Ten months after Ghana joined the league of oil producing nations, Daniel Nonor assesses how the country has fared thus far

Although Ghana’s oil reserves are relatively modest by international standards, forecasts are that it will soon be awash with petro-dollars. Based on an assumed price of oil at $75 per barrel, Ghana could earn additional revenue of $1 billion on average annually, which, if properly managed, will accelerate the country’s socio-economic development.

Although the actual size of government revenues from the oil and gas sector continues to be speculative due to price fluctuations on the world market, the immediate returns are big enough to improve the country’s economic prospects. It is also possible that Ghana’s oil reserves will turn out to be considerably larger than currently stated in view of fresh discoveries being made by lead partners in the Jubilee Field, where oil was first struck in 2007.

Having carefully examined the experiences of other oil producing nations, Ghana is attempting to follow the policies of those that are doing well in terms of resource management. But experts warn none of them will become effective if they are not broadly owned locally.

Earlier this year, Ghana's Parliament passed the long-awaited Petroleum Revenue Management Bill containing strong provisions for the sector’s governance and accountability. This includes rigorous rules for reporting on oil fund assets and investments, and the creation of an independent regulatory body, the multi-stakeholder Public Interest and Accountability Committee. Analysts say the passage of the bill represents a powerful tool in Ghana's efforts to avoid some of the serious pitfalls that have plagued many oil-rich nations.

The Ghana National Petroleum Corporation and PetroSaudi International (PetroSaudi) have also signed a Memorandum of Understanding establishing a strategic alliance to enhance the country's upstream oil and gas industry.

The partners are expected explore joint ventures in oil and gas exploration, development and production; oilfield services and infrastructure; and national capacity building, infrastructure and facilities development aimed at increasing opportunities for Ghanaians in the development of the sector.

On March 11, the Ghana National Petroleum Authority lifted its first share of crude from the Jubilee Field which was sold for $112.86 per barrel. Latest figures released by Bank of Ghana’s Monetary Policy Committee indicated that Ghana,’s total export of crude oil from January to September amounted to $1.97 billion.

Crude oil imports were $991.4 million while imports of oil products amounted to $1.1 billion. In addition, there were imports of gas through the West African Gas Pipeline of $107.9 million.

However, the government has tried to play down the significance of its oil revenues, apparently to moderate public expectation. According to energy economist, Mohammed Amin Adam, Coordinator Civil Society Platform on Oil and Gas, the oil revenue estimated at GH¢1250.8 represents 2.2 per cent of GDP, a percentage more than the revised non-oil revenues of GH¢698.8 in the supplementary budget. With oil revenues, the revised budget revenues for the 2011 fiscal year increased by 39 per cent over the 2010 out-turn compared to 21.6 per cent of the increase from non-oil revenues.

Adam further noted that revenues allocated for spending in the 2011 Supplementary Budget, the Annual Budget Funding Amount, also constitute about 47 per cent of total supplementary revenues due for spending. Thus the Supplementary Budget largely relies on the expected oil revenues.

Ghana continues to attract suitors from around the world who want to have a share of its oil. Most recently, Hess of the US and Nigeria's Sahara Energy Fields have shown interest in Ghana's West Keta and East Cape Three Points blocks. Shell has also made overtures to the government for an exploration licence.

After months of strained relations with the government over an intended sale of its shares in the Jubilee fields, the EO Group finally brokered a deal with Tullow Oil leading to the acquisition of the Ghanaian interests in EO for $305 million. The acquisition increased Tullow’s interest in the West Cape Three Points licence offshore Ghana by 3.5 per cent to 26.4 per cent, and increases the Group's interest in the Jubilee field, which Tullow operates, by 1.75 per cent to 36.5 per cent.


Ghana’s oil and matters arising

In May, it was revealed that the devices used to independently monitor how much crude oil is produced from the Jubilee Field were malfunctioning. In order to allay public concern, the Ministry of Energy stated that it had implemented measures to ensure that Ghana was not short changed during the period.

The incident is said to have created strained relations between Tullow Oil and the Ghana Revenue Authority (GRA), which is unable go near the FPSO let alone assess oil revenues, a claim denied by the ministry. A ministry spokesman explained that keys to the oil storage are held by GRA representative on the FPSO and so before oil is offloaded, the revenue agencies and other authorities are aware of the quantity.

The incident was immediately seized upon by the opposition New Patriotic Party (NPP). A member of its communication team, Sammy Awuku, said it was strange that there were no records of oil production at the Jubilee Field and served notice that anyone who had squandered even a pesewa from oil revenues would be held to account by the NPP when it was elected back into power.

It has meanwhile been alleged that the Jubilee Oil partners have still not honoured their quarterly corporate tax obligations to the government within the last year. These taxes constitute the largest of all the revenue streams that go to the government. Energy economist, Mohammed Amin Adam, who made the allegations, blames the Ghana Revenue Authority for failing to enforce payment.

But head of Investor Relations and Corporate Communications at Tullow Oil, Gayheart Mensah, rejected the claims, saying that the tax laws permit the companies to pay their corporate taxes only after they have recovered their $3. 5 billion investment.

“Tullow and the Jubilee partners are operating within the tax laws of Ghana as implemented by the Ghana Revenue Authority,” he said. The tax law permits the recovery of investments that have been made in the jubilee field over a period of time. That is the $3.5 billion investments that Tullow and the Jubilee partners have made.

“It is not right to say that we have failed to honour our tax obligation. There are laws governing what the Jubilee partners are doing in the Jubilee field and everything we are doing is within the law.

Gayheart Mensah, Communications Manager, Tullow Ghana Ltd