ACEP launches www.ouroilmoney.org website

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By Seibik Bugri

Key stakeholders in Ghana?s oil and gas sector have resolved to be more transparent since their actions and inaction in the sector ?has profound consequences on the people of Ghana? and that they are committed to supporting an accountability and transparency mechanism initiated by the Africa Centre for Energy Policy (ACEP). This bold commitment to accountability, was made at a ?Multi-Stakeholder Forum on Accountability Reports per the Petroleum Revenue Management Act 815? when they (key Stakeholders) collectively launched the www.ouroilmoney.org online platform in Accra.

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The Ministry of Finance (MoF), Bank of Ghana (BoG), Ghana National Petroleum Corporation (GNPC), and the Public Interest and Accountability Committee (PIAC) are the key bodies that deal with the finances and governance issues of the oil and gas sector of Ghana. And therefore their importance to accountability and transparency cannot be underestimated.

www.ouroilmoney.org is a site that captures timely data on all aspects of the sector from these key stakeholders and others as well. The site will be a platform for citizens? interaction and feedback collection point. It is important to state that all the data on the site comes from government sources.
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It is instructive to know that all these organizations were grateful to be associated with the initiative by ACEP and supported by the Danish NGO IBIS and pledged to support the site with the necessary reports and data to achieve the intended desire for which it was created.
PIAC.

Contributing, PIAC representative, Yaw Owusu Addo noted with pleasure how the site will enhance the job of timely reporting and disclosure of the various data from the relevant organizations it?s mandated to work on. PIAC is mandated to report exactly how oil revenue is disbursed and ensure that the projects that the revenue is said to be used for is actually what it is. Especially the social sectors of the economy such as water, schools, and agriculture. PIAC then makes its mandated quarterly reports and findings available to the President and Parliament of Ghana.

MoF
Doing a short presentation, the Ministry revealed that PIAC which has suffered from funding since its creation will soon be a thing of the past as the amended Petroleum Revenue Management Act 815 ensures that regular funding will be given by the MoF for its work as mandated by the law. Adding his voice Yaw Owusu Addo, noted that deliberate and disgraceful starving of the PIAC as if it was somebody?s personal institution and not a creation of the laws of Ghana seeking the interest of all Ghanaians including all those at the MoF is welcome. In its ?stillborn? years it was foreign donors (Giz, NRGI) until these revelations that assisted in keeping the PIAC alive. For two years PIAC had great difficulties in carrying out any of its mandated activities. It had no office space to operate from, no paper, let alone salaries. He continues ?this is a body that is supposed to superintend on oil revenue and yet lack revenue itself?.

BoG
Nana Aba of the BoG took participants through the various laws? requirement and how revenue from the sector was disbursed and its utilization. The various funds operated by BoG and requirements.
Accountability.

Leading the discussing, a former leader of the Public Accounts Committee of the Parliament and chairman of the occasion, Kan Dapaah, explained that accountability and transparency issues was nothing more than the availability of information and necessary data from all stakeholders charged with handling oil and gas revenue and so that why this launch was more than necessary to the enhancement of accountability. And urged all bodies to be forth-coming with information for the site for all those who need them to access. He superficially urged BoG to do more in that direction adding that the presentation was no more than a re-harsh of the norm, no details. He was worried that inspite of the availability of this site and its contents another disturbing factor is whether recommendations are implemented for meaningful effects.

Civil Society

Moderating, Emmanuel Kuyole of Natural Resources Governance Institute (NRGI) asked what the presentation by the two ministries can be used for. And that we as a people should move beyoung that to getting more. Citing the Agriculture sector to buttress his point, he stated that oil revenue allocations to the sector were nothing more than a waste as the needed effect of that allocation did not only achieve its desire outcomes but did not reach the sector as budgeted. And so all stakeholders must track the allocations from the MoF to see if indeed what the law requires of them is truly taken place.
In addition he cited Ministry of Fisheries and Aquaculture who?s highest budgetary allocations in 2014 was office building which was strange that revenue oil would be used for office building instead. And that tracking was very important to achieve the needed development we all want for Ghana. Participants were unanimous that oil revenue allocations to state institutions should be given the needed tracking.

