Ghana must adopt Production Sharing Agreement for oil revenue – GIGS

By Edmund Smith-Asante, ACCRA

 A Senior Research Fellow at the Ghana Institute of Governance and Security (GIGS), Mr Solomon Kwawukume, has strongly advocated that Ghana must adopt the Production Sharing Agreement (PSA) system to stem the massive loss of oil revenue to the state.

At a press conference yesterday, he said, “Information and data available to us indicate that Ghana could earn between US$60 billion and US$80 billion from the Jubilee Field adopting the Production Sharing Agreement, as against the US$20.269 billion and US$19.390 billion estimated by IMF and the World Bank respectively under the current prevailing system – the Modern Concession.”

The press conference was held by GIGS on the 2014 Petroleum Exploration and Production Bill that is currently before Parliament.

Loss to the state

According to Mr Kwawukume, Ghana earned total oil revenue of US$2.557 billion out of US$12.510 billion as of September 30, 2014, which represented 20.50 per cent, far below the international standard of 42 per cent to 60 per cent “Minimum Government Take” set by the United States’ Government Accountability Office (GAO).

Foreign oil companies made US$9.953 billion in revenue, while Ghana lost over US$3 billion under the Modern Concession system as of September 30, 2014, he said.

He noted that Ghana’s abysmal performance in oil revenue was due to its employment of the Modern Concession system, which the draft Petroleum Exploration and Production Bill currently before Parliament sought to consolidate into law.

“Ghana’s adoption of the Modern Concession system  would make it difficult for her to derive the full maximum benefits from the oil and gas resources if the bill is passed into law.

“We believe the introduction and application of pure Production Sharing Agreement would be in the best national interest,” he said, adding that the PSA would have earned the country between US$5 billion and US$6 billion by September 30, 2014.

Mr Kwawukume said the Modern Concession system was subject to undue influences and corruption and, therefore, called on public interest lawyers to test the sanctity of oil agreements and contracts at the Supreme Court in the interest of the country.

Withdrawal of bill

He appealed to President John Mahama to withdraw the bill as a matter of urgency and invite independent international experts to review the draft bill to reflect PSA fiscal provisions, in order to achieve maximum benefits from the country’s oil and gas resources.

Mr Kwawukume said all the oil and gas agreements and contracts approved by Parliament were modelled to suit the Modern Concession laws, which were not in the statute books when they were being signed and were, therefore, unconstitutional.

“These agreements and contracts are not compatible and in conformity with the tenets of the existing laws governing the upstream oil industry. They are, therefore, unconstitutional, illegal and ultra vires,” he stated.

The GIGS senior research fellow called on various groupings such as the National House of Chiefs, National Peace Council, National Union of Ghana Students (NUGS), the Association of Ghana Industries among many other bodies to impress on the President to withdraw the bill, because its passage would amount to complete eternal economic and modern-day slavery.

The Executive Director of GIGS, Mr David Agbee, said the institute had presented memoranda to Parliament on the current bill’s inadequacies and presented their concerns on the losses in oil revenue being incurred by the country to the government several times for a withdrawal but they had still not seen any change. 

Writer’s email: edmund.asante@graphic.com.gh 

This story was first published by the Daily Graphic on January 28, 2015