Fair-Trade Oil Share Ghana Critique of Petroleum Commissions (Part - - PowerPoint PPT Presentation

Fair-Trade Oil Share – Ghana

Critique of Petroleum Commission’s

FTOS-GH DIASPORA EXECUTIVE COUNCIL (DEC) Analytical Support Group (ASG) GhanaHero.Com & Associates

6 Apr 18 Contact: professor.lungu@yahoo.com

“Presentation to the Council of State”

“Overview: Ghana’s Oil and Gas Fiscal Regime”, of 27 Feb 18

1

GHANA OIL GHANA OIL GHANA OIL GHANA OIL

(Part 2)

Your’s 2 Your’s

• Dedication ………………………………………………………………….….. 3
• Organizing Principles of this Review …………………………….... 4
• Markers …………………………………………………………………………. 5
• Introductory Points of Order …………………………………………. 9
• What Oil Companies Are Reporting ……………………………….. 14
• Review of Feb. 2016 “Overview” to Parliament …………….. 16
• Review of Feb. 2018 “Presentation to Council of State” … 24
• On Royalties and Ghana’s Petroleum Agreements ………… 33
• On Production Sharing Agreements (PSAs) …………………… 36
• Major Omissions & Admissions by PC …………………………… 40
• Five Questions to Ask of Petroleum Commission ………….. 42
• Summary / Conclusions of the Critical Review ……………… 43
• 9 DEC/ASG Recommendations to Gov. of Ghana …..……… 45
• Credits …………………………………………………………………….…… 46
• Sources & Reckons ..………………………………………………….…. 47

Fair-Trade Oil Share–Ghana

Outline (Part 2)

ARCHIVE VERSION AT: http://ghanahero.com/FTOS-GH/FTOS-GH-PSA-Library/PRSESENTATION-TO- COUNCIL_OF_STATE-BY-PETROLEUM_COMMISSION-27Feb18.pdf

Fair-Trade Oil Share – Ghana

Petroleum Commission 2018 Presentation

24 Your’s Your’s

Fair-Trade Oil Share – Ghana

Review of Feb. 2018 Presentation to CoS

Fair-Trade Oil Share – Ghana

Review of 2018 Presentation to CoS (contd.)

WE SAY: (1) “Government Take” is not wholly based on “Net”. Royalty is a part - collected on “GROSS” (1) THEREFORE, Government & PC may be abusing their stewardship responsibilities. (2) That’s not “prudent cost management” (1) If collected from gross, royalty can defray some operating expenses (OPEX). (3) Today, there is no limits on OPEX; there are No Open, Competitive Bidding (4) Today, there is no transparent “Pre-Bid Qualification” process.

Fair-Trade Oil Share – Ghana

Review of 2018 Presentation to CoS (contd.)

Fair-Trade Oil Share – Ghana

Review of 2018 Presentation to CoS (contd.)

Fair-Trade Oil Share – Ghana

Review of 2018 Presentation to CoS (contd.)

WE SAY…(PC neglected to show source of the data): (1) Where’s the BONUS for Ghana? (Dollars in hand in 2018 is worth a whole lot today than in the out-years (in 2036) (2) Where’s “Government Take” of 35% for “Income Tax”, for Eq. Guinea & Gabon? (3) REPEAT: Suggest Oil Companies are in charge!

Fair-Trade Oil Share – Ghana

Review of 2018 Presentation to CoS (contd.)

30 Your’s Your’s

Fair-Trade Oil Share – Ghana

Review of 2018 Presentation to CoS (contd.)

During 2007 – 2016:

• --- Loss of Income to Ghana on “Royalty Line” Alone = $136,300.000

5% Royalty off $16,586,300,000 = $829,315,000 (≠ $693,000,000)

Fair-Trade Oil Share – Ghana

Review of 2018 Presentation to CoS (contd.)

32

West Cape Three Points (WCTP)

• PETROLEUM AGREEMENT Among THE REPUBLIC OF GHANA GHANA NATIONAL

PETROLEUM CORPORATION KOSMOS ENERGY GHANA HC And THE E. O. GROUP

• ARTICLE 10 | SHARING OF PETROLEUM
• 10.1 Gross Production of Petroleum from each Development and Production Area shall (subject to a

Calendar Year adjustment developed under the provisions of Article 10.7) be distributed amongst the Parties…:

• a) Seven and one half percent (7 1/2%)of the Gross Production of Crude Oil shall be delivered to the

State as royalty, pursuant to the provisions of the Petroleum Law and the Petroleum Income Tax Law 1987; provided,….Five per cent (5%)…..

