Award of oil block contracts questioned by industry players, as Heritage Fund accrual hits $500m
A policy Analyst with a renowned energy think-tank has told The Chronicle that future generations will be more assured if the national oil company, Ghana National Petroleum Corporation (GNPC), focuses on its core mandate, than engaging in unnecessary Corporate Social Responsibilities (CSR).
To him, instead of spending its share of the oil revenue on activities that do not generate revenue, it should rather work on ensuring that there are more activities on the oil fields to generate more revenue for the country.
He also said if the Corporation would be more transparent in the appraisal processes and not cut corners by giving oil blocks to cronies and others who may not be able to manage it, the country would be on the path to success.
“Ten years down the line, we can generate more revenue and more oil can be generated if our national oil company, which is GNPC, would be focused on their core activities so that whatever money we give them, we should also be able to see some returns coming from there.
“It also comes back to the government to ensure a lot of transparency in the bidding processes and the selection process. There should also be information sharing on oil activities. Government shouldn’t cut corners and give blocks to cronies and others who may eventually not be able to manage it.”
The Analyst, who spoke on grounds of anonymity, revealed this to The Chronicle in an interview on the paper’s Special Report on “A Decade of Oil Production: Its Impacts, Challenges and Gaps”.
It would be recalled that after Ghana discovered oil in 2007, managers of the economy adopted the Norwegian best practice in the management of its oil revenue. Some few other best practices were adopted from Trinidad and Tobago as well as East Timor.
Some key personalities, who are well-grounded in the oil sector, were sent to these countries to equip themselves with these best practices to ensure that Ghana gets the best out of its oil discovery.
Consequently, the country promulgated the Petroleum Revenue Management Act (815) (PRMA) in 2011, which was later amended in 2015.
The core mandate of the PRMA was to provide the framework for the collection, allocation and management of petroleum revenue in a responsible, accountable and sustainable manner, for the benefit of the citizens of Ghana, in accordance with Article 36 of the Constitution.
Some of the contents in the PRMA include allocation and disbursement of oil funds, management and investment of Ghana Petroleum Funds, Investment Advisory Committee, Audit of the petroleum funds and accountability, transparency and public oversight.
Under the allocation and disbursement of oil funds, the Act stipulates that after the funds have been assessed, collected and accounted for by the Ghana Revenue Authority, it would be paid by direct transfer into a Petroleum Holding Fund at the Bank of Ghana.
The Act enjoins that 55% of the carried and participating interest accrued in the Petroleum Holding Fund should be given to GNPC to cater for the cost of financing its activities in relation to the interest it holds in petroleum agreements.
70% of the remaining 45% also goes to the Consolidated Fund in support of the national budget, 30% to the Ghana Petroleum Funds (GPF) which includes the Stabilization and the Heritage Funds for purposes of investment and last but not least for exceptional deductions according to provisions of the Act.
On the Heritage Fund, the Act stipulates that 9% of the money that goes into the GPF should be kept in the fund to provide an endowment to support development for future generations when petroleum reserves have been depleted.
Since the establishment of this act, the Heritage fund has constantly been receiving the percentage stipulated in the PRMA.
The 2018 annual report by the Public Interest and Accountability Committee (PIAC) states that the Heritage Fund since its establishment has accumulated a whopping US$500 million.
PIAC is a citizens-led statutory body established under Section 51 of the Petroleum Revenue Management Act 2011 (Act 815) as amended by the Petroleum Revenue Management (Amended) Act, 2015 (Act 893) to provide independent oversight over the collection, allocation and utilization of Ghana’s petroleum revenue.
According to Chairman of PIAC, Dr Steve Manteaw, the future generations are assured because the money has not been touched.
Contrary to what was being circulated in the media that it was being used to fund the current government’s flagship program, the Free Senior High School Policy, Mr Manteaw says that money is a safe investment.
“The future generations are assured with regards to the Heritage Fund. The money has not been touched. As we speak, the Heritage Fund has accumulated something close to US$500 million, which money is there and is invested.”
But the Policy Analyst thinks the country can rake in more money if the Ghana National Oil Company focuses on its core mandate.
According to Ghana’s laws, GNPC is a corporation which started operations in 1985 and is a partner in all petroleum agreements in Ghana.
On GNPC’s own website, the company describes itself as Ghana’s National Oil Company (NOC), established in 1983 by PNDC Law 64, to support the government’s objective of providing adequate and reliable supply of petroleum products and reducing the country’s dependence on crude oil imports, through the development of the country’s own petroleum resources.
The PNDC law 84, Petroleum [Exploration and Production] Law which was enacted in 1984 to provide the regulatory framework for the exploitation of the country’s hydrocarbon resources also establishes the contractual relationship among the state, GNPC and prospective investors in upstream petroleum operations. The law grants GNPC the right of entry into any open acreage to undertake exploration activities.
It is because of these established functions that the PRMA made provision for payments to be made to GNPC to support its activities.
As stated earlier, payments from the PHF to GNPC are to cater for the cost of financing its activities in relation to the interest it holds in petroleum agreements.
But over the years, the corporation has been in the news for undertaking activities described by many as not being part of its core mandates.
In 2013, the company signed a five-year contract deal with the Ghana National Team, Black Stars. This didn’t sit well with many Ghanaians and called for the cancellation of the contract. Subsequently, Parliament in 2017 ordered the corporation to stop spending resources on non-core activities, including sponsoring the Ghana Black Stars.
The corporation’s Chief Executive Officer, Dr K.K. Sarpong, was also accused by a policy think tank, IMANI Africa, of engaging in a conflict of interest situation in a US$4.4 billion petroleum agreement between Ghana and Arker Energy Ghana Limited, though Dr Sarpong denied having shares in the fuel trade.
A report by graphiconline.com on Thursday April 24 said that the Vice President of IMANI Africa, Mr Kofi Bentil, alleged that Dr Sarpong “and his family own Fueltrade,” one of the local partners of the Deepwater Tano / Cape Three Points (DWT/CTP) Petroleum Agreement, with a two per cent stake.
But in a press statement responding to the allegation, Dr Sarpong stated: “I wish to state emphatically that neither I nor my family owns Fuel Trade as claimed by IMANI Ghana”.
Dr Sarpong subsequently demanded an apology from Imani, which was done by the policy think Tank.
The policy Analyst posited that all these banters could be curtailed if GNPC is more focused on its core mandate and transparent in its dealings.
He said “You can’t say a corporation shouldn’t carry out CSR but it should have a core activity that it undertakes.
“GNPC can do CSR but not with the money they get from the oil funds, they should rather work with that money and generate revenue so that they can use that revenue to do their CSR works.
“We have to find a way of increasing the PHF and that way is to ensure that a lot of activities is ongoing in our fields. We have had a situation where we have discovered fields, given it to companies and these companies have just taken hold of the fields but are not exploring so this does not ensure a lot of activities on our fields and GNPC is the organisation that can make it happen,” he added.
He also called on GNPC to ensure that the appraisal processes are very competitive to enable country to secure the most competent and financially sound companies to handle our oil blocks.