Response To Mr Mutawakilu's Comment

The Ghana Institute of Governance and Security (GIGS) and the Fair Trade Oil Share-Ghana PSA Campaign Team are amused and surprised at the comments made by Mr. Mutawakilu, Deputy Chairman of the Select Committee on Mines and Energy that “the $6 Billion claims made by GIGS was based on hypothetical figures and not true figures. They didn’t know the true cost of exploration, development and production of Jubilee Field and when Petroleum Commission provided us with the cost we realised the outcome would be the same as using the hybrid system” (corrected for typos) in response to Prof. Lungu’s “Damongo Mutawakilu: No NDC Minister Ever Paid for the $6bn Loss in Oil Revenues” (Modernghana 17 July 2016).

This is a complete fallacy and public deceit to the highest order. In the first place we have seen the Petroleum Commission figures and we have problems with their calculation. The calculation was doctored to make and to prove a point that the two systems could achieve the same results. This we have duly pointed out to the Select Committee after our second meeting on July 16^th 2015.

Secondly, we want to state emphatically that our calculations were based on true and actual figures we took time over the years to meticulously compile from the Quarterly Petroleum Receipts and Distribution Reports released by the Ministry of Finance over the first five (5) years of the Jubilee Field operations.

The results to the best of our ability showed that total volume of oil lifted was 169, 535, 385 barrels valued US$ 15,980,235,948 at a Moving Average Price of US$94.259 per barrel. Ghana under the Hybrid System lifted 28,117,764 barrels valued US$ 2,650,352,317 made up of Royalties, Carried and Participation Interests out of the total.

The FOCs lifted 144, 417, 622 barrels valued US$ 13,329,883,631.Out of this total the FOCs paid corporate tax of US$ 459,997,049 and surface rentals of US$ 1,264,419 leaving a gross net of US$ 12, 868, 622,165 - 80.60%.

Ghana therefore under the Hybrid System received a total of US$ 3,111,613,783 representing 19.40% out of total production revenue of US$ 15,980,235,948 as “Government Take”.

In calculating what would have accrued to Ghana under PSA, we applied the Jubilee Field Data published in the Daily Graphic of 10th July, 2008 by GNPC to the actual true figures compiled. The data are 5% Royalty, 10% of production as Production Cost, 10.50% of production as Capital Cost recovery and 35% Corporate Tax. We however did not factor into our calculations Ghana’s 3.75% Participation Interest to show the superiority of the PSA over the Ghana Hybrid System.

The final calculations showed that under PSA Ghana would have lifted 101,941,628 barrels of oil valued US$ 9,608,909,293 as against 28,117,764 barrels valued US$ 2,650,352,317 plus Corporate Tax of US$ 459,997,049 a surface rental of US$ 1,264,419 totalling US$ 3,111,613,783. The difference between US$ 9,608,909,293 and US$ 3, 111,613,783 is US$ 6, 497, 295,510, a great loss to Ghana.

Even if Ghana had adopted PSA and opted for “Profit Oil” only without Royalties and Corporate Taxes, Ghana would have lifted 81,207,449 barrels valued US$ 7.662 billion in the first five (5) years.

The argument that we did not know the cost of exploration, development and production of Jubilee Fields is laughable. What Ghanaians do not know, but we know, from Day one (1) when the Jubilee partners entered the field to the last day in 30 years when the field is supposed to be exhausted under US$ 10 billion would be spent on the entire project. Approximately about US$ 6 billion for exploration and development of Phase -1 and Phase-2 and under US$ 4 billion as operating and technical cost would have been spent. However, from our analysis and computation, a net gross of US$ 12.868 billion was earned while Ghana, sovereign owners of the oil, earned US$ 3,111,613,783 – 19.40%.

This is the system the Ministry of Petroleum, Petroleum Commission, Energy Commission, GNPC and our representatives in Parliament say is good for Ghana even though they are aware, the Hybrid System would make Ghana earned less than 25% of total production revenue, and this ridiculous position is supported by ACEP, NRGI, CSO PLATFORM on Oil and Gas, IEA, IMANI,PIAC and others who are heavily funded by the World Bank, Oxfam America, Star Ghana, DFID and the Oil Companies through their so call Corporate Social Responsibility (CSR) to deceive and brainwash all sectors of the Ghanaian public to believe what Ghana is doing is the best and modern scheme. They are purely traitors to the interest of Ghanaians because of the pittance they are receiving and so their silence is not borne out of any superior knowledge but from the fact that they know they are in an indefensible position.

From the analysis above, you can all see for yourselves that the two systems cannot produce the same result within the Ghanaian context by any stretch of the data exception one indulges in fanciful fabrications as done by the “Honourable” Minister on behalf of his colleagues in the Energy Committee.

SOLOMON KWAWUKUME
(Senior Research Officer – GIGS)
Co-ordinator F-TOS-GH, PSA Campaign, Ghana