Fair-Trade Oil Share – Ghana

On Royalties & Oil Agreements

33

Deep Water Tano (DWT)

PETROLEUM AGREEMENT AMONG GOVERNMENT OF THE REPUBLIC OF THE DEEPWATER TANO CONTRACT AREA | DATED MARCH 10, 2006 ARTICLE 10 | SHARING OF CRUDE OIL

• 10.1 Gross Production of Crude Oil from each Development and Production Area shall (subject to a

Calendar Year adjustment developed under the provisions of Article 10.7) be distributed amongst the Parties…: a) Five per cent (5%) of the Gross Production of Crude Oil shall be delivered to the State as ROYALTY, pursuant to the provisions of the Petroleum Law. Royalty for any Crude Oil having an API gravity of less than…. Your’s Your’s

Royalty Expected/Royalty Paid (2007-2016 Revenue = $16,586,000,000) Royalty Percent (%) Royalty (Expected) Per Petroleum Agreement (FTOS-Gh Finding) $829,300,000 5.00 Royalty Paid (Actual) (By Oil Companies $693,000,000 4.18 Difference $136,300,000 0.82

13

Fair-Trade Oil Share – Ghana

On Royalties and Oil Agreements (contd.)

TABLE: Uncollected/Underpaid Royalty ($136,300,000) (2007-2016)

Your’s Your’s 34

GRAPH: Uncollected/Underpaid Royalty ($136,300,000) (2007-2016)

829,300,000 693,000,000 136,300,000 100,000,000 200,000,000 300,000,000 400,000,000 500,000,000 600,000,000 700,000,000 800,000,000 900,000,000 ROYALTY from Top (from GROSS) ROYALTY Collected (After Some Expenses) Estimate of Royalty Balance (Unpaid - Minimum)

Fair-Trade Oil Share – Ghana

On Royalties and Oil Agreements (contd.)

Data Source: Petroleum Commission Presentation to Council of State, 27th February, 2018), Table 1, Page 4

NOTE: Contrary to what PC says, PSA revenues and exact split of those revenues, including bonuses, are a result of “…hard bargaining -- there are no scientific determinants of what a reasonable split should be…”.

Fair-Trade Oil Share – Ghana

On Production Sharing Agreements (PSA)

36

• Royalty is at “Gross”.
• “Take” ought to include bonuses,

annualized for transparency.

• Cost recovery is capped, ~35%.
• “Take” includes royalty.
• As Ghana has never received a

bonus in almost 10 years, who are the persons taking the bonuses?

Your’s Your’s

• PNDC Law 84 stipulates PSA for Ghana’s Fiscal Oil Regime.
• Royalty is key part of PSAs.
• Bonuses are key part of PSA.
• A “Model” PSA provides standard framework for competitive bidding
• ver areas to be awarded.
• Unlike other fiscal regimes, PSA allow variation of economic terms for

an area without amendment of fiscal legislation.

• Combination of PSA with tax allows Contractors/Investors to obtain

credit at home; this minimizes cost to sovereign revenues.

• The People of Ghana have never received a pesewa in BONUS.
• REPEAT: “…The Jubilee field, discovered in 2007, was significant not only

because of its size but because it opened a new Cretaceous hydrocarbon play along the West African Transform Margin (WATM)...”.

– Who got away with the “bonuses”, when, how?

Fair-Trade Oil Share – Ghana

On Production Sharing Agreements (PSA)

NOTE: The FTOS-Gh Campaign found that around 2011, Angola alone received over $4 Billion in Bids and Bonuses from 7 major Oil Companies for 12 Blocks.

37 Your’s Your’s

Fair-Trade Oil Share – Ghana

On Production Sharing Agreements (PSA)

38 Your’s Your’s

Fair-Trade Oil Share – Ghana

On Production Sharing Agreements (PSA)

MESSAGE: (Above) Analysis of 2010-2015 by the Fair-Trade Oil Share Ghana/PSA Campaign showed that if Ghana had opted for PSA, Ghana would have earned approx. 60% of all petroleum revenues. During 2011-2017, out of total revenues of approx. $19 Billion, Ghana would have earned $11 Billion in fair trade, and the foreign oil companies $8 Billion, as contractors. (But, instead Ghana earned a pithy $3.5 Billion.