ACEP
Ben Boakye of ACEP noted that the essence of the site was to deepen the accountability mechanism of the sector for the good of Ghana. It will also make it easier for all to access data without having to hassle from a one-stop-shop platform authentic source. With the support of IBIS, ACEP brought all the stakeholders to assist in making the vision of transparency to the people who need the information to make decisions as part of value for money. The site will afford an active participation of the citizenry. It has enabled SMS, charts, downloadable reports and engagement for interactive purposes. It also displays statistics, timelines, projects, characteristics of areas.

Participants at a two-day- workshop on ?Fiscal Systems in the Petroleum Sector? for Anti- Corruption Agencies and other allied state agencies in the sector have agreed to share vital and critical information pertaining to criminal activities to enhance investigations into issues of underhand dealings, over and under invoicing and other malfeasance in Ghana?s extractive sector. This, they noted will lead to precision and pining down of criminals and culprits whose activities cause economic loss to the state and the public purse.

Drawn from officials in the Judiciary, the security services, and other state agencies, the top officials of Ghana Police, Economic and Organized Crime Office, Financial Intelligence Center and the Audit Service of Ghana among others were taken through ?Petroleum Fiscal System, Fiscal Regimes Sector, Petroleum Revenue Management and Petroleum Revenue Accountability?.

Educating them, Dr Mohammed Amin Adam, Executive Director of the Africa Centre for Energy Policy (ACEP) revealed that contracts are often not accessible but fiscals terms are available in the annual reports, websites and other sources of the companies and investors to enable investigators to come to a well-informed conclusion to warrant prosecution. The investigators were educated on what to look for in revenue data information in the sector.

Data Integrity & Accounting Standards

Touching on crude oil pricing and accounting, Dr Adam explained that there is a price difference between the price offered by Ghana for its share of the oil and that of the companies and the international market which is important for policy forecasting purposes. However, these have revenue implications for the country. Coming mainly from anti-corrupt agencies, they should not accept blanket figures from government and other investors because of tax purposes which tell the public which companies paid the various taxes and under what parameters.

He reminded them to focus on comparison of fiscal terms with revenue generated as reported, crude oil price accounting, crude oil (barrels) accounting ? volume and value of oil, oil revenue accounting, the actual inflows and outflows of the Petroleum Revenue Holding Account. Other sectors are amount transferred to the Consolidated Fund, amount transferred to the Petroleum Revenue Investment Reserve, Investment income from the Investment of the Reserve Fund, reconciliation of transfers between the Holding Funds and other Funds he revealed.

Ownership

?The citizens of Ghana are the primary owners of the country?s oil and gas resources, which have been entrusted in the President to manage on their behalf. The trustee President or Government of Ghana should inform the citizens regularly about developments in the management of the resources. Failure to compile this mandatory requirement for the disclosure of oil contracts has therefore provided convenient room to hide badly negotiated oil contracts from citizens? scrutiny. ?The Government has published 7 out of 23 active oil contracts. However, the discretion to publish some contracts and leave others does not give good account of comprehensive disclosure regime and this is largely due to the fact that there is no framework?.

Also, the lack of a framework for the disclosure of beneficial ownership information of directors of companies holding oil contracts is not helping matters. ?The extent of vested interest sometimes leads individuals with political connections to submit companies for the award of oil contracts without disclosing the identity of the owners of the companies?. ?Local directors often represent the companies whilst the true owners are at large, often hidden in the books of secret jurisdictions such as Gibraltar or British Virgin Islands where the parent companies or their subsidiaries are incorporated. This increases vested interest, which has the potential to create an elite class dominating benefits from the oil and gas industry at the expense of the citizens, who are the primary owners of the resources,? the statement added.

What must be disclosed for Accountability?

The disclosure of revenue data is as important as the disclosure of the parameters used in arriving at the data reporting. Dr Adam explained that in some countries revenue data is accessible by law or by voluntary initiatives but the parameters are not indicated. Relevant data pointers for Accountability should look at the contents of contracts, revenues, and expenditures that anti- corrupt agencies should look at.

Dr. Adam added that there are also standards that facilitate access to extractive revenue and expenditure data, mandatory contract disclosure as in the Europe, mandatory and voluntary payments disclosure (EITI) process. The EITI process reconciles what government claims it has received from companies and what the companies say they have paid to government in terms of revenue.

