Saturday, 7 December 2019

Feature: Government Violates the Law on Accounting for Oil Revenue

 Image result for alex mould

As you are aware, in each oil field Government of Ghana (GoG) has two distinct 'equity Interest'; a Carried Interest, and a Paid-in Participation Interest.

The Carried Interest is where GoG is “Carried” and as such pays no exploration/appraisal or development cost to bring the field to production; it is only when the field is in production that GoG contribute to the fields operating and production cost;

The Paid-in  Participation Interest is where GoG, having opted to increase its equity after Contractor Group declares Commerciality, pays for only development cost to bring the field to production, and then when the field is in production GoG contributes to the field’s operating and production cost;

For both Jubilee and TEN we agreed to repay their Contractor Group which financed the development costs for Ghana National Petroleum Corporation's (GNPC) Participating Interest. The agreement was to use 40% of our revenue from sale of the crude oil of our combined Carried and Participating Interests equity takes (this excludes the Royalties that are paid directly to government)

But with SGN oil field, the Agreement was silent on what percentage of our revenue from oil sales would be used to repay the amount owed to the SGN Partners (eni Ghana & Vitol) who funded the development costs for GoG’s 5% Participating Interest on behalf of GNPC.

Based on data from GNPC, SGN Partners are being paid the amounts owed using 100% of all the revenue from sale of Ghana’s share of Oil (excluding Gas) from the SGN field production; (note: for Jubilee and TEN we used 40% of our revenue)

However, the revenue from the sale is not being paid into the PHF as per the PRMA before being disbursed to GNPC to pay for the debt incurred by the SGN Partners to defray the amounts advanced to GNPC for the development cost of the field;

So, why is it that GoG is not following the PRMA rules when it comes to the revenue from selling Ghana’s share of the oil to pay down the monies advanced by eniGhana and Vitol to GNPC to pay for its share of the development cost of the SGN field?

The PRMA rules are simple:

- Sell Ghana’s share of the oil from the field (to eniGhana);

- Pass the Funds through the Petroleum Holding Fund (note: this is also not being done for Natural Gas Sales i.e GNPC is here again violating the PRMA);

- Allocate GNPC funds to pay for the Development and Production costs;

- GNPC pays the Contractor (eniGhana in this case) for the costs incurred (which is 100% of the equity portion of the funds derived from sale of crude oil relating to only the participating Equity Interest (5%));

Also, why are we giving them 100% of the revenue derived from the sale of all Ghana’s oil (excluding Oil related to Royalties) and not only 100% of the Participating Interest “Equity”?

- Why are we not asking them to make the oil revenue payments into Bank of Ghana accounts as we do for the oil revenue from sale of Ghana’s oil from both the Jubilee and TEN fields?

- Does the law not require payment of all petroleum (oil and natural gas) sales into the PHF before any disbursement is made and such disbursement should follow the PRMA Waterfall

- Is there no violation with Natural Gas proceeds from Jubilee, TEN and SGN?

Lastly, it seems from the various reports Ministry of Finance has released that GoG is actually under reporting the amount of Oil sold and as such under reporting the amount of our oil contribution to our GDP?

If any company in Ghana under reported its Revenue, GoG would have clamped down in it;

Let’s do the right things, please!!

Alex Mould
(Former Chief Executive of GNPC)


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