Petroleum Revenue Management in 2011 ANNUAL REPORT PUBLIC INTEREST AND ACCOUNTABILITY COMMITTEE GHANA WASHINGTON, 1 ST JUNE 2012
Petroleum Revenue Management Act, 2011 Petroleum Revenue Management Act, 2011 (Act 815) - Revenue management system: Annual Budget Funding Amount Stabilisation Fund Heritage Fund - Roles of new and existing institutions within the system Public Interest and Accountability Committee
Introduction to the Public Interest and Accountability Committee Rationale Objectives Monitoring and evaluating compliance with the Act by the Government and other relevant institutions in the management and use of petroleum revenues, Providing a platform for public debate on spending prospects of petroleum revenues in line with development priorities; Providing an independent assessment on the management and use of revenues Membership from across society
PIAC reporting Annual report due on the 15 th March each year Scope: Ghana s petroleum sector Projections for 2011 Oil production in 2011 Exploration, development and production costs Government receipts in 2011 Allocation of government receipts in 2011 Projections for 2012 Roles of institutions Methodology for this report
Ghana s oil and gas sector Exploration Production Jubilee Field Saltpond Field
Key findings - 1 Mid year passage of Act 815 led to two projections of oil revenues for 2011. October 2010 2011 budget July 2011 2011 supplementary budget
Key findings - 2 Outturn of petroleum revenues was 53% of projections Actual mil) (GH Forecast mil) (GH Variance mil) (GH Total Oil Revenue 666.2 1,250.0 (-) 583.8 o/w Royalties 184.4 201.25 (-) 16.9 o/w Carried and Participating Interest o/w Corporate Taxes 481.8 445.77 36.03 NIL 603.76 (-) 603.76 Sources: Government of Ghana-2011 Supplementary Budget; 2012 Budget Statement; Petroleum Receipts and Distribution Report for Period Ending 30th September 2011 and 31 st December 2011.
Key finding - 3 Ghana s lifting of 3,930,189 barrels represented 16% of total liftings. Table 5: Crude Oil Lifting by Jubilee Field Partners in 2011 COMPANY QTYLIFTED( BBL) %LIFTED YEAR END STOCK TOTAL Tullow Ghana Ltd & EO Group 8,617,372 35.24278 Kosmos 5,970,592 24.41815 Anadarko & Sabre OG Ltd 5,933,299 24.26563 Ghana Group 3,930,189 16.07344 649,138 4,579,327 TOTAL 24,451,452 100 914,362 25,365,814
Key finding - 4 Not all payments expected to go into the Ghana Petroleum Holding Fund were reported on. Royalty Carried interest Participating interest Corporate Tax Surface rentals Saltpond production? Others In respect of the Jubilee Field operations
ALLOCATION OF REVENUES Oil revenues were allocated as follows:
Key finding - 5 GNPC was allocated GH 315,390,698, representing 47% of total Government oil receipts in 2011. It presented its programme of activities to Parliament. It is currently under audit and is yet to publish a report on the use of the funds.
Key finding 6 The Annual Budget Funding Amount received GHS 250,432,600. Seventy percent was allocated to capital expenditure, guided by the GSGDA. Table 11: ABFA Capital Expenditure in 2011 ITEM Expenditure (GH ) % 1. Expenditure and Amortization of loans for oil and gas infrastructure 20,000,000.00 11.5 2. Road Infrastructure 134,102,367.20 76.5 3. Agricultural Modernization 13,147,652.00 7.4 4. Capacity Building (including oil and gas) 750,000.00 0.4 5. Unreported spending (Q4) 7,302,800.80 4.2 Total ABFA for Capital Expenditure 175,302,820.00 100 *GSGDA - Ghana Shared Growth and Development Agenda
Key finding - 7 The Minister of Finance and Economic Planning is yet to sign the Operational Management Agreement with the Bank of Ghana for the Ghana Petroleum Funds. Allocation Amount (Actual) - GH / % Amount (Act 815) - % GH Transfer to the 103,808,031.7 100 103,808,031.7 100 Ghana Petroleum Funds o/w Ghana 21,799,687.0 21 31,142,409.51 30 Heritage Fund o/w Ghana Stabilization Fund 82,008,345.0 79 72,665,622.19 70
Key finding - 8 Delays in the establishment of agencies and procedures created under Act 815. For example: Public Interest and Accountability Committee Investment Advisory Committee Operational management agreement Lack of clarity around roles Investment policy not yet developed
Key finding - 9 Inconsistencies within the law which lead to implementation challenges for Act 815 Definition of Benchmark Revenue
Key finding - 10 Problems with the estimates used to define the benchmark revenue for 2012. Amount (GH million) Total Annual Oil Revenue 1,239.82 o/w Royalties 236.87 o/w Carried and Participating 618.84 Interest o/w Corporate Taxes 384.11
Recommendations - 1 MOFEP must use the methodology for determining the Benchmark Revenue set out in the law. involve all relevant institutions Independent certification
Recommendations - 2 Revenue overspill from 2011 must be reported on in 2012. Appropriate regulations should be enacted by parliament to deal with such occurrences likely to continue in future years due to the nature of the lifting agreements (COLA).
Recommendations - 3 MOFEP should take steps to account for the 2011 unaccounted proceeds in the Petroleum Holding Fund in a special report to Parliament and ensure that all receipts are reported on in future.
Recommendations - 4 Government must expedite the process for the development of a nationally owned long-term development plan in line with the provisions of Act 815 to guide the productive and efficient utilization of petroleum revenues for national development.
Recommendations - 5 In the interest of public accountability and transparency, GNPC must publish an interim report on the utilisation of the funds it received as part of the appropriation of petroleum revenues in 2011 pending the release of its annual report and audited financial statements.
Recommendations 6 The Minister of Finance and Economic Planning must sign the Operational Management Agreement with the Bank of Ghana as soon as possible
Recommendations - 7 Government must provide the necessary resources for all institutions with responsibilities under Act 815 and ensure that they have the required capacity to carry out their responsibilities effectively
Recommendations - 8 The Minister of Finance must initiate action to amend those portions of the law and/or draft regulations to provide increased clarity in determining the composition of the Petroleum Holding Fund and, by extension, the Benchmark Revenue.
Recommendations - 9 The Committee recommends that Parliament investigate the matter of the potential overestimation of the Benchmark Revenue for 2012 as raised by the Committee and advise the Ministry of Finance and Economic Planning accordingly. They should request explanations for noncompliance with provisions of the act and develop a sanctions regime.
Recommendations - 10 The Auditor General must begin the process of auditing of the Ghana Petroleum Funds as prescribed by Act 815.
Conclusion Challenges Resources Access to information Lessons learned
Utilisation of this report Act 815 requires that the report Be submitted to Parliament Be submitted to the President Be published on the website Be printed in the national dailies
Reactions to the report Media coverage Legal action Disclosure
Questions and Answers
Thank you