GHANA’S OIL AND GAS INDUSTRY
Management of Oil Revenue:
How Can Northern Ghana Benefit?
by
Sulemana Stevenson, PhD.
(Development Consultant)
Overview of Ghana’s
Oil & Gas Discovery
and Expected Revenues
Overview of Ghana’s Oil & Gas Discovery
• Oil and Gas exploration in Ghana began in
the early 1970’s, with occasional reports on
discoveries from 1970 to late 1990’s.
• Various exploration teams and companies
had identified and mapped out basins with
rich potential in oil and gas.
• It was however not until in the early 2000’s
that definite and clear discoveries were
made.
• The discoveries have been welcomed and
hailed by Ghana and its development
partners as “very welcome news for the
economy of Ghana”
Some Commonly Used Terms
• Upstream – refers to all operations involving
exploration, drilling, crude oil production,
shipping, etc.
• Downstream – refers to all operations related to
refining, storage and distribution of petroleum
products to the final consumer
• Oil Revenues – refers to money paid to the
State by oil exploration and production
companies as various categories of taxes,
royalties, fees, etc. for production and
exportation of crude oil.
• Oil Taxes: Currently Ghana’s Oil Revenue is
only from taxes levied on petroleum products
and paid by consumers (Ghanaians)
Legal and Institutional
Frameworks
• In Ghana petroleum operations are
governed by the Petroleum Law of 1984
which
empowers
Ghana
National
Petroleum Corporation (GNPC) to operate
in all open acreage of the country on its
own or in association with foreign partners.
• The basic contract between the State, the
GNPC and the private companies is the
Production Sharing Agreement.
Legal and Institutional
Frameworks
• The legal framework governing Petroleum
exploration and production is being reviewed to
create a very competitive business environment
for investment in Ghana over others in the subregion and the international oil industry
• The legal framework governing Petroleum
exploration and production is being reviewed to
create a very competitive business environment
for investment in Ghana over others in the subregion and the international oil industry
Legal and Institutional
Frameworks
•
•
•
•
•
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Advantageous terms of the contract with Oil
Exploration companies include:
No front end payments such as signature or
production bonuses;
negotiable royalties and income tax (currently at
35%);
no limit on cost recovery,
low rental payments,
no restrictions on the repatriation of funds, and
no import duties on exploration and production
equipment and materials.
Ghana’s Offshore Oil Basins and
Drilling Prospects
Ghana’s Offshore Oil Basins
Ghana has five sedimentary basins
1. Offshore Tano Basin (West, North and South
Tano)
2. Offshore Saltpond Basin
3. Offshore Accra/Keta Basin,
4. Inland Voltaian Basin,
5. Offshore Cape Three Points Basin (East,&
West)
Ghana’s Oil & Gas Drilling Prospects
•
•
•
•
•
•
Field
Saltpond
C. T. Points
South Tano
3-AX block
North Tano
West Tano-1
Basin
Saltpond
C. T. Points
Tano
Tano
Tano
Tano
Year
1970
1973
1978
1979
1980
2000
Fluid type
Oil & Gas
Gas
Oil & Gas
Gas
Gas
Oil
Current Operations
• Devon Energy Gh. Ltd: Offshore Keta
Basin - Jul 2006
• Vanco Ghana Ltd: DeepW Cape 3-Points Aug 2002
• Kosmos Energy Gh. HC, Anadarko
Petroleum Energy and Tullow Gh.
