8 years of oil production in Ghana – Independent report

Eight years of oil production in Ghana has come to an end and, as usual, the Fair Trade Oil Share (FTOS) – PSA Campaign Team, under the auspices of the Centre for Natural Resources and Environmental Management (CNREM), has the painful task to present to Ghanaians, sovereign owners of the oil resources, our independent report on how Ghanaians are being robbed off their oil wealth in the name of investment.

This is coming at a time when there seems to be some awakening at last to the colossal financial losses to Ghanaians successive governments - not only the ones occurring under the present NPP regime - have caused Ghanaians. These losses far outweigh the sums being borrowed from the Chinese for which our country’s natural resources and forest reserves are being further sacrificed and mortgaged to repay. We maintain that had the NDC and Parliament listened to out pleadings to consolidate the PSA, Ghana would not be in its present dire straits deep in debt and piling on more.

As usual, our report is limited to analyzing the major economic benefits that make up the Government Take. These are the Royalties, Carried and Participation Interests and Corporate Taxes paid by the Foreign Oil Companies (FOCs) under the Royalty Tax/Hybrid System Fiscal Regime Ghana is operating. The results are compared to expected earnings if PSA was adopted in order to bring out the losses.

As a reminder, the legal framework which supported the PSA (Production Sharing Agreement) was on our legal books since the 1980s (PNDCL 64 and 84), but both the NPP and NDC Governments decided to ignore them and signed recent oil agreement contracts contrary to the spirit and intent of these laws by using the Royalty System. They thereby have failed to take advantage of the oil boon to garner the resources to avert the economic crisis and deprivations Ghanaians are currently facing, not to mention the current wrangling and accusations of shenanigans between the NPP and NDC.

*NOTE: Taxes paid, according to our calculations from oil lifted, display a huge shortfall which is currently a whistleblower case and subsequent litigation, details of which are available.

Explanation of tables of our findings

At the end of the 2018 production year, 311,134,513 barrels of Oil worth US$23,844,352,884 were produced, excluding Gas of which production figures are difficult to come by.

The Royalty Tax/Hybrid System earned Ghana 53,444,527 barrels of oil worth US$4,106,510,085 from the total production of oil. With Corporate Taxes of US$621,488,944 added to the US$4,106,510,085, Ghana earned US$4,727,999,029, representing 19.83% of total production revenue at cost.

Ghana is expected to pay Tullow the lead operator almost US$2 billion by the end of 2025 under the Royalty Tax/Hybrid System (Ref. World Bank Report. Energizing Economic Growth in Ghana. June 2013. Page 54)

The FOCs had 257,689,986 barrels worth Gross Revenue of US$19,737,842,799. With the deduction of paid Corporate Taxes of US$621,488,944, the FOCs earned a gross revenue net of taxes in the sum of US$19,116,353,855, representing 80.17% of total production revenue from crude oil alone.

If Ghana had adopted PSA which PNDC Law 84 supports and taken the Least-Minimum Government Take of 42% of total production revenue set by the US Government Accountability Office (GAO) which should accrue to a host country for allowing its oil and gas resources to be exploited, Ghana would have earned US$10,014,628,211.

At the upper limit of 60% also set by GAO, Ghana would have earned a total of US$14,306,611,730 as at the end of 2018 without paying a cent or a pesewa on capital development cost and daily operating expenses as is presently happening.

Bizarrely, GNPC officials are on record for telling Ghanaians that Ghana is not contributing to the oil production, hence the low shares and revenues Ghana is deriving. All this, of course, are blatant misinformation to cover up the huge financial losses their dismal stewardship is causing Ghanaians.

Fellow Ghanaians, the verdict is yours to make as to which of the two fiscal regimes could have made Ghanaians, sovereign owners of the oil and gas resources, derive the most potential benefits. Is it not clear as daylight that it is the Production Sharing Agreement rather than the Royalty Tax/Hybrid System which you have been made to believe over the years is the best for you, while they get their 2-5% “local partners” shares with companies formed in tax havens overseas?