A Risk Manager at TD Bank in Canada, and a Leader of the Ghana Environmental Advocacy Group, Madam Elizabeth Alluah Vaah, has suggested that Ghana cannot continue making excuses to “dish away” its oil and gas resources.
She noted that it’s not in the country’s interest to give ‘juicy offers’ to foreign oil companies in the form of incentives through the existing fiscal regime (hybrid system), and now the ongoing energy transition may be the next ‘excuse’.
This sentiment, according to her, emerged when the concessionary regime was in place, at the time the country first discovered oil, where petroleum agreements favored foreign oil companies. But the status quo remains even now, through the current fiscal regime, after ten years of commercial production of oil.
Through the test of time, the outcomes of these two fiscal regimes are evident; the country’s oil fields generated an estimated $31.2 billion from commercial oil production out of which $6.5 billion of the petroleum receipts accrued to the country (9.97% of 2020 GDP). The question is, could Ghana have achieved better outcomes, if another fiscal regime, and a more superior one was adopted?
Speaking to the Vaultz News, Madam Alluah Vaah alluded to section 2 subsection 2b of the PNDC Law 64 (1983), which is one of the key objectives of the GNPC, stating that, the NOC is to “ensure that Ghana obtains the greatest possible benefits from the development of its petroleum resources,” while also advocating for the adoption of the Production Sharing Agreement (PSA).
Based on analysis by the Centre for Natural Resource and Environmental Management (CRNEM), Ghana could have earned $13.982 billion at no cost to the country, out of $23.304 billion generated from the Jubilee oil field alone under the PSA regime for these ten years of commercial production of oil as against $4.735 billion under the current regime with cost, according to a document cited by the Vaultz News.
“…If we are not going to be able to make the case to get the most from it, we have no business touching this [oil and gas] resources. Look at what we’ve done with gold, we’ve ended up with worst environmental conditions, with no money. It’s going to cost us more to clear those rivers… we’ve left all over the country. It’s going to cost us more, more than 4-5 times whatever it is that we are earning from it (so then, ‘did we go or did we come’).
“We can’t just keep making excuses to dish away our resources like that. Pull up Production Sharing Agreement (PSA) that Uganda has, and you will ask yourself why can’t we think along those lines? We don’t have to just do this kneejerk things that [suggest that], we are transitioning so let’s go find investors and let them come and take this and then when they get something, they give something small to us. That is a losing mindset. That is the mindset of people who don’t know the value of what they’ve got.”Madam Elizabeth Alluah Vaah
Adopting the PSA Regime
Madam Alluah Vaah noted that, by adopting PSA, the country takes ownership of its resources, instead of the current hybrid system where the country’s oil resources are placed in the hands of these foreign oil companies. She explained that, with the PSA regime, “if we go [and] say when you come to this place ABCD, we have oil here. We don’t have the wherewithal to pull it out so you are coming in to take it out, you are going to take this percent, we are going to keep this percent for 5 years, and after that we will renegotiate. They will do the risk-return analysis… and if it makes sense for them they will come in, if it doesn’t make sense for them, they can go.
“But going to them and saying, come and exploit our resources and give us Royalties, give us a few cedis here, that is the sign of people who don’t know value for money, they don’t know the value of the resources that they’ve got and with such mindset we are better off leaving those resources in the ground because this exploitation comes with its own risks. The people that we have that are negotiating on behalf of Ghana either don’t know why they are doing it or they are not doing the right thing and we need to find out what exactly is not making them do the right thing…”Elizabeth Alluah Vaah
Considering the foregoing, Madam Alluah Vaah, criticized the “hastened” enactment of the Petroleum Production and Exploration ACT 2016 (ACT 919), which is backing the existing fiscal regime, while the then PNDC Law 64 and PNDC Law 84 which “had better things for Ghana” were abandoned.
