Even before the eggs are hatched, Ghana is already counting its chickens. Or is it a case of building castles in the air?
As a result of a strong conviction that there is approximately 2 billion barrels of crude oil of the highest grade hidden in the deep seas of Cape Three Points in the Western region, there has been a renewed hope for the Ghanaian economy.
It is a renewed hope in the sense that some leading analysts have commented that Ghana should be able to withstand the global economic shocks because of the oil find. Oil revenue is expected to flow when commercial quantities of the commodity hit the market in 2010.
Kosmos Energy, the renowned Texas based oil exploration company and Tullow of Britain, last year announced the discovery of the “Black Gold”, an announcement which threw the entire nation, particularly the government, into frenzy.
Perhaps, the euphoria that greeted the find is also clear indication of how “money” hungry the country and its people are. Possibly the enthusiasm could be due to the fact that as a nation, Ghana does not want to be the begging type.
The oil revenue therefore provides that cushion, according to government officials. President Kufuor once declared that “Our country would not become a beggar in the energy sector anymore”.
With the oil announcement, political parties in Ghana are using the expected revenues in about two years' time to plan their budgets, and the various kinds of projects they intend to undertake with the proceeds when in power.
They have already conceded that the find will not be a curse but a blessing, and this is obviously a refreshing expectation.
However, in spite of this spectacle, what really is Ghana's share in the find? This is a question that appears to have eluded many.
Many people have not considered the actual income the country may derive from the find and continue to excite themselves about the find and the gross proceeds in oil sales, and what it will do for the country.
Petroleum operations in the country are governed by the Production and Exploration Law of 1984 which regulates the petroleum sector.
The law provides for only 10 per cent equity share, that is petroleum share for Ghana in the event of the discovery of oil in commercial quantities by an oil exploration company, in this case, Kosmos and Tullow.
The law empowers the Ghana National Petroleum Corporation (GNPC) to open acreages on its own or in association with other foreign partners or operators. Again, the general terms of a fiscal package negotiated and agreed with the parties in the event of a commercial discovery are as follows;
1. Royalties in respect of oil and gas are 12.5% cent and 7.5 per cent respectively
2. Carried interest of the GNPC is 10 per cent
3. GNPC's additional interest is 10 per cent, but subject to reimbursement of GNPC to contractor for its proportionate share of it participating interest.
Other advantageous terms of the contracts include;
1. No front payments such as signature or production bonuses
2. Negotiable royalties
3. Income tax (presently at 35 per cent)
4. Cost recovery concession
5. Low rental payments
6. Generous repatriation of funds and
7. Import duty exemption on exploration and production equipment and materials.
The exploration companies, for instance, Kosmos tells us that it spends more than US$700,000 a day in its exploration activities offshore, an amount which the government cannot afford now and, therefore, can only allow the exploration companies to fund the exploration.
This, of course, looking at the dynamics is a step in the right direction by the government.
What therefore needs to be considered now is Ghana's stake in the entire oil reserves, which is expected to last for more than 30 years when production finally commences.
At the maiden National Forum on Oil and Gas Development in Accra at GIMPA from February 25-26 this year, the issue of Ghana's share in the entire process came up strongly.
When he took his turn at the presentations forum, the head of the GNPC enumerated all what Ghana stood to gain from the find. Generally, the impression among participants was that what the country stands to gain from the find was not enough.
Cocoa and gold are the two major sources of foreign income to the country and they are those that have helped sustain the economy for several decades.
In the case of gold for instance, although the resource is mined in the country with its negative effects on the communities in which the mining companies operate, what Ghana gets in terms of its share seem paltry.
It is for this reason that the country is not even excited about the recent high rise in the commodity on the international market, when oil was burning the world's economies with it record high prices.
Ghana should learn from the gold experience and ensure handsome windfall from oil revenue. The call for a review of the present fiscal regime in the upstream sector in the dawn of this new era of discovery of oil in Ghana is not out of place.
There should be greater attention paid to the regulatory, contractual and fiscal framework of the petroleum industry before it is too late.
In doing this, the nation (government and citizens alike) should work hard together to ensure that the blessing of oil is felt by all and not only the privileged few.
By Charles Benoni Okine