By Solomon Kwawukume


PETROLEUM EXPLORATION AND PRODUCTION LAW (2016) ACT 919

The Modern Conspiracy Against Ghanaians: The Need For Review And Intervention By The Supreme Court

‘’Imagine what Africa will look like when it has fully tapped into its potential‘,’ he said citing opportunities in agriculture, manufacturing and intra-African trade.

‘’But Africa and its partners will miss the opportunity to transform the lives of future as well as present generations if they carry on with business as usual....Tax avoidance and opaque business practices block Africa’s extractives sector too’’, said Mr. Kofi Annan. He was upbeat about prospects for Africa’s resource-rich countries, adding, ‘’Africa’s natural resources wealth rights belongs to the continent’s citizens, but these citizens are being robbed of its benefits by revenue diversion, corruption, jobless growth and rising inequality’," (Kofi Annan , Geneva, September, 2013).

Dr. Peter Eigen, the founder of Transparency International observed that the World Bank and Western Governments do not see anything wrong with the multinational companies engaged in extractive industries paying tens of millions of dollars into private accounts overseas to secure bad agreements, contracts and laws in their favor, (DW TV Journal Interview, 31st December, 2013).

In a Paper titled from "Concession to Service Contract" by Ernest E. Smith in Tulsa, Law Review Vol. 27, Issue 4, International Energy Law Symposium 1993, Modern Concession
(Hybrid System) Contracts are characterized and subject to undue influences and corruption. That is exactly what is happening in Ghana as stated categorically by Dr. Adam Amin, Executive Director of ACEP, in a presentation to the US Congress Sub-Committee on Africa, Global Health, Global Human Rights and International Organization, on 18th July, 2013. Reported Dr. Amin:

"...I have already mentioned the issue of bad deals in the oil and mining industries. Some of these bad deals have already been producing resources and the United States like other importing countries is consuming oil from some of these bad contracts. This places an important responsibility on the United States to lead by example in ensuring that oil and minerals from countries that promote questionable contracts tinted with corruption are not patronized...”

It is surprising, painful, sad and shameful the Parliament of Ghana, the Star of Africa, has passed an exploitative, predatory and obnoxious law, Act 919, to legalize corruption and perpetuate the robbery of Ghanaians of their sovereign wealth rights in the name of attracting investment, the very thing Mr. Kofi Annan had complained about.

Without mincing words, we know that the World Bank, Oxfam America and others were actively behind the passage of the Petroleum Exploration and Production Law (ACT 919) to rob Ghanaians of our oil wealth in the name of attracting investment in favour of Western vested interests and their local patrons.

We are not against investments nor do we think Ghanaians expect favours from any oil company. We believe that Ghanaians expect and stand for ethical investments governed by fairness and equity in sharing revenue from sovereign Ghana natural resources. That should be the basis of our national development and transformation that Kofi Annan highlights above.

OIL DISCOVERY

As is well known, before the discovery of oil and gas in Ghana, the nation had been blessed with a number of other extractive natural resources in the form of gold, diamond, bauxite, manganese and others. In respect of gold for example, it has been mined and have left the shores of Ghana for over 500 years. However, in terms of visible, concrete returns to the nation’s development as well as its socio-economic benefits, no one can dispute the fact that not much has been achieved. The evidence is visible for all to see. Take a trip to Obuasi and see whether Obuasi looks anything like Johannesburg, or whether Akwatia looks anything like Kimberley, South Africa.

Through providence, the discovery of oil and gas in commercial quantity has come at an opportune time when Ghana most needs injection and, indeed, a booster, into the nation’s general welfare and socio-economic development. The announcement of the discovery in 2007 sent expectations by Ghanaians high through the roofs all over the land. However, after 6 years, the general consensus of public opinion on the operations of the oil and gas industry in Ghana has so far been negative. The euphoria and expectation of the whole nation which greeted the announcement of the discovery has flattened to the grounds because of the current economic hardships and difficulties Ghanaians are facing.

After 6 years, Oil and Gas production in Ghana has not been a development, economic and social mobility multiplier for Ghanaians.

Upon careful study and coordination with several interested parties, we have taken issue with the oil contract regimes, the conditionality under which the oil companies are operating, and the fact that the expected oil revenue inflows to Ghanaians are not forthcoming as Ghanaians were made to believe and expect.

For example, before production begun, regional workshops were held in the 10 regional capitals soliciting views from Ghanaians as to how the first US$5 billion for the first 5 years would be spent. Six years down the line, Ghana is not yet close to earning US$4 billion but total silence surrounds this fiasco.

