Foreign Oil Companies Not Shortchanging Ghana – Alex Mould
Former Chief Executive Officer of the Ghana National Petroleum Commission (GNPC), Alex Mould, has shot down claims that Ghana is being shortchanged by multinational companies working in Ghana’s oil fields.
According to him, the companies have over the years put in measures to ensure that there are benefits to Ghana.
Ghana could have made $11 billion in the oil sector
An oil and gas policy think tank, Centre for Natural Resources and Environmental Management (CNREM), has claimed that Ghana could have made over $11 billion instead of $4 billion in oil revenue over the seven years of mass production of oil in Ghana.
They say Ghana would have made more profit if it used the production sharing agreement instead of the hybrid system which depends on royalties and taxes.
According to CNREM, Ghana also lost over $900 million because the oil companies paid lower taxes and royalties to the State, and further advised the government.
The Executive Director of CNREM, Mr. Solomon Kwakumey, while speaking on the Citi Breakfast Show on Wednesday, further argued that some countries including Nigeria and Libya are making more from their oil resources because they are practicing the production sharing method.
“The hybrid system is skewed towards the collection of taxes and royalties. It is challenging to collect taxes from multinationals. Secondly, under the hybrid system, we transfer our sovereignty and ownership of the oil to the foreign oil companies. The hybrid system is just a small modification of traditional concession…just as the way we have given out gold concessions where we get only taxes and royalties from the mining companies; it is the same old thing being applied in the oil sector.”
The Director of the Center further explained that under the production sharing agreement, the output of the oil which is strictly shared between the host nation and the foreign oil company.
This he said, is “because the oil is our sovereign property under the production sharing agreement. You don’t transfer it to the foreigner, we still have control over it. So it is only output that is shared and not money.”
But reacting to CNREM’s claims, Alex Mould said such arguments are “myopic” because the multinational companies have to recoup their investments, adding that Ghana would begin making extra from the oil fields after the investments are made by the oil companies.
“That will be a very myopic way of looking at it. You have to remove a few things from that. You have to remove all the investments and cost of producing the fuel from that. After that, look at the taxes that are paid, we don’t pay the taxes from oil. So that is why I say it is a little more complicated than what the gentleman has portrayed. So the citizens of Ghana should be rest assured that the government is doing everything possible to increase the yield for the country.”
“Most of the countries he is talking about, most of the equity have been paid back. So the investment cost has been paid back, and that is why it seems they are benefiting by about 75%…These are fields that are either ten years or more than five years because when you put an investment in, you are allowed to recoup that investment in the first five years.”
Touching on the Jubilee Field, Mr. Mould said about $5 billion was invested in it “So that amount would be extracted from the first production in the first five years, when you finish paying back all the investments, then you could find out that the amount that is going to the state will increase.”
Hybrid system more transparent
On why Government still used the hybrid system, Mr. Mould said it is more transparent than the production sharing mode.
“The reason why we used the hybrid system was that we believed that the hybrid system was more transparent for both the investor and the government. The [multinational oil companies] have refined that system to our benefit as the years have gone by.”