Ltd.: West Cape 3-Points - July 2004
• Tullow Gh. Ltd., Sabre Oil & Gas Ltd.:
Shallow Water Tano Basin -July 2006
• Tullow Gh. Ltd., Sabre Oil & Gas Ltd.,
Kosmos Energy Gh. HC : DeepWater
Tano Basin - July 2006
• Vitol Upstream Gh. Ltd, Offshore Cape
3-Points - March 2006
Amerada Hess Gh. Ltd.: DeepWater Tano
CTP - July 2006
• Gasop Oil Gh. Ltd: Offshore Saltpond
Basin - July 2006
• Saltpond Offshore Prod. Company
(Lushann Eternit Energy Ltd.): Saltpond
Field- July 2004
Expected Revenues
from
Oil and Gas Industry
Expected Revenues from Oil and Gas
Industry
• Ghana is expected to start commercial oil and
gas production by December 2010
• Revenues are expected to be received from Oil
Companies registered with the Ghana National
Petroleum Corporation and other State Agencies
• Ghana is expected to receive US$1.0 billion
annually over the next 10 years, with
incremental growth of revenues as new oil and
gas fields are established
Expected Revenues from Oil and Gas
Industry
• Ghana has estimated total gas reserves of
between 1.5 Trillion Cubic Feet, and 1.7 Trillion
Cubic Feet including reserves not yet
discovered.
• It has an estimated 840 billion cubic feet of gas
in place. Natural gas was first discovered in the
Cape Three Points Basin in 1974.
• Tano Gas reserves are estimated to be sufficient
to power a 100-140 megawatt (MW) power plant
for 15 to 20 years
Expected Revenues from Oil and Gas
Industry
Under the proposed Bill the fiscal package
negotiated and agreed upon between the parties
in the event of a commercial discovery are as
follows:
• Royalty in respect of Oil and Gas are 12.5%
and 7.5% respectively;
• GNPC carried interest 10%,
• GNPC additional interest (subject to
reimbursement of GNPC to contractor for its
proportionate share on its participating
interest) is 10%
• Corporate Income Tax 35%.
Current Measures to Ensure
Accountability and Transparency
• Ghana Integrity Initiative (GII)
• Ghana Extractive Industries
Transparency Initiative (GEITI)
• Capacity building and sensitization
workshops for media practitioners in the
emerging oil and gas industry
• Ghana Oil and Gas Stakeholders
Network
Actions and Pressure from Civil Society
Organisations
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•
•
•
•
For increased transparency and free release
of information on Oil & Gas revenues by
Companies and by the Government of Ghana
Transparency International
Revenue Watch Institute
Global Witness
Tax Justice Network
National Civil Society Platform on Oil and Gas
(NCSPOG)
Ghana Petroleum Account Receipts
Ghana’s Petroleum Revenue is expected to
come from:
1. The gross revenue, royalties, all additional oil
entitlements, initial carried interest from any
petroleum operations including, prospecting or
exploration for, and development, exploitation,
transportation, sale or export of, petroleum and
other activities relating thereto.
2. Any amount received from direct or indirect
participation of Government in Petroleum
Operations.
Ghana’s Petroleum Revenue (cont.)
3.Corporate income taxes in cash from all
upstream and midstream petroleum
companies;.
4.Any amount received by Government from
the investment of petroleum funds.
5.Any amount received by Government
directly or indirectly from petroleum
resources not covered in paragraphs (a) to
(d) above, including capital gains tax
derived from the sale of ownership of
exploration, development and production
rights.
Ghana’s Petroleum Revenue (cont.)
It is expected that all petroleum
revenues assessed as due in each
month shall be collected via electronic
transfer of funds by the 15th day of
the ensuing month, with quarterly
reconciliation of petroleum receipts
due and actual amounts collected.
Ghana’s Petroleum Revenue (cont.)
• In the event that the Government participates in
petroleum operations indirectly, through the
GNPC or any other national petroleum company,
the receipts of the Ghana Petroleum Account
shall include the following:
(a) any amount payable by the GNPC or other
national petroleum company as tax, royalty or
any other due in accordance with Ghanaian law;
and
(b) Dividends from GNPC or other national
company for Government’s equity interest.
Ghana’s Petroleum Revenue (cont.)
• GNPC is entitled to receive the additional
“paid” participating interest of Government,
as direct operating revenue according as
the additional paid interest is financed.
• All initial carried interest is expected to be
collected by the Ghana revenue Authority
as part of direct petroleum receipts to
Government.
3.0
PROPOSED CHANNELS
OF UTILIZATION OF OIL
REVENUE
Special Oil and Gas Revenue Account
to Channel Oil Funds
• As part of strategies and channels for
management of Oil Revenue, it has been
proposed that a special Oil and Gas Revenue
Account should be set into which all proceeds
would be lodged.
