One Year Of Jubilee Fields Operation: How Did Ghana Fare?

The stark realities of producing oil in today's world under the Royalty Tax System should now be stirring glaringly in the face of our leaders with the publication of the fourth quarter of the 2011 Petroleum Receipts and Distribution Report in the Daily Graphic of 17th February, 2012. For a better and proper understanding and appreciation of the discourse below, here is a reproduction of the Report in table.

The fourth quarter report indicated that 6,886,552 barrels of oil were lifted and Ghana's share was 949,469 representing 13.79%. There was a drop of 110,410 barrels from the third quarter. However, there were increases of 2,258,851 and 916,315 barrels over the first and second quarters respectively and yet Ghana's share in the fourth quarter was the lowest. The overall total output for the first year of operation was 24,451,452 barrels. Ghana's share made up of royalties, carried and participation interests was 3,930,189 barrels representing 16.08%. The implication is that 83.92% of the oil produced or revenue went to British and American operators, the same direction revenue from our gold and other minerals go.

They have even refused to pay taxes because they claimed they have made losses and were carrying over the losses into the second year of operation. The British Foreign Services had to step in in defense of Tullow, the major operator, with a follow up by a visit of Princess Anne the Queen's daughter to Tullow's oil facility offshore. Even Ghanaian professionals were hired to defend them through the print and radio media. How could they declare losses when total gross sales of US$2,257 billion in the first year of operation yielded over 60% returns on total capital investment of US$3.5 billion, based on gross sales of 20,521,263 barrels at US$110.00? Which progressive country producing oil in today's world is letting foreigners take over 80% of the oil revenue away in the name of investment?

Ghanaians are their own enemies. At the Annual New Year School at the University of Ghana, when I tried to draw the attention of Hon. Moses Asaga and the participants to the fact that the Royalty Tax System was not going to make us derive the maximum benefits from our oil resources, I was jeered at. I was confronted by a gentleman from Obuasi (name withheld) for embarrassing and antagonizing Mr. Moses Asaga with the pertinent questions I put to him. I have since then sent him a mail to render my apology, if indeed I did as alleged. But, my questions remain, as I have not had a single rebuttal of my claims from either official or unofficial sources so far.

On the closing day, I was approached by another gentleman who informed me that I was perceived to be a sponsored opposition participant, to my surprise and dismay, because of the questioned I put to Hon. Moses Asaga. Ghanaians are not aware that they are ruining this country by political colourisation of every national issue. Oil and Gas matters are not NDC or NPP issues, but Ghana matters, therefore NDC and NPP and other parties would have to wear the same knickers to handle it for the maximum benefit of all Ghanaians; not only a few as is happening now.

As stated in my last article on the same issue, not only the formula for computation of fiscal benefits to the state has been manipulated and ignored. I have also observed that a serious manipulation mechanism has been put in place to make sure Ghana does not earn more than a certain level of predetermined income, using the pricing mechanism of the post-dated price of US$ 60 per barrel and the current market price which is above US$ 100.00. What is happening is, Ghana is being allocated that volume of oil if sold at the current market price that projected income would be realized. Therefore, the increases in the volume of production is not being considered and reflected in Ghana's share. For example, royalty of 5% of 24,451,452 is equal to 1,222,572 barrels. However, if you took the total royalty of US$122,941,143 earned and divided it by US$110 the result is 1,117,646 barrels a shortfall of 104,925 barrels. This represents 4.57% royalty paid instead of 5%. In all a total of 6,388,323 barrels was denied Ghana. The breakdowns are tax equivalent of 5,428,222 barrels, carried and participation interests 855,176 barrels, and royalties of 104,925 barrels.

I arrived at this conclusion and analysis using the effective percentage share of 42.20% of the revenue the Advisor to the Minister of Finance declared on 21st March, 2010 at the Accra International Conference Centre that will accrue to Ghana yearly.

Jubilee Field at the post-dated price of US$ 60.00 per barrel is worth US$108 billion and at December 2010, closing price of US$ 85.00 was worth US$ 153 billion. Ghanaians should we be contended with only US$20 billion projected for 20 years by the World Bank which is likely to elude us in the face of these manipulations?

If we were operating under Production Sharing Agreement and applying the data provided on 10th July 2008 by GNPC, the result would have been different. The foreign oil companies would be entitled to 14,270,080 barrels made up of 7,482,500 for capital recovery and production cost and 6,787,580 as profit oil. Ghana would have 10,181,371 barrels as profit oil only. Royalty has not been considered in the calculation. Clearly, Ghana is making huge gargantuan losses which make all the questionable judgment debts paid so far, as a result of the flawed decisions of our leaders, pale into insignificance!

Ghana's share of 3,930,189 barrels worth US$444,125,723, which was under 2 months of the country's oil requirement of about 2,015,000 barrels per month, could have had value added to it to generate additional income rather than exporting it. The policy of becoming net exporter of crude oil is not in the best interest of the country and dates back to outmoded pre-1960 mentality. The claim that the facilities at Tema Oil Refinery cannot refine the oil is not supportable, because Ghana's oil is almost equivalent to Brent Crude in quality, and very cheap to refine into aviation fuel to meet the increasing demand from the airlines. Aviation fuel and ship bunkerages are equally paid in foreign exchange.

Ghanaians, wake up from your slumber! Open your eyes, as our oil and gas resources are being fraudulently and unfairly exploited in the name of foreign investment.

Are our political leaders and technocrats aware that they are simply watering the tree of continual backwardness and poverty of our dear country planted a long time ago, instead of taking bold decisive steps to uproot this tree for the sake of posterity? The consequences may lead to implosion when the very few flaunt around their new found wealth. This is how it all started elsewhere. Let us rally to nip this hideous parasitic outgrowth in the bud before we have our second round of economic refugees a decade or so later when the stark realities hit the masses.

The writer, a retired accountant is a social commentator and activist. He is author of the book “Ghana's Oil and Gas Discoveries: Towards Full Maximum Benefits,” Printer Excell Limited, P.O. Box NT272, New-Town, Accra. On sales at Methodist Book Depot, Accra and some selected venues. Copies can be procured directly from him.

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