In some countries companies listed on Security and Exchange Commission?s demand that those companies publish all documents and transactions. And these are areas they can get information to carry out investigations. Also companies have corporate governance principles that facilitate public reporting on its activities and finances, Accountability institutions such as theirs need a combination of these standards to facilitate access to extractive revenue and expenditure data to carry out informed decision and prosecutions.

US probes Ghana shady oil deals
Kwabena Adu Koranteng Member of the Journalist Against Corruption)

The United States department of Justice has begun investigations into some dubious oil contracts signed between the government of Ghana and the oil companies operating in the country. On top of these deals are the recent contracts signed under the certificate of urgency without proper scrutiny and community engagement as well as transparency in the area of tender and competitive bidding.
This was disclosed by Dr Mohammed Amin Adams, Executive Director of the Africa Centre for Energy Policy (ACEP) at a two day workshop organised for state officials in the Judiciary, the security services, and other state agencies.
Mr Amin Adams indicated that several documents have been intercepted by the United states Department of Justice and in collaboration with some criminal investigators who are already in Ghana; these so called classified documents are being analyzed. When the investigations are completed, the officials involved would be seized on the orders of the United States and prosecuted.

Corruption?
Dr Adam noted that if care is not taken, the current framework conditions put in place by state actors for governance and management of the oil and gas resources are ripe in promoting corruption. ?Ghana has a relatively young oil and gas industry with only one producing well, and another well now under development and expected to come on stream by the end of 2016. However, some of the laws and regulations that have been developed so far provide significant risks for corruption and therefore have the tendency of undermining the country?s resolve to escape from oil curse, a phenomenon that has afflicted many oil rich countries in which vested interests have overtaken national interests, he pointed out

Throwing more light on the dangers, he listed some as lack of application of open and competitive public tender process in the award of petroleum licenses. Petroleum licenses are awarded through an administrative process, which opens up to potential corruption. The deliberate failure to develop regulations for the application of competitive bidding as provided for in Section 32(m) of the Petroleum Law, has demonstrated the lack of political will by all Ghanaian governments since 1984 to open the process for petroleum licensing and thereby increasing the risks of corruption. Close to 30 years now since the Petroleum Law came into forces, no competitive bidding of oil blocks even though the rules requires it.

Sadly, Ghana?s new Petroleum (Exploration and Production) Bill 2014 does not provide for the disclosure of beneficial ownership information, which therefore provides serious governance risks with implications for increasing corruption. Another risky behaviour is that most of the companies granted oil contracts are not publicly listed companies and are therefore not regulated. For example, of all the companies involved in new Petroleum Agreements signed between 2013 and 2014, only four are publicly listed, six are incorporated in secret jurisdictions and 5 are incorporated in Nigeria. Therefore, apart from those publicly listed, the beneficial ownership information of the rest is not publicly available.
Local Content and Local Participation
Another bad and risky behavior is that the local content regulations provide the environment for rent seeking behavior as beneficiaries of local content requirements from equity participation, jobs and the provision of services are often influenced by ones relationship with an oil company, a public official or a politician. The recent regulations passed in Ghana, the Petroleum (Local Content and Local Participation) Regulations (LI2204) empowered the Minister responsible for Petroleum to abuse the qualifications for local content beneficiation. In regulation 4, the LI provides for a minimum of 5% equity for indigenous local persons or firms in a Petroleum License and 10% in a service company. However, sub-regulation 4 further provides the Minister responsible for Petroleum the power to decide on persons who qualify to hold the minimum equity. Without clear regulations on the criteria for determining qualifications, the LI has subjected the process to potential abuse, which may have implications for corruption in the oil and gas industry.
The operations of the National Oil company, Ghana National Petroleum Corporation (GNPC) and the mode of financing its operations as provided for in Section (15(2)) of GNPC Law which requires the ?Corporation to borrow money only on the recommendation of the Secretary and with the approval of the Secretary responsible for Finance as to the amount, source of the loan and the term and conditions under which the loan may be effected?, only provides a convenient route to seek loans without parliamentary scrutiny. Danger is that the ties between the GNPC and the Government are seldom transparent and could provide space for the government to turn the corporation to a cash cow or turn its accounts to a slush fund, approving loans for the corporations which are spent outside the budgetary processes.
EO Group
Citing a number of cases to buttress their arguments, ACEP say Developments on the oil and gas sector so far show that coming events cast their shadows. Some of the instances that have cast their shadows are: ? Government commenced investigations into EO Group?s alleged involvement in ?causing financial loss to the state, money laundering and making false declarations to public agencies?. The Attorney General of Ghana reportedly said at the time, ?The signs are pointing to the fact that we have gathered enough evidence we believe in order to give us serious concern about the activities of the company offending against the laws of this country,? However, whilst the US authorities announced the conclusions of its investigations, including the fact that the EO Group did not violate US laws particularly under the US Foreign Corrupt Practices Act; we are not sure whether these conclusions held for Ghana?s investigations into violation of Ghanaian Laws. Unfortunately, till date, the Government of Ghana is yet to announce the conclusions of its investigations into the matter. There have been suggestions that this might be due to alleged compromise of some public officials. We are also at a loss why Government, which raised such serious charges against EO GROUP eventually, approved the sale of EO?s shares to Tullow Oil at over US$300 million.

