Oil companies owe US$2.1 million in surface rentals

Some international oil companies (IOCs) have defaulted in the payment of surface rental fees to the state, accruing arrears to the tune of US$2.11 million in 2020.

The amount represents a 34 percent increase over the arrears outstanding in 2019 of US$1.57 million, according to the 2020 annual report of the Public Interest and Accountability Committee (PIAC), the country’s petroleum revenue management watchdog.

PIAC, which monitors compliance by both state agencies and private parties with the Petroleum Revenue Management Act (PRMA), said the law regulates payment of surface rental fees by petroleum upstream companies as part of petroleum receipts due to the government.

“The non-payment of this stream of income denies the Petroleum Holding Fund (PHF) the necessary funds for development projects,” the committee stated in its report.

It charged the Ghana Revenue Authority (GRA) to initiate action to recover the arrears with appropriate interest, as provided for in the PRMA.

Mr. Mark Agyemang, Technical Director of PIAC, said by law, overdue surface rental should attract a 5 percent penalty starting from the date the rent was due.

A representative of the GRA, speaking at the launch of the report, said four companies have refused to pay their surface rentals since 2016, yet their petroleum agreements have not been terminated.

According to him, the surface rental is imposed by the petroleum agreement between an oil company and the government, and such agreements do not give the GRA the power to enforce the payment.

Though he agreed that there is a new Legislative Instrument (LI) that gives the GRA some powers of enforcement, this, he said, only took effect in 2019, before which the pre-existing Petroleum Tax Law did not impose any obligation on GRA to go after surface rental defaulters.

Ghana generated US$666 million from petroleum production activities in 2020, a decline from US$937 million in 2019, largely due to the global pandemic, PIAC’s report showed.

The country realised US$697,532 from surface rentals in 2020 as compared to US$1.1 million in 2019.