Adnan Adams Mohammed
Assessing ten 10years of oil production in Ghana, the Public Interest and Accountability Committee (PIAC) has called on the government and petroleum agreement (PA) negotiators to do a better job for the citizens.
The Committee tasks the government to adopt measures to thoroughly vet costs provided by international oil companies before PA are signed so as to help Ghana gain more from the oil and gas production.
Commercial production of oil and gas in Ghana commenced in December 2010 following the discovery of the play-opening Jubilee Field offshore Ghana in 2007. Since then, oil and gas production and exports have provided a critical boost to Ghana’s economy over the past ten years. It has become a fundamental component of the country’s industrial strategy and transition to a middle-income country, acting as the lever to provide jobs and energy security.
According to the report, “production will continuously decline if nothing is done through new in-fill developments on these existing fields or new fields coming on-stream”, the legally mandated oversight body cautioned. “We are advising the government to adopt a laser-like approach to cost monitoring as this, along with transfer pricing, is one of the major ways the State loses money in the industry.”
The Committee believes there is a strong need for Ghana to fully vet costs provided by international oil companies as this ultimately goes to the heart of whether the country would get its fair share of revenues.
To effectively operationalise this, PIAC is suggesting that the petroleum and transfer pricing units of the Ghana Revenue Authority be provided with adequate human resources and technical capacity to conduct audits effectively.
The PIAC report titled, “Assessment of the Management and Use of Ghana’s Petroleum Revenues between 2011 and 2020”, assessed Ghana’s management and use of petroleum revenue between 2011 and 2020 in line with the requirements of Ghana’s Petroleum Revenue Management Act 2011 (Act 815, as amended by Act 893) and the Petroleum Revenue Management Regulations 2019 (L.I. 2381).
Analysing the petroleum revenue receipts for the 10year period, PIAC stated that, The report further showed that three oil-producing fields, namely the Jubilee, Tweneboa Enyenrab Ntomme (TEN) and Sankofa-Gye Nyame (SGN), account for petroleum revenues as of the year end 2020. According to PIAC, an amount of US$31.22 billion dollars in value was generated from these fields in the ten-year period.
From the amount, Ghana earned about $6.55 billion from oil and gas production as of the end of 2020, equivalent to 9.97% of Gross Domestic Product.
Regarding the breakdown of the petroleum receipts by fiscal instrument, PIAC said carried and participating interest by far generated the highest share for Ghana, accounting for 58 percent or 3.8 billion dollars of the total revenue earned.
On the allocation of petroleum revenue inflows, the report revealed the Annual Budget Funding Amount received the highest amount of $2.6 billion (40%) over the period.
This is followed by the Ghana National Petroleum Cooperation receiving $2.0 billion (30%); the Ghana Stabilisation Fund (GSF) receiving an amount of $1.39 billion (21%) of total revenues; whereas the Ghana Heritage Fund (GHF) received $586 million (9%) of the total allocation.
The report said the ABFA has been a critical financing source for the national budget.
Nevertheless, while total benchmark revenue allocations to ABFA amounted to GHS9.41 billion (US$2.61 billion), allocations amounted to GHS8.51 billion (US$2.28 billion), leaving the balance being swept into the Consolidated Fund under the government’s Treasury Single Account (TSA) policy.
In essence, ABFA investments have yielded some successes but its overall impacts have been minimal, delayed, or negligible.
According to PIAC, many stakeholders believe that the ABFA has not delivered on its expectations in maximising the rate of economic development and enhancing the well-being of citizens.
“Many of the challenges affecting the effective and efficient utilisation of petroleum revenues, especially the ABFA, are macro-fiscal in form. The potential for ABFA to deliver optimal outcomes is hinged on several underlying macro-fiscal factors, including the robustness of the existing systems for public financial management, efficient budget preparation, implementation, monitoring and evaluation, accountability, efficient macroeconomic management, among others. The evidence points to weaknesses in these underlying factors; hence the implementation of ABFA in the last decade has suffered from broader challenges associated with macro-fiscal management,” the statement said.