39 Your’s Your’s

Fair-Trade Oil Share – Ghana

Major Errors, Omissions & Admissions by PC False and Unprovable PC Statements (2018):

(Page 3 (Error)) (Page 16 (Error)) (Page 16 –Only if reasonable & fair) (Page 17 (Not True))

• PC totally neglected to inform CoS changes made since Act 919.

40 Your’s Your’s

Fair-Trade Oil Share – Ghana

Major Errors, Omissions & Admissions (cont.)

1. For the purpose of Ghanaian history and other national reasons, who are the 4 key Government of Ghana officials that negotiated directly with KOSMOS and TULLOW before the agreements were signed between Ghana and KOSMOS/TULLOW? 2. What is the total amount the Petroleum Commission has received in funding from UK, via GOGIG Revenue Management, or other subventions, each year, during 2010 - 2018? 3. Ghana National Petroleum Corporation (GNPC) has over the years expended cash and

• ther tangible resources towards petroleum exploration, development, and
• production. During the last 10 years, how much has GNPC expended towards

petroleum exploration, development, and production? 4. Did any foreign oil company (KOSMOS, TULLOW, etc), foreign government official (USA, UK, etc.), their staff, department, agency, or their resource employed, used, consulted to support the composition, editing, presentation of "Overview: Ghana's Oil and Gas Fiscal Regime...Presentation to Council of State“, of 27 Feb 18, and the earlier one titled “Overview:….Clarification Meeting with Parliament, 26 Feb 16”? (If so, who were they?) 5. How precisely sure is Mr. Ken Ofori-Atta when he reports to Parliament that “…The 29.1 percent under-performance of petroleum revenue for... (2016)...stemmed from the continuous fall in crude oil prices…,” (in addition to decline in production at Jubilee and TEN), when oil companies are not paying all royalties and taxes they owe and Ghana is negotiating poorly, in addition?

Fair-Trade Oil Share – Ghana

Five Questions to ask of PC

42 Your’s Your’s

MEMO: PC is defending a rigged machine system that takes

• il revenues from Ghanaians and gives to Oil Companies!
• 1. Ghana lost at least $136,300,000 during 2007-2016 from uncollected royalties.
• 2. PC admitted Joint Venture is NOT a bonafide petroleum fiscal regime.
• 3. PC admitted there‘s obviously room for Ghana to extract more rent, but have done little.
• 4. Statement “no one type of fiscal regime is better than the other” is a spurious argument

by a government: It’s an oil company argument!

• 5. PC can’t prove “Hybrid System” is “more attractive to investors”, except to crooks, maybe.
• 6. There’s no good reason why Ghana can’t limit production cost deductions to 25%-35%.
• 7. Infrastructure improvements (i.e. corporate responsibility) are pithy a bait-and-switch.
• 8. “Headline names by themselves” Do Matter! Ghana Hybrid is Concession!.
• 9. Ghanaians are seeing departure from Oil Agreements through loss of Royalties/Taxes.
• 10. “World class discoveries” ARE NOT yielding world class financial results for Ghana.
• 11. Ghana’s Oil Curse most likely begun with enactment of ACT 919, in 2016. But, there is still

time to rectify these important matters for the benefit of all Ghanaians.

Fair-Trade Oil Share – Ghana

Summary/Conclusions of the Critical Review

43 Your’s Your’s

• 1. Ghana should with immediate effect collect from oil companies those 2007-2016

uncollected/underpaid royalties in the amount of $136,300,000.00, with interest.

• 2. Ghana should re-negotiate all existing contracts and adopt Production Sharing

Contract (PSC) with better than 70% returns for Ghana on all revenues.

• 3. Ghana should cease leasing of new acreages for oil exploration unless under pre-

qualified, open bid competitive protocols.

• 4. Ghana should forbid the signing of any oil contract for which all and every owner

and/or transferee of any share is not fully and completely disclosed to Ghanaians.

• 5. Ghana should mandate inclusion of all types of bonuses into oil agreements prior

to approval/signature of agreements and provide timely notices to Ghanaians.

• 6. Ghana should forbid every Oil Company from utilizing income derived from Ghana

to support losses outside Ghana without first notice to Ghana.

