Six Years Of Oil Production In Ghana Under The Ghana Hybrid System

The sixth year of oil production in Ghana ended last December, 2016 and with the publication of the 4^th Quarter Petroleum Receipt and Distribution Report, we present to our fellow Ghanaians at home and abroad and the whole world our independent analysis of amounts as reported from the publications of the Ministry of Finance over the six years.

Our analysis is limited to the operational results in respect of volume of oil and gas produced and distributed between Ghana and the foreign oil companies (FOCs) for export and corporate taxes paid so far by the FOCs. Other incomes such as surface rentals and interests on Petroleum Holding Funds (PHF) in the reports have not been taken because they are insignificant. They account for only 0.01% of total revenue declared.

Below is a table of summary of the analysis of the Petroleum Receipts and Distribution Reports for the past six years.

Summary of Analysis of Six Years of Oil and Gas Production in Ghana

In 2016 a total of 28,947,968 barrel of oil were produced from Jubilee Field and TEN field which came on stream in the last quarter of 2016. Of this amount 2,850,000 barrels came from the TEN fields of which Ghana had no allocation. Out of the balance of 26,097,968 barrels from the Jubilee Field Ghana had 4,824,417 barrels representing 16.60% of total production of the 4^th Quarter of 2016.

The 2016 total of 28,947,968 barrels brought the cumulative six years total production to 198,483,054 barrels valued US$17,438,125,675 at the Moving Average Price of US$87.857 per barrel. Ghanaians, the sovereign owners of the oil resources, had a total of 32,942,181 barrels valued US$2,894,213,645 representing 16.50% of total Production Revenue and with Corporate Taxes of US$471,076,138 added brought the total cumulative earnings from oil excluding gas to US$3,365,209,783 representing 19.29% of total production revenue from oil far below the 42% Minimum Government Take set and recommended by the US (GAO). Gas proceeds amounted to US$9,856,621 over the period which added up to US$3,375,066,404 as total proceeds from oil and gas in the six years.

The foreign oil companies on the other hand had a net gross of 165,540,873 barrels valued US$ 14,972,915,892 representing 80.71% of total production revenue from oil. Information on gas lifting by FOCs are not available to the public therefore we are unable to compute their earnings on gas.

Note: The capital development cost and daily operating and technical costs of Jubilee Fields for 26 year is about US$10 billion. Ghana is contributing US$2 billion of this amount in 15 years.

This is the fraudulent and robbery situation in the name of investment the new Petroleum Exploration and Production Law Act 919 (2016) has come to protect and consolidate.

And yet, Ghanaians are being told at roof tops that their interests as sovereign owners are well protected by the Act 919 by past and current Ministers of Mines and Energy, Petroleum Commission, Energy Commission, GNPC and supported by ACEP, IMANI Ghana, IEA, PIAC, CEPA, ISODEC, CSO Platform on Oil and Gas and other NGO’s well-funded and resourced by the World Bank, DFID, Star Ghana, NRGI (formerly Revenue Watch Institute), OXFAM America and the oil companies through the so called Corporate Social Responsibility (CSR). What is the motive behind the almost US$900 million spent by these foreign agencies and the oil companies as free gifts to some Ghanaians, NGOs and governmental bodies?

If Ghana had adopted the world standard norm, the Production Sharing Agreement (PSA), which PNDC Laws 64 and 84 support and without participating in the project with no cost to incur and depending upon the terms of the agreement, Ghana could have earned one of the following: Note: Participation is optional under PSA.

1. Profit Oil only

If under the PSA Ghana opts to take Profit Oil only without Royalty and Taxes which is an incentive to investment, Ghana could have earned as much as US$8,317,985,985,947 representing 47.70% of total production revenue during the period of 6 years.

2. Royalty + Profit Oil

Under the second option whereby Ghana opts for Royalty and Profit Oil without payment of Corporate Taxes, Ghana could have earned US$8,666,748,480 representing 49.70% of total production revenue over the period.

Though Options 1 and 2 would have seriously breached PNDC Law 84, Ghana is better placed under the PSA than under the Hybrid System.

3. Royalty +Profit Oil + Corporate Taxes

Under the third option which conforms and falls in line with the terms in PNDC Law 84, Ghana could have earned US$10,462,875,405 representing 60% of total production revenue.

The above expected earnings under the PSA fall within the Minimum Government Take range of 42%-60% of total production revenue that a host government is entitled to, set by the US Government Accountability office (GAO), for allowing its oil resources to be exploited under any oil contract.

The cumulative total losses to Ghana as at the end of 2016 is US$7,097,665,662 for not adopting PSA.

The above benefits of adopting PSA, we have demonstrated at our three meetings with

Petroleum Commission, Ministry of Mines and Energy, Energy Commission, Select Committee of Parliament for Mines and Energy and other stakeholders, but our advice was ignored.

Before the Appointment Vetting Committee of Parliament, Dr. Mohammed Amin Adam (Anta) while being interviewed for the post of Deputy Minister of Mines and Energy told the whole world that there is now a convergence between the Royalty Tax System and the Production Sharing Agreement, and the Hybrid System which Ghana has adopted is superior to the PSA, because the fiscal terms cut across each other without any scientific and empirical evidence yet Parliamentarians believed him.

We have serious integrity problem with the Parliament of Ghana over the years. Parliament of Ghana, we have discovered, is part of an international conspiracy to deny Ghanaians a fair share of their sovereign property in the name of attracting investment for the oil lobby money that undoubtedly comes their way.

With the above analysis, Ghanaians should now judge for themselves whether the Ghana Hybrid System is a superior and better fiscal regime than PSA to adopt and whether the Deputy Minister of Mines and Energy has been truthful and honest with Ghanaians all this time.

Equally, are the officials of the Petroleum Commission, Energy Commission, GNPC, Ministry of Mines and Energy and our political leaders truthful and honest in their handling of the Upstream Oil Industry? We have no hesitation in answering with a resounding BIG NO! What about you, fellow Ghanaians?

We challenge the Ministry of Mines and Energy, Petroleum Commission, Energy Commission and their supporters to name countries in Africa that have adopted the Hybrid System and they are doing better than countries that have adopted Production Sharing Agreement. We also challenge them to prove us wrong.

In the meantime, we have brought this bizarre situation to the notice of the present government of President Nana Akufo Addo and the members of the Council of State - the Wise Counselors of Ghana, and other Stakeholders. We are yet to receive any response from the President, however we had the opportunity to make a presentation to the Council of State on 22^nd March, 2017. We are awaiting further concrete response from them.

Meanwhile, we are preparing to take our case to the Supreme Court for arbitration, since we have no doubt that the Executive and Parliament have conspired to breach existing laws and acted irresponsibly to bring colossal financial loss to the people of Ghana. We plead with all well-meaning patriots to join us in this quest to reclaim our birth right from the clutches of our exploiters posing as benevolent investors, with the active support of traitors posing as our leaders.

Solomon Kwawukume
Senior Research Officer – GIGS
National Coordinator FTOS-GH PSA Campaign