NPP Must Come Clean On Oil – CPP

The CPP marked Republic Day, the day that above all else signifies Ghana’s Sovereignty as a nation, with a call to the current rulers of our Republic, the NPP Government to be alive to its duty and be transparent with Ghanaians on the Oil find in Ghana, who owns what?, what contracts has been signed with foreign companies?, and the actual financial gain that will accrue to Ghana. Mr. Kwame Amporfo Twumasi, Deputy Minister for Energy confirmed recently that, data indicates oil finds in Ghana by the Russians as far back as the CPP Government of the 1960’s.

The questions many are asking is why Oil companies have waited for decades before finally getting involved in Ghana. Many have hinted at charitable contracts handed to them by the NPP Government, and thus it is worth exploring the facts surrounding Oil in our country and who gains.

NPP TIMIDITY

When the Ghana National Petroleum Company (GNPC) handed seismic data to Kosmos ?????, Mr Manner from Kosmos reportedly said, “We are very excited about the size and nature of the seismic data available," and indeed the quality and richness of the 3D seismic Data, compelled Kosmos to sign an exploration agreement with Ghana in three months, a record time for oil contract negotiations, when compared to three and a half year oil contract negotiations between Oil Companies and Azerbaijan.

The Azerbaijani example involved feasibility study and draft contract in six months, signing of several memoranda of mutual understanding, Azerbaijani expert analysis of terms of the future contract, and clarification from the foreign oil companies, at the end of which Azerbaijan stood to get nearly 80 per cent of all the oil profit on completion.

The Republic of Ghana’s deal has 10% concession, 5% royalties and 35% corporate tax. The 35% tax is governed by the Minerals and Mining Law, 1986 (PNDCL 153). This was a reduction from the 45% General Mining Corporate Tax rate of 45% by Act 475.

The Corporate tax has since been reduced further by the NPP Government to 25%. Article 22 of the Minerals and Mining Law 1986, which also governs oil, mining companies were required to pay no less than 3% and, depending upon their profitability , up to 12% of their gross revenues as royalties, in line with IMF proposals. The question the CPP wants to ask is why the NPP has tamely accepted the 5% royalty tabled by the oil companies.

Indeed the NPP has gone further and under Article 25 of the Minerals and Mining Act, 2006; ACT 703, amended the royalty rate to, not above 6% and not below 3%. - Why reduce the top rate of 12% royalty to 6%

We hope the NPP government realises that the corporate tax is subject to abuse as the oil companies apply accounting trickery, and the use of offshore accounts to avoid paying the appropriate level of tax, and should thus have negotiated a better royalty terms as royalty payments are less subject to false accounting, paid at source and easy to collect.

The stable political climate and democracy fought for by all Ghanaians, coupled with the light and high grade West African oil should have been the bargaining chip for at least the median of between 7 to 8% royalty against the higher 12% rate, instead of the timid acceptance of this below average 5% rate. The NPP showed similar timidity under a stability agreement when it granted gold companies AngloGold Ashanti and Newmont, the very minimum of 3% royalty allowed by the Mining Law.

The importance of royalties, is shown by the fact that out of the 122.8 Billion Cedis of total mining benefit received by the Ghana Government from January 2004 to June 2004, 109.3 Billion Cedis - 89% came from royalties as opposed to 3.08 Billion Cedis- a paltry 3% - contributed by corporate tax payments. Half of the 20% royalties that goes into the Minerals Development Fund goes to the Office of the Administrator of Stool Lands. They in turn retain 10% of that and distributes 90% to local authorities for intended use in repairing environmental damage and development projects in the mining communities. Although, fishing communities in the Cape three points area have been barred from fishing offshore, they and the chiefs have been kept in the dark over royalties. This is the beginning of what has gone wrong in the Niger Delta region – the heart of the Nigerian Oil Industry.

TRANSPARENCY

After a protracted period of dithering the NPP finally signed the Extractive Industries Transparency Initiative (EITI). This would seem to be an empty gesture on r transparency, the NPP, has secretly agreed with AngloGold Ashanti to hold between 60% and 80% of its earnings in offshore accounts, thus avoiding tax, under the terms of the stability agreement. This is on the back of the massive capital flight from Ghana and Africa . The African Union reported recently that at least $148 billion is lost to Africa illegally every year due to offshore tax havens. Falsified transfer pricing by multinationals is reportedly costing Africa $10 billion to $11 billion annually. Conservative estimates, suggest that Africa 's political elites hold between $700 billion and $800 billion in offshore accounts.

We need to avoid in Ghana the situation which has been reported recently that the Nigeria National Petroleum Corporation, NNPC connived with dodgy operators to under-report the quantity of oil the country produces and exports everyday. There was smuggling of large quantities of the highly sought after, blue ribbon of oil, Forcadoes Condensate, to Cameroon and, which was then sold at charitable prices, as low as of $5 per barrel . It is estimated that Nigeria lost over $60 Billion in about eight years, in deals. Prominent in this dodgy trade is the company Gencore, owned by the American, Marc Rich, a billionaire who fled the United States in 1983 just before he was indicted for tax evasion and racketeering, Marc Rich’s Gencore has been licensed to operate Ghana National Petroleum Corporation's 30,000 barrels per day of oil. This man whose indictment (by a U.S. federal grand jury on more than 50 counts of wire fraud, racketeering, and tax evasion) could have landed him 300 years in jail, will be in business in Ghana !!.

Of 37 oil, gas and mining companies that have joined the EITI only three.Royal Dutch Shell, Chevron and StatoilHydro, operate in West Africa. None of the oil companies operating in Ghana have joined the EITI.

NPP NOT LEARNING LESSONS

The NPP does not seem to learn any lessons from the past. Turning to Norway for oil lessons after signing contracts, is a classic case of closing the stable door, long after the horse has bolted. These lessons should have preceded the contract signing. Executive Secretary of Transparency International’s local chapter, Vitus Azim’s advice for the adoption of the Transparent and Independent Oil Fund, based on the “Norway Model” to manage oil revenue has been rejected by the NPP. “We need to keep an eagle eye on the contracts we are signing with the oil companies,” said Vitus Azim.

The NPP Government signing of the Extractive Industries Transparency Initiative (EITI) remains an empty gesture as it continues to reject legitimate concerns of Executive Vitus Azim. on bogus oil contracts, the need to follow the “ Norway model” oil fund based on the principles of transparency and independence in oil revenue management.

The question we should all be asking the NPP and Nana Akuffo-Addo is can we trust them with Ghana’s Oil.

Communications Directorate – www.cppuk.org

info@cppuk.org

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