79 percent of total shares in revenue, the largest ever for the country in an oil deal.
First of all, the business of oil and gas is very capital intensive — such that most Petroleum Agreements (PA), similar to Production Sharing Agreements or Contracts (in other territories), are structured to ensure that the principal investing party recoups its investment and more. Thus, I find it baffling that the government continues these charades around such public announcements without presenting the fine details of such deals. For who would invest in such a joint venture project as the principal investing party and hand over the “lion’s share” to the minor investing party? AGM Petroleum Ghana Limited! In that regard, I agree with the African Centre for Energy Policy (ACEP) in the need to be worried that “the circumstances leading to the agreement cannot pass the deal as genuinely seeking Ghana’s interest, and t~ e case of `patronage’ can arise if the country does not adopt an open competitive process in its oil and gas industry.”.
Secondly, it is to be expected that the country (government and GNPC) would take a 10% royalty, 10% carried interest and corporate tax of 35% as that is already standard practice (PwC, Oil and Gas Tax Guide for Africa 2013); and some percentage for exported gas, as there is no specified separate regime for gas taxation in Ghana. However, on what basis did the government determine that there would be revenue from domestic gas? Without a gasification or liquefaction plant installed in the country and issues with the Ghana Gas company not meeting certain timelines, I find it hard to comprehend whether this deal is an upstream deal or a downstream deal as there seems to be real and blurry details which have not been made public.
Thirdly, reports amidst a backlash from the Civil Society Platform on Oil and Gas a few weeks ago indicated that Ghana may have lost close to US$70million in taxes from two oil deals, being the transfer in 2011 of the EO Group’s 3.5 percent stake in the Jubilee Field to Tullow Oil, and Sabre Oil’s sale of its 4.05 percent share in the field to South Africa’s national oil company, PetroSA. It is in this regard that I believe government’s announcement of this deal with AGM Petroleum Ghana I.td. with emphasis on the “expected” revenue share/stake was made with such pomp to paint a picture that the national interest via revenue was being taken care of However, with carried interest and participatory interests stated in this deal, and the uncertain fate of domestic gas, it is not advisable that government parades this announcement so eagerly. For it is the same government that will be quick in the near future to clarify the details of this deal when we (the people) believe that this deal could have generated so much money we would require evidence thereof — either by actual revenue/income or by infrastructural or developmental projects.
Finally, it is only prudent that the arithmetic of how the revenue projections were made is shared with the public. A cursory look at the figures suggests a total of 85% is being gained when all the percentages are added together. Yet can the flipside it can be argued that the country is in fact getting far less; that is, an estimated average of 13-14% since the revenue streams are from 6 different sources for which an aggregation of the figures is required. Either way, it is only prudent for government and the GNPC to come out and explain the mechanics for arriving at this 79% calculation.
For me, let the details of this deal be made public. Let us, through parliament, assess the viability and interest of this deal; and let us (as a country) clearly establish whether this deal is in our national interest or it is being made with a revenue interest. It is very easy to assume that both interests are aligned, but this is not always the case — especially when pursuing the money may have serious implications and repercussions for the country; such that at the end of the day, it may not have been in our national interest to have brokered this deal at all.
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