“The CNREM, has been advocating, asking Ghanaian elites and Ghanaian leadership to take a look at PSA, take a look at the existing laws that they hurriedly overruled and they didn’t. They won’t even listen to them, and this is not just NPP, [both NDC and NPP], they won’t listen to them. Because, these oil companies had their own way of making sure that they won’t pay attention to what is in the best interest of Ghana.”Madam Elizabeth Alluah Vaah
Strategies to Adopt, Going Forward
Peeking into the future, she recommended that, there should be a reconsideration of the existing law and “think like owners, reshape the ACT 919, and make sure that we are looking at it from the angle of the PSA.” Apart from these, she admonished that, in terms of the benefits local communities receive from the exploitation of oil in their jurisdictions, “fairness and equity” should be at the fore of decision making regarding the management of oil revenues.
“Even with our mineral resources… we will make a good case that the 5% (that goes to the communities) is not enough, but then you say that, when it comes to oil and gas not even 0.1% will be earmarked for these communities, why? Because it is offshore? Really! That is the most unfair position that anybody who cares about Ghana and its citizens will take, it’s not right; it’s not right at all. We are telling fishermen don’t go [near oil rigs] and yet, we have in that PRMA that, if you are adversely affected, you can get compensated under the law… it’s very unfair.”Madam Elizabeth Alluah Vaah
Regards the National Oil Company, the environmental advocate, said: “GNPC has to know its role. They have to think big and leave the building of turfs and others to those organizations whose role it is to build them. They should focus on taking ownership stake in the resources and being owner-minded, making sure that Ghana incorporated gets the most from its resources.”
Going a step further to ensure that the status quo becomes bygone, Madam Alluah Vaah, is making an appeal to Ghanaians to demand accountability of the country’s oil resources. On her part, and that of her allies: “We are looking to get some legal review of all these [petroleum] agreements and make the case for these organizations and individuals who happen to be in a position to negotiate for the country to reconsider their mindset and how they go about things.”
This is great keep up,
May I know what stops the 10% benefits promised to the Nzema’s from the oil money.
Who is to follow up to ensure that, we the Nzema’s benefits from the oil and gas money ?
This is fantastic advocacy by Sister Lizzy. She’s spot.
Very apt to point to the mindset of those in charge of parcelling out Ghana’s oil and gas resources as the major problem. It’s not only an ingrained colonial mindset but they’re also awfully ignorant about oil fiscal regimes. In fact, shockingly and embarrassingly ignorant, considering the level of education they have. Masters and PhDs, they’ve them! I am writing as one of the key activists in CNREM and so know what I am writing about. The situation is actually very pathetic. I am still surprised when some mention cost in association with PSA, completely unaware that under PSA, the govt or NOC doesn’t need to invest too, except when it wants to take a bigger share in production, ie., take up the participating interest, beyond the standard 60% share the country automatically gets. The FOC does all the investment and gets its capital back in 4-5 years when oil is struck by lifting extra oil. Afterwards, everything is profit for them. Cost of operations is always paid for by lifting of extra oil.
Considering that the GNPC had done all the exploration, i.e., seismic surveys and even done test drills which struck huge amount of gas already, if it were Malaysia, they’d ask for more than the 83% share they take! Ghana should have got at least 70% for the Jubilee Fields under PSA instead of turning it into a cash cow for Kosmos, Tullow and the Ghanaians who fronted for them. After all, all that Kosmos did was to read the seismic data and in conjuction with the previous test drills information, point out where the next test drill should take place. It’s a pity none of the geologists GNPC trained up could do that! It wasn’t exactly rocket science to figure that the oil must be a bit deeper sea if the gas is closer to the shore. Is it?
All that talk about de-risking Ghana is just a hollow trope. After Jubilee, Ghana was a hot cake. In fact, even PNDCL 64 and 84 were formulated to give PSA models, not concessionary fiscal regimes. So it was illegal for Kufuor and the NPA to sign an agreement using concession, which doesn’t exist in under our laws. Parliament, especially the NDC opposition then, failed us and went on to fail us even more awfully with Act 919. They literally sold us down the river, as what we’re receiving is even far less than the 33% ex-slaves received as sharecroppers from their former masters in the US! And they didn’t own the land nor the inputs (capital) to farm the cotton fields, etc.
Btw, Nigerian oil is also offshore but all the states with oil offshore get 13% share of the govt take.
We must certainly revisit the obnoxious Act 919.