In fact, as at 30th September, 2016, Ghana had earned approximately US$3.320 billion, representing 19.76% of total oil revenue of US$16,803,359,555, far below the 42% ‘’minimum government take’’ recommended by the US Government Accountability Office (GAO). 42% is the least expected to accrue to the host country from total production revenue for allowing sovereign oil and gas resources to be exploited in partnership with foreign oil companies. Ghana earned US$9,302,806 from gas within the same period making a total of US$3,329,041,243.

How did Ghana reach this sorry state of affairs?

ROYALTY TAX/HYBRID SYSTEM

We have determined that the prevailing hybrid system under which the oil companies are operating in Ghana is the cause of this short-fall in oil revenues to Ghana and consequent abysmal situation from the perspective of Ghanaians.

GIGS and the Fair-Trade Oil Share-GH PSA/Campaign and their supporters long ago observed that the Royalty System was not in the best interest of the people of Ghana, for Jubilee Oil Field, if only for lack of use by wisely managed countries. Now, the Royalty System has been transformed into the so-called Hybrid System by Act 919, still not in the best interest of the people of Ghana. The Hybrid System is skewed towards collection of taxes due from the Foreign Oil Companies, a great impossibility, as noted by the Auditor-General.

PRODUCTION SHARING AGREEMENT

The framework for managing the Upstream Petroleum Industry in Ghana before the discovery of oil in commercial quantities was established and given legal backing by two main statutes, PNDC Law 64 which established GNPC and the Petroleum Exploration and Production Law, PNDC Law 84.

The basis of these two laws being Production Sharing Agreement (PSA), the laws were crafted and modeled to represent the most progressive, equitable and fair fiscal regime for sharing petroleum revenue in this 21st century between host government and the foreign oil company (contractor).

Records available at Oxford Institute of Energy Studies and Barrow Company Inc. indicated earlier agreements entered into by Ghana in the 1990’s based on these Laws were Production Sharing Agreements.

However, contrary to existing statutes, all agreements and contracts entered into by our Governments and approved by Parliament - our Law makers – from the 2000s have been modeled after the Royalty Tax/Hybrid System Laws which, needless to point out, were not in our statute books at the time those agreements and contracts were signed.

As such, the signed Royalty Tax/Hybrid System agreements and contracts therefore do not conform with the tenets of the two PNDC Laws. In our informed opinion, these agreements and contracts are illegal and ultra vires because they are at variance with the existing PNDC Laws, which were still on the books. The fact that Royalty Tax/Hybrid System contracts have been approved by Parliamentarians does not make them legal.

The Executive and Parliament have erred in law.

The passage of Act 919 is to give retrospective legal backing to these illegal agreements and contracts tinted with corruption as stated emphatically by Dr. Adam Amin in his message to the Sub-Committee of the US Congress on 18th July, 2013.

The practice of law and jurisprudence frown upon, abhor, and resist this illegal practice and conduct that puts Ghanaian citizens at enormous developmental disadvantage merely for the benefit of foreign oil companies and their political patrons in Ghana.

BENEFITS OF PRODUCTION SHARING AGREEMENT.

If Ghana had adopted the Production Sharing Agreement without participating which the PSA allows, Ghanaians, sovereign owners of the oil resources, would have earned US$9.608 billion as at 31st December, 2015, instead of the US$3.112 billion earned under the Hybrid System.

As at 30th September, 2016, Ghanaians should have earned US$10.103 billion representing 61% of total revenue accrued instead of the US$3.320 billion under the Hybrid system.

LOSSES FOR NOT ADOPTING PSA

As at 30th September, 2016, Ghanaians suffered a loss of US$6.784 billion in oil revenue alone under the Ghana Hybrid System, now consolidated by Act 919. Data on gas was not available in the public domain to enable any meaningful assessment. Ghanaians would be losing more revenue in the region of about US$7 billion plus more within the next five years under the Ghana Hybrid System. This would bring the total losses to over US$13 billion in 10 years, per our estimates, considering other projects are coming on stream (TEN, Sankofa, etc.).

REMEDIAL ACTIONS TAKEN

Having realized these shortcomings in the Hybrid System, the illegalities and the robbery of our natural resources in the name of attracting investments and long before the Jubilee Fields started production and before the passage of Act 919 on 4th August, 2016, GIGS and the Fair-Trade Oil Share PSA/Campaign supporters have drawn the attention of the Presidency and Parliament and the general public to these abysmal situations through several letters and petitions but no positive response. They went ahead and adopted the obnoxious Hybrid System which, in our estimation, is even worse than the best of the old Royalty or Concession System

We had drawn the attention of the Speaker of Parliament, Committee Leadership and all members of the House through periodic publications and petitions made available to them over the years but no positive response.

