Only 20% gained from US$31bn petroleum revenue in 10yrs

Only 20% gained from US$31bn petroleum revenue in 10yrs

Out of an estimated US$31.2billion generated from commercial oil production in the last ten years, the state has gained only 20 percent with too little to show how the country has benefitted, a Public Interest and Accountability Committee (PIAC) report has shown.

According to the report, the US$6.55billion is the total petroleum receipts between 2011 and 2020, which is equivalent to 9.97 percent of 2020 GDP. A breakdown of the amount shows carried and participating interest (CAPI) yielded US$3.81billion, which represents 58 percent, while royalties comprised US$1.64billion representing 25 percent, and corporate income tax yielded US$1.08billion or 17 percent.

The report shows that contrary to pre-oil expectations of sustained economic growth and transformation, there is nothing tangible to point to in terms of projects to show what the US$6.5billion has been used for.

The amount came from three producing fields: namely Jubilee, Tweneboa-Enyenra-Ntomme (TEN) and Sankofa-Gye Nyame (SGN) as of end-2020, although the country has signed 18 petroleum agreements with various international and local oil companies which are not producing since the early 2000s.

A breakdown of the allocations shows that the Annual Budget Funding Amount (ABFA) has received the highest amount of US$2.6billion – 40 percent, over the period of income from petroleum accrued to the state. This is followed by Ghana National Petroleum Corporation (GNPC) receiving US$2billion, 30 percent; Ghana Stabilisation Fund (GSF) received US$1.39billion or 21percent; whereas the Ghana Heritage Fund (GHF) received US$586million representing 9 percent. These allocations, PIAC added, are broadly consistent with the amended Petroleum Revenue Management Act (PRMA).

In essence, the report said: “ABFA investments have yielded some successes, but its overall impacts have been minimal, delayed or negligible. Many stakeholders believe that the ABFA has not delivered on its expectations in maximising the rate of economic development and enhancing the well-being of citizens. Many of the challenges affecting the effective and efficient utilisation of petroleum revenues, especially the ABFA, are macro-fiscal in form.

“The potential for ABFA to deliver optimal outcomes is hinged on several underlying macro-fiscal factors, including the robustness of existing systems for public financial management; efficient budget preparation, implementation, monitoring and evaluation; accountability; efficient macroeconomic management, among others. The evidence points to weaknesses in these underlying factors, hence the implementation of ABFA in the last decade has suffered from broader challenges associated with macro-fiscal management,” it further noted.

It added that the country has made commendable efforts at increasing the revenue which accrues to it by making changes in legislation to control petroleum costs claimed by the international oil companies; statutorily increasing its Carried Interest stake; and contractually preventing the petroleum agreement from being a fiscal enclave in respect of taxes and imposts that the state can levy.

However, it said there is need for a laser-like approach to cost-monitoring, as this along with transfer pricing is one of the significant pathways the state loses money in the industry.

“Peaking is further compounded by reservoir challenges leading to production losses on some fields. At the same time, the above-surface issues include floating production storage and offloading (FPSO) reliability challenges and delayed gas processing infrastructure forcing gas reinjection, which is ultimately negatively impacting well-performance,” PIAC said.


On the back of these developments, the report outlined some policy recommendations to improve petroleum revenue management in Ghana.

Among them is included the adoption of a stringent approach to cost-monitoring along with transfer pricing, which are among the major ways the state loses money in the industry.

It tasked the Ministry of Finance to forward to Parliament for approval of the long-delayed investment policy and qualifying instruments for overall management of the Ghana Petroleum Funds (GPFs), which were drafted by the Investment Advisory Committee (IAC) and approved by the minister in 2020.

According to the report, there is also need for more institutional coordination and collaboration with other petroleum agencies to share data and ideas.

“We advocate for reconstitution and formalisation of the Multi-Agency Petroleum Revenue Committee (MAPERC) to serve as a technical inter-agency coordination committee. MAPERC, chaired by the GRA, would be the forum to resolve issues such as updating petroleum accounting guides, developing a petroleum tax guide, validating IOC tax returns and liabilities, validating IOC costs to calculate CIT and AOE, and setting the scope for specialised audits, among others.”

Furthermore, the study also called for official public criteria to guide the technical prioritisation of ABFA projects.

“The Minister of Finance’s selection of ABFA priority areas should have an evidence-based justification and criteria to ensure the selection leads to the intended objectives of ABFA, as specified in the law,” the report states.

It further called for a more comprehensive and decentralised project preparation, planning and monitoring process, which is needed to ensure ABFA projects are strictly monitored and delivered on time.

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