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Mixed reactions greet first PIAC Report

  • SOURCE: | qwesa2big
  • Chairman dragged to court

    The Public Interest and Accountability Committee (PIAC), an additional public oversight in the management of Ghana’s petroleum revenues, created by the Ghana Petroleum Revenue Management ( Act 2011), and whose membership is drawn exclusively from identifiable civil society groups in Ghana, published its first annual report on petroleum revenue management (for 2011) in May this year.

    Public reaction to the report has so far been mixed. While it has been praised by individuals and civil society groups for its scope and depth, some industry players have demonstrated outright hostility towards the Committee’s report. The Saltpond Offshore Oil Company, operators of Saltpond Oil fields, threatened and subsequently went ahead to sue the Chairman of the PIAC, Major Daniel Sowa Ablorh-Quarcoo, over some comments he made about the company’s obligations to the state.

    The Chairman had granted interviews to the media, explaining that some of the gaps identified by the Committee’s report, including its finding that both surface rental payments and receipts from the Saltpond oil field, which produces around 700 barrels per day, had not been captured in oil receipts. In other words, the Committee found no evidence of lodgment of these receipts into the Petroleum Holding Fund.

    In general, the PIAC report compares oil revenue projections from 2011 against actual receipts. It also considered the roles assigned to the different institutions within the new petroleum law, and offers a critique of the 2012 projections.

    Despite earlier assurances by the Ministry of Finance and Economic Planning that the Committee?s report will be accorded serious and immediate attention, Resource Watch Agenda can confirm that the report is yet to be given full attention, including taking action on the numerous recommendations.

    Below, we recap the key findings of the report:

    •Ghana lifted 3.9 million barrels of oil, representing royalty payments, carried and participating interest

    •Total revenues from the sale of liftings came to $444 million, of which 47% was transferred to the national oil company

    •Ghana budget received $164 million in contribution from petroleum revenues, 70% of which was allocated to capital expenditure projects (roads, agricultural modernisation, gas infrastructure & capacity building).

    •Ghana saved $69 million from oil revenues in 2011. This is split between a shorter term Stabilisation fund and a longer term Heritage Fund

    •Ghana revenues in 2011 only came to 53% of amount projected, principally due to non-collection of projected corporate taxes.

    •Projections for 2012 revenues lower than for 2011 and still include corporate taxes, widely accepted to be non-forthcoming
    •The forecasting methodology for petroleum revenue as specified in the Act 815 was not strictly complied with. This was reportedly due to the lack of historical price data on Jubilee crude oil, the failure of Ministry of Finance and Economic Planning to consider the advice of the Ghana Revenue Authority the tax-paying position of the oil companies and the lack of certification in line with established international practice. As a result, there were wide disparities in oil receipts for 2011 between the forecast and the outturn; and the Committee notes this precedent could be exploited to over-estimate the Benchmark Revenue to justify higher allocations to the Annual Budget Funding Amount.

    •Ghana’s lifting of crude oil was consistent with the Petroleum Agreements reflecting a royalty of 5% of gross production and a carried and participating interest of 13.75% of net production for the Jubilee Field. Lifting of crude oil in 2011 however spilled-over into 2012 in accumulated stocks of 649,138 barrels of oil, representing 2% of total production due to Ghana for 2011. This led to revenue overspill of US$74,463,275.

    •Not all payments expected to go into the Ghana Petroleum Holding Fund were reported on. Act 815 covers all oil receipts and Section 6 of Act 815 lists surface rentals explicitly. The surface rentals were paid into Government of Ghana Non-Tax Revenue Account in 2011 and not accounted for in the Petroleum Holding Fund, nor were payments from the Saltpond field included.

    •The selection of the priority sectors for spending of the ABFA was guided by the Ghana Shared Growth and Development Agenda, a medium term development framework which puts greater emphasis on road infrastructure and agricultural modernisation. The Minister therefore complied with sections 18(2) and 21(2) d of Act 815. However, this was not aligned to a long-term national development plan, as required under Act 815 because of the absence of such a long- term plan.

    •The report also suggested ways of resolving the challenges it had enumerated. These, as captured in the recommendations section, are:

    • The law should be followed in projecting revenues, since this key step affects amounts to be spent and saved. They also called for completion of a national development plan, since capital expenditures are based on a medium term plan- whilst this is not in contravention with the law, it does not guarantee the best long term decisions.

    • MOFEP must use the methodology for determining the Benchmark Revenue set out in the law, involving all relevant institutions, and ensure the assumptions are certified by a reputable independent expert appointed in accordance with the Public Procurement Act, 2003 (Act 663). This will avoid the likelihood of distortions in establishing the Benchmark Revenue and deriving the Annual Budget Funding Amount.

    • MOFEP should take steps to account for the 2011 unaccounted proceeds in the Petroleum Holding Fund in a special report to Parliament and ensure that all receipts are reported on in future.

    •Government must expedite the process for the development of a nationally owned long-term development plan in line with the provisions of Act 815 to guide the productive and efficient utilisation of petroleum revenues for national development.

    • In the interest of public accountability and transparency, GNPC must publish an interim report on the utilisation of the funds it received as part of the appropriation of petroleum revenues in 2011 pending the release of its annual report and audited financial statements.

    • The Minister of Finance and Economic Planning must sign the Operational Management Agreement with the Bank of Ghana as soon as possible.

    vii. Government must provide the necessary resources for all institutions with responsibilities under Act 815 and ensure that they have the required capacity to carry out their responsibilities effectively.

    Public Agenda

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