We have equally brought these to the notice and attention of the following: The Minister of Finance, officials of the Ministry of Petroleum, Petroleum Commission, the Council of State, The National House of Chiefs, the Steering Committee and the Governing Council of the Trades Union Congress, the Christian Council of Ghana, the Muslim Council of Ghana, the Catholic Bishops’ Conference, the Ghana Journalist Association, Asantehene, Ex-Presidents Rawlings and Kufuor and other State Institutions through publications, letters, organized workshops and lectures requesting all the above mentioned bodies and individuals for their interventions to no avail.

Lastly, GIGS and PSA Campaigners on three different occasions, 6th July, 2015, 15th July, 2015 in Parliament House and 20th February, 2016 at Aqua Safari at Ada made an in-depth presentation to the Select Committee on Mines and Energy, Petroleum Commission and Ministry of Petroleum to make them understand and appreciate the fact that the Hybrid System can never be superior to the PSA as they claimed and that the system would not be in the best interest of Ghanaians. We were told in the face that, notwithstanding our position and presentation the Select Committee would go ahead and recommend to Parliament the passage of the Ghana Hybrid System Law to our amazement. Just because some are getting 3-5% free shares in those contracts?

SUPREME COURT INTERVENTION AND SUPPORT

This very important national issue bordering on the economic survival, security and stability of our country Ghana, and having sought the intervention of all the above mentioned bodies and entities over the years to no avail, GIGS and the Fair-Trade Oil Share Campaigners have decided to seek review, adjudication, and intervention by the Supreme Court of Ghana.

We are therefore appealing through the medium of this article to all Ghanaians wherever they might be on this Planet Earth, who mean well and care about the economic prosperity, stability and security of their beloved country Ghana to stand up, join and support us to pursue this very important national issue on behalf of the present as well as future generation of Ghanaians yet unborn to save them from economic bondage and servitude our Governments and political leaders have plunged us into.

We are equally appealing and calling upon Nana Akufo-Addo, the President-elect, not to enter into any new Petroleum Agreements after assuming office on 7th January, 2017 under this exploitative and obnoxious Act 919 until a National Consensus is reached as to what Fiscal Regime or Arrangement Ghana should adopt to regulate the exploitation and production of our sovereign Ghana natural resources, the oil and gas.

The whole Upstream Oil Industry in Ghana needs a proper re-engineering and restructuring for the maximum benefit of Ghanaians. The present arrangement does not.

CONCLUSION

We conclude first with the following three quotations which vindicate and support our position.

First, we quote from Mr. Kwame Pianim’s exchanges with a supporter of the PSA Campaign, a Ghanaian who resides in the USA, which has reached our hands.

‘’Let us be clear, what my position is. I am for the introduction of PSA. The fact that the Ghana System has been under adjustment from the royalty based system to some hybrid system should be evidence enough that it is inferior to a properly structured and implemented PSA’’. (Mr. Kwame Pianim is a member of the Petroleum Commission).

‘’Ghana’s petroleum fiscal regime should be reformed to ensure maximum long-term revenue generation, even if the state is not fiscally dependent on oil revenue. The regime can also achieve greater take by increasing the state’s share in production share agreements.’’ (Sara Zedingle Ghebremusse, Faculty of Law Thesis, University of Toronto Canada, 2014).

‘’Unlike the concessionary system, where a sovereign nation often transfers its ownership of the resource to the licensee and mostly gets less than 25 percent of total revenue accrued, the PSA’s mostly vest ownership on the state and could give a country over 50 percent of the accrued money’’, (Mr. Ben Dagadu, Deputy Minister of Petroleum, Graphic Business of Tuesday March 8th-March 14, 2016).

BOTTOMLINE: Adopting PSA with additional revenue accruing to Ghana, Government would have a lot more additional resources to undertake the massive infrastructural development the country and its people need. Provision of portable water to every community, construction of all-weather motorable roads, provision of class rooms and educational facilities, affordable housing accommodations, extensions of health facilities, and all other things that would positively impact on the social wellbeing of the Ghanaian, reducing pressure on Government and administration themselves.

The time for our economic liberation is here and we MUST grasp it, instead of pawning present and future generations yet unborn in the name of attracting investment under questionable and clearly wrong notions.

We live in the midst of plenty as a Nation, but we have become a beggar Nation with a bowl in hand…….

Act 919 is a conspiracy hatched against the masses of Ghanaians from the corridors of Western Powers in collaboration with few Ghanaian elite technocrats and politicians. It is a 419 Royalty scheme to rob Ghanaians of their sovereign oil and gas wealth in the name of investment, that, like gold, diamonds and other minerals, will never materialize unless Ghanaians receive a Fair Share to begin with.

Senior Researcher Officer (GIGS)
National Coordinator (FTOS-GH)