EITI report reveals a government agency refuse to disclosed data on oil revenue

A final report on the aggregation and reconciliation of oil and gas sector payments and receipts for 2010 and 2011 by the Ghana Extractive Industries Transparency Initiative has reveal the unwillingness on the part of some big players in the industry including a government agency to disclose information regarding their earnings. The Bank of Ghana, which is responsible for the day-to-day operational management of the Petroleum Holding fund, the Ghana Petroleum Funds and subsequently the Ghana Petroleum Wealth Fund under the terms of the Operations Management Agreement as captured in Section 26 of the Petroleum Revenue Management Act, 2011, declined to provide details of the petroleum Holding Fund Account. Other companies that also refused to participate in the process were Sabre Oil and Gas Limited and Anadarko (Ghana) Limited. This was contained in the first ever oil and gas aggregated report on the oil and gas industry in Ghana. According to the report authored by Messrs Boas and Associates (an independent third party) on behalf of the Ghana Extractive Industries Transparency Initiative, the “The EITI reporting process has been challenging as companies and government institutions were reluctant to provide data. In general International Oil Companies (IOC’s) were not willing to provide information beyond payments made to the government. Some actually stated their unwillingness or inability to provide information beyond that which is statutorily required.” Sharing this frustration, the National Coordinator of the Ghana Extractive Industries Transparency Initiative, Mr. Franklin Ferdinand Ashiadey noted that some of the companies are hesitant to disclose their earnings because they opined that the EITI is not obligatory, emphasizing that, “This is why we are seriously pushing for the Ghana Extractive Industry Transparency Initiative Bill, which makes it obligatory and mandatory for companies and government institutions to disclose information. The Bank of Ghana for instance was not ready to disclosed oil and gas revenues they have received because they insist the Bank of Ghana Act has made them independent. The Bank has been operating in a world their own for far too long. If the GHEITI Bill is passed we do not hope to encounter the challenges that we are having with the Bank of Ghana in future again.” The EITI aims at enhancing transparency around the generation and spending of revenues from extractive sector to improve development outcomes reduce the potential for corruption or large scale embezzlement of funds by host governments and to provide citizens with a basis for demanding a fair share of its resources. This report presents the results of the reconciliation of payments by the oil and gas companies including the National Oil Company, GNPC, and receipts by the Government of Ghana. They include both cash and in-kind flow payments in 2010 and 2011. The participating oil and gas companies in the reconciliation exercise consisted of partners in the Jubilee producing field and the Saltpond offshore Producing Company. Relevant Government Ministries, Departments and Agencies in the petroleum sector also participated. The assignment was categorized into three phases. These included: inception, Reconciliation and the validation and feedback phase. The objectives of the report include the following: collect, analyze and aggregate payments made by oil and gas companies to Government of Ghana; reconcile oil and gas companies’ submissions of payments to those received by Government; analyze the disbursements to the Ghana National Petroleum Company (GNPC), Annual Budget Funding Amount and the Ghana Petroleum Funds; and utilize lessons learnt from the reconciliation process to enhance Transparency in payments, receipts, disbursements and utilization of these benefits. The terms of reference (TOR) for the assignment however required the reconciler to analyze and comment on some details including operating cost, capital allowance computation, prices and liftings by GNPC and the IOC’S. Surprisingly, all the companies and relevant government agencies associated with the oil and gas industry were represented on the committee that came out with the terms of reference for the reconciliation. “They knew the terms of reference and therefore it was startling that they are not forth coming with the necessary information being asked of them,” Mr Ashiadey pointed out. “If you looked at the TOR it is very far reaching. We wanted to dig really deeper than required by the international EITI and get to the bottom of some the problems and gray areas that has not been addressed by the international EITI” he added. Mr. Ashiadey pointed out that the essence of the EITI report is to sensitize and empower ordinary citizen to know how much their natural resources are generating. It is also to empower civil society groups to take it up as an advocacy tool to go out there and ask the right questions and get maybe the right answers from the people who are in authority or power. This has to do with accountability and transparency. The report will help people to ask how monies given to the District Assemblies from for instance the mining side was used by the local authority. This will help the local people demand accountability from their local leaders by so doing making them careful of how they use revenue from their natural resources. The EITI Steering Committee apart from sensitizing the people and holding district and regional stakeholders meetings also follow up on the recommendations emanating from the various EITI report to ensure that they are adhered to or implemented. “Today we have our royalty reviewed from 3% to 5% in the mining sector as a result of a follow up to a recommendation made in one of the numerous EITI reports on mining,” Mr. Ashiadey pointed out. RECOMMENDATION The oil and gas aggregated report recommends the harmonization of the provisions in the Petroleum Income Tax Law and the Internal Revenue Act, Act 2000. It is recommended that tax losses are carried forward for five years in the petroleum industry as pertains in the mining industry. The practice of carrying forward capital allowances indefinitely in the mining sector may also be extended to the petroleum industry. It further recommends that legislation similar to the amendment on ring fencing in the mining sector should be introduced in the petroleum industry to production areas. As many fields commence production ring fencing legislation is needed to ensure early corporate tax receipts. This however should be viewed against the need to obtain more geological data from Greenfields. PIAC REPORT VERSUS EITI REPORT One outstanding feature in reports issued by both the Public Interest and Accountability Committee (PIAC) in its semi-annual report and the EITI’s first ever oil and gas aggregated report is that the provisions of Act 815 on allocation of petroleum revenues have not been strictly followed. However, the basic difference between the Public Interest Accountability Committee report and the EITI report is that the PIAC report is one sided. It focuses only on what has been paid and received but does not reconcile the two. But with the EITI there is an independent third party who collects the data independently and reconciles them. Some times during the reconciling process it is discovered that what companies have reported paid is different from what government has reported received. When this discrepancies happens the reconciler calls for an investigation audit. For instance, the oil and gas aggregated report discloses that there were discrepancies in payment and receipt of surface rentals in 2010 and 2011. In 2010 a discrepancy of US$6,028 was recorded, whilst an amount of US$465.63 was established in 2011. A PIAC report looks at how institutions that have been mandated to implement the Revenue Management Act are performing their duties. The utilization process is also very key in a PIAC report to show how oil revenue is being disbursed. Though the EITI report tries to go a little bit into the utilization aspect, it is not what the report seeks to do. The EITI report seeks to check whether there has been some corruption. EITI reports deals with only audited accounts both from government agencies and companies, whiles a PIAC report may not necessary do so.