• By this, it is proposed that the Account should be
allowed to accumulate funds before spending
commences. This is referred to as the Delayed
Spending Strategy.
Government Central Budget
Financing and Spending
• Another school of economists propose that
all revenue from the Oil & Gas industry
should be channeled into the Central
Budget of Ghana Government, and used
to finance annual national budgets, as it is
the case of externally derived Aid funds.
This is the current mode of financing of all
sectors of the Ghanaian economy. This is
referred to as the Conventional
Spending Strategy.
Dedicated Sector Funds for Ministries
• Still, another school of thought has proposed
that Oil & Gas Revenue should be dedicated to
some specific sectors that need immediate
revamping and capital injection. Such sectors
include education sector, roads and transport
sector (railways, water transport, etc.), energy
sector (alternative
sources of energy),
agriculture (modernization, industrialization,
etc.). This approach is termed the Sector
Spending Strategy.
Special Posterity Fund Allocations
• A radical school of advocates and activists have
proposed that Ghana Government should
dedicate at least half of the accruing revenue
from the Oil & Gas industry into a Special
Posterity Fund reserved for future spending
when the Oil and Gas resources are exhausted.
• The proposed strategy is based on the premise
that Ghana’s Oil & Gas Resources (and
therefore, revenues) belong to present and
future generations yet unborn. Spending of Oil &
Gas funds should therefore take into account the
future generations of Ghanaians, and so the
Posterity Fund Strategy has been proposed.
4.0
WHY THE NORTH
SHOULD BE GIVEN
INCREASED ATTENTION
1. Northern Ghana Lags 400 Years
Behind the Rest of Ghana
• The arrival of Portuguese explorers on the
shores of Gold Coast in the 1400’s marked the
turning point in the development of the native
peoples of the coastal regions and the
hinterland.
• Interactions between the White People and the
Coastal peoples gave birth to commerce and
education. Schools were established to train
native people to serve and protect the interests
of White merchants.
• It was not until in 1905, that the first White
man cross the Volta River and set foot into
the then Northern Territories. Socioeconomic development activities were
confined to the South of Ghana for 400
years.
• The advent of the infamous Slave Trade
depleted the Northern Territories (which
was a source of slaves) of its strong men
and women, and left behind children and
aged people to carry on with their socioeconomic development.
• The intensive mining of gold and other
minerals led to the establishment of mines
in Southern Ghana. These mines were fed
with unskilled human labour from the
Northern Territories.
• As often quoted, the British Governors
deliberately refused to develop the
peoples of the Northern Territories so that
“they will continue to serve as hewers of
wood and fetchers of water for their
brethren in the Gold Coast and Ashanti
regions”.
• These 400 Years‘ of Dark Ages” in
Northern Ghana are the cause of unequal
development between Southern Ghana
and Northern Ghana.
2. Northern Ghana Lost 30 Years
In Government Spending
• After independence in 1957, the CPP
Government under Dr. Kwame Nkrumah,
embarked on massive social infrastructural
development of all regions of the newly
independent Ghana.
• So vibrant were development programmes that
Ghanaians were excited and contributed
immensely to the development of Ghana. Ghana
soon became the “England of West Africa” and
attracted many migrants from other West African
countries.
• The Wheel of Intensive Development was
however brought to a halt after the
overthrow of Dr. Kwame Nkrumah. From
1987 until 1987, the focus of Government
Spending was shifted to the development
of the Southern Ghana, to the detriment of
socio-economic development of Northern
Ghana. This neglect has resulted in
underdevelopment, poverty, conflicts, etc.,
creating the current negative image of
Northern Ghana.
3. Failure To Achieve MDGs in Northern
Ghana Affects The Rest of Ghana
• If Ghana is to achieve it lustrous goal of being a
“Middle Income Country” by 2020, then all
concerted efforts have to be exerted to virtually
‘drag’ Northern Ghana along with the rest of the
country.
• The achievement of the Millennium
Development Goals (MDGs) in Ghana cannot be
fulfilled if Northern Ghana remains in its current
state and pace of development.