• 7. Ghana should leverage GNPC and Ghana Oil to allow GNPC gain

access/partnership into Contractors’ exploration activities in other countries (e.g. Angola).

• 8. Ghana should educate Ghanaians about Oil Company responsibility with respect

to oil spills, pollution, chemical spills, etc., from oil production activities and

• perations.
• 9. Ghana should enact a strong Freedom of Information/Right to Information

(FOI/RTI) bill with an independent arbiter.

Fair-Trade Oil Share – Ghana

9 DEC/ASG Recommendations to Government

45 Your’s Your’s

Executive & Coordination Partners (DEC-ASG)

• Doe H. Ladzekpo, M.Sc. - Petroleum Drilling Operations Geologist, with 30

years of West African exploration experience. Mr. Ladzekpo wrote the first and most complete geology of the Tano Basin.

• Andy Kwawukume - Andy C.Y. Kwawukume. Cand. Phil, Admin. &

Organization Theory.

• Dr. A. Kobla Dotse – A. Kobla Dotse, Ph.D., Technical Director and Deputy

General Manager, Level VI of Chemical Technologies & Innovation Management and Technical Leadership, Asian Region.

• Prof Lungu, Ph.D.: Landuse Planner, Research and Communicative

Methods in Governance and Administration, Applied Geographic Information Systems (GIS), Transportation Safety & Analysis, Writer, Concerned Ghana National.

• www.GhanaHero.Com & Associates. / DEC-ASG - professor.lungu@yahoo.com
• (Sound Track” Music by WAZOBIA – “Tribute”)

46 Your’s Your’s

Fair-Trade Oil Share – Ghana

Credits

47

Fair-Trade Oil Share – Ghana

Sources & Reckons

No. Title / Item

1 Petition to President Akufo Addo - Frontpage Ghana (14 Feb 17). (https://www.frontpageghana.com/index.php/business/item/download/2_48d86a4cef3860 c01f91ac2e7beebb0c.html). 2 Ghana Ministry of Finance. 2016 Annual Report on the Petroleum Funds (Submitted to Parliament by Ken Ofori-Atta). 3 Ghana Ministry of Finance and Economic Planning. 2016. Petroleum Receipts and Distribution Report. 4 Ghana. Petroleum Exploration and Production Law, PNDC Law 84. 5 Ghana Petroleum Commission. 2016/2018 Presentations (to Parliament/Council of State) 6 GhanaianTimes.Com. Incorporate Mandatory Disclosure Clause In PEP Bill – ACEP, 2013, 7 IIED. 2012. How to scrutinise a Production Sharing Agreement. 8 Jasper Abembia Ayelazuno. 2016. Oil-rush, Great Recession, and 'Development' Implications for Africa. 9 Kristen Bindemann. 1999. Production Sharing Agreement: An Economic Analysis, Oxford Institute for Energy Studies. 10 Public Interest And Accountability Committee (PIAC).. 2013. Report On Management Of Petroleum Revenues for 2013. 11 Solomon Kwawukume. 2012. Ghana's Oil and Gas Discoveries: Towards Full Maximum Benefits. 12 World Bank. 2013. Energizing Economic Growth in Ghana.

Your’s Your’s

Your’s

FTOS-Gh/PSA – DIASPORA EXECUTIVE COUNCIL (DEC) Analytical Support Group (ASG) POC: professor.lungu@yahoo.com

48 Your’s Your’s

Fair-Trade Oil Share – Ghana

(FTOS-Gh)

END

DO IT FOR THEM

QUESTION?

BACK-UP SLIDES

49 Your’s

Fair-Trade Oil Share – Ghana

(FTOS-Gh)

Ghana vs. Foreign Oil Company (USD)*

Fair-Trade Oil Share – Gh

Update on Actual Oil Revenues

*Production Years 2010 - 2015

Your’s

Jubilee Oil Fields

50 Your’s

NO MATTER THE RECORD

We Believe That Ghana is No. 1

Most Officials in Government/Parliament/Bureaus (NDC, NPP, CPP, PPP, PNC, GCPP) Media / Press Council of State Civil Society / NGOs Religions / Agnostics / Atheist / Traditionalists Most Citizens Care & Give a Hoot About Fair Trade Oil Share!

1 1 1

Your’s Your’s

Fair-Trade Oil Share – Ghana

Commitment in Ghana’s Interest

51