• None of the 8 MDGs can be said to have
made any significant progress, as abject
poverty, poor quality education and
infrastructure, gender abuse and women
disempowerment, high infant and maternal
diseases and death, environment
degradation, and total absence of social
partnerships and collaboration resulting in
strife, ethnic conflicts and social
upheavals. Ghana cannot afford to
continue to pay ‘ blind eyes and deaf ears’
to the plight of Northern Ghana.
4. Northern Ghana Can Be Developed
into the Food Basket of West Africa
• The vast agricultural resources of Northern
Ghana can be transformed into the food basket
of Ghana and subsequently of West Africa.
• The vegetation, relief and topography of
Northern Ghana is no different from those of
South Africa, Botswana, Malawi, and
Zimbabwe. Yet these countries have developed
their “Steepe” lands into great agricultural
production areas that feed themselves and
export grain and livestock to other African and
South-East Asian countries.
• Large and continuous investments are
needed to raise the current state of
underdevelopment, abject poverty, low
productivity, gender disparities, and strife
and conflict. Developing Northern Ghana
socio-economically, would also pave the
way for transforming it into the industrial
hub of West Africa. Tamale, Bolgatanga
and Wa are currently the commercial
centres for Burkina Faso, Mali, Niger and
Chad.
5. Northern Ghana Can Be Transformed
Into the Intellectual Hub of Ghana and
West Africa
• History and various studies have shown that the
people of Northern descent have high
intellectual capacities and capabilities for
excellent academic and professional
performance.
• This evidenced by the pockets of excellent
performance of students in Northern Ghana
given the very poor educational facilities and
abject poverty under which they raised.
• With the right resources, students in Northern
Ghana can perform excellently and Northern
Ghana will soon serve as the source of
intellectuals for Ghana and for West Africa subregion, as in the case of India in South East Asia
region.
• With all the debilitating disadvantages in socioeconomic development, Northern Ghana has
produced so many intellectuals who are serving
in national and international missions, the UN
and other international organizations, and are
very active in the political arena of Ghana.
• A conscientious focus on education and human
capital development as expected to be done
through SADA, would transform Northern Ghana
as a suppliers of intellectuals and professional
resources.
5.0
AREAS AND
PROGRAMMES
THAT CAN BENEFIT
NORTHERN GHANA
Development of Social Infrastructure
and Social Capital
• Northern Ghana falls far behind the rest of
the country in terms of social infrastructure
and social capital development. A focus on
the development of social infrastructure
and human resources through education,
health, environmental management, etc.
would catapult Northern Ghana into a
position that will induce massive
development of its regions, districts and
communities.
Enhancement of Economic Productivity
and Industrialization
• Through the SADA initiative, there should
be concerted efforts at turning every
resource in Northern Ghana into points of
economic activity. Existing industries and
sectors of the economy of Northern Ghana
should be supported with massive
investments to be transformed in terms of
productivity, scale of economics, and
export potential.
Facilitation and Strengthening of
Private Sector and Entrepreneurism
• Another area that needs to be strengthen
with large investments is the private sector
in Northern Ghana. Entrepreneurism and
partnerships should be stimulated and
encouraged, as was in the case of South
Korea, Malaysia and Japan in the late
1900s. Northern Ghana has been
estimated to have over 250,000 small
commercial enterprises, not mentioning
the over 3 million small scale farmers who
are actively engaged in agricultural
production and processing.
• Stimulating cooperative activity, microfinancing (savings and loans), processing
and value chain development, quality
control and standardization of products, as
well as encouraging the establishment of
partnerships and corporate companies,
would pave the way and foster collective
effort towards the socio-economic and
financial transformation of Northern
Ghana.
Consistent Dedicated Funding of SADA,
and Donor-funded Programmes
• For SADA to achieve its laudable goals, there is
a strong need for continuous consistent
dedicated funding. Present and succeeding
governments should be encouraged to continue
to provide support for SADA as this is one
vehicle that can achieve the aspirations of
Ghanaians. SADA and other donor programmes
such as MiDA, Northern Rural Growth,
NORPREP, etc. should be supported by
Government Annual Budgets and the necessary
counterpart funding released on timely basis for
programme implementation.
6.0
THE WAY FORWARD
Opportunities for Policy Advocacy on
Management of Oil & Gas Revenues
•
•
Presence of a growing body of networks and
platforms of Key Actors (State, Local
Authorities, Civil Society, Private Sector) that
are keen to support policy advocacy initiatives
on Ghana’s Oil and Gas Resources and
Revenues
Various Legislative and Institutional
Frameworks formulated and implemented by
Government of Ghana create space and
opportunities for policies and regulations to be
studied, monitored and critiqued
• Growing Levels of Initiatives that promote
Transparency and Accountability through
increased access to information on Oil and
Gas resources and revenues in Ghana
through the Right-To-Information Bill and
similar laws, all create opportunities for
Civil Society to advocate for sustainable
management of Ghana’s Oil and Gas
resources and revenues.
• The unavailability of a stable long term
development strategy for the use of Oil &
Gas Revenue is another opportunity for
policy advocacy
• The need for strengthening the fund
management capacities of State
institutions especially sub-National
Government Structures who are the
recipients of major outflows for local
community developments.
•
Opportunities for Monitoring
Government Spending on
Development in Northern Ghana
Roles that the Peoples of Northern
Ghana Can Play
•
Civil Society’s Roles in Holding
Government Accountable to the North
•
Ghana’s External Partners and
Counterpart Funding for the
Development of Northern Ghana
7.0
Strategies for Effective
Policy Advocacy on
Ghana’s Oil & Gas
Revenues in Favour of
Northern Ghana
Strategies for Effective Policy
Advocacy on Ghana’s Oil & Gas
Revenues
1. Strengthening of Ghana Oil & Gas
Stakeholders Network to decentralize its
programmes and activities to sub-national
levels (regional and district levels)
Strategies for Effective Policy Advocacy on
Ghana’s Oil & Gas Revenues
2. Strengthening of CSOs in research,
information management, and advocacy
on policies and regulatory frameworks
relating to the operations of Ghana’s Oil &
Gas industry and to the sustainable
management of Ghana’s Oil & Gas
Revenue
Strategies for Effective Policy Advocacy
on Ghana’s Oil & Gas Revenues
3.Strengthening national and sub-national
level structures in the administration of
revenues from the Oil and Gas sector
disbursed by the Ghana Petroleum
Account through the national development
financing frameworks and institutions
Strategies for Effective Policy Advocacy
on Ghana’s Oil & Gas Revenues
4. Continuous capacity building and
strengthening of media, press, and
independent private sector activists to
engage Ghana Government machinery
and hold them accountable for the
sustainable use and management of Oil
and Gas resources and revenue
5.0
Conclusion
Conclusion
• There are great prospects for Policy
Research and Advocacy on Ghana’s
Oil and Gas Revenue Management.
• The central concern of Ghanaians is
how the State Machinery can manage
Oil and Gas revenues sustainably so
that Oil and Gas Resources will be a
Blessing and not a Curse.
Conclusion
• There is need for continuous
education and interest building in
Ghanaian public circles concerning
the present and future mechanisms
for sustainable management of
Ghana’s Oil and Gas Resources and
Revenues.
Conclusion
• Civil Society Organizations should sit
up and ‘walk the talk’ in actively
monitoring and tracking the equitable
distribution of Ghana’s Oil and Gas
revenues, with clean hands and
highest levels of integrity.
Conclusion
• Successive Governments should
build on policies and institutional
frameworks established by preceding
Governments on the sustainable
management of Ghana’s Oil and Gas
resources and revenues
Conclusion
• The Youth of Northern Ghana should
be encouraged and empowered to sit
up and pay particular interest in the
sustainable management of Ghana’s
Oil and Gas resources and revenues
since the Future of Ghana is theirs.
A Better Ghana Agenda is their
Agenda.
End of Presentation
Thank You for the Rapt Attention You
Afforded the Presentation
Long Live Ghana’s Oil and Gas!!!
Long Live Northern Ghana!!
Long Live Ghana!