Abrogation of Petroleum Agreement

Another instance of shady deal is the Abrogation of Petroleum Agreement by the Minister of Energy between the Republic of Ghana, GNPC, Aker ASA and Chemu Power Ghana Ltd over the South Deep Water Tano Contract Area, without a parliamentary assent, the Minister of Energy unilaterally abrogated the license, claiming that a Ghanaian registered company, and not Aker ASA as was the case, should have been the signatory to the Petroleum agreement. The Petroleum Agreement (PA) under reference was unanimously ratified by Ghana?s Parliament; it had had the appropriate approvals of the Ministry of Energy, Cabinet and the GNPC Management and Board as required by the laws.

The Minister in abrogating the Contract contended that there were some ?legal defects? with the Agreement because Section 23(15) of the Exploration and Production law 1984 (PNDC Law 184) clearly required that a Ghanaian registered company ought to have been the signatory to the Petroleum Agreement, and not AKER ASA?. This was in spite of the advice granted the Minister by GNPC in a letter which stated that the solution to that ?legal defect? laid in AKER ASA transferring and/or assigning the Agreement to AKER GHANA LIMITED, the entity that would be operating the Agreement.

GNPC further stated, ?This assignment is permitted under the provisions of article 25 of the Agreement?. It added that ?Indeed Aker Ghana Limited has commenced work and currently has a seismic vessel on location in its contract area to acquire approximately 2,600 square kilometers of 3D seismic data which exceeds the 1,500 square kilometers negotiated in the Petroleum Agreement?, Interestingly, the Majority Leader in Parliament, Hon. Cletus Avoka reportedly said ?Procedurally, if Parliament takes a decision on a matter, particularly ratifying an agreement, and later on there are lapses in that agreement, the Minister cannot arbitrarily arrogate to himself the authority to abrogate the agreement.? However, Parliament did not do anything about this. Whilst we do not fault government for ensuring that Ghana?s laws are protected however minor the legal defects may be, we equally think that the national interest and not self-interest should guide all such decisions. There are suggestions that this action was taken because another company felt it deserved the block but was denied. Therefore, was this decision to abrogate the Agreement without Parliament?s involvement induced by self-interest or the national interest?

AGM Petroleum Ghana Limited

Continuing, Dr Adam noted that what is worrying is the complex ownership structure of AGM. AGM Petroleum Ghana is 100% owned by AGM Gibraltar registered in a tax haven. AGR Energy, Minexco OGG and MED Songhai Developers own AGM Gibraltar. Minexco OGG is also registered in Gibraltar and is owned by Minexco Petroleum and WA Natural resources also registered in Gibraltar. Minexco Petroleum is also owned by Minexco Group. On the other hand, AGR Energy is a subsidiary of AGR Group, which is also a subsidiary of Altor. Very confusing ownership structure indeed.

Also curious is the fact that the area was granted to AGM under fiscal terms not different from the previously abrogated contract under Aker ASA in spite of the 3D Seismic work carried out on the area and for which the work obligations on the area were greatly enhanced. The fiscal terms include oil royalty of 10%, gas royalty of 5%, initial participating interest of 10%, and additional participating interest of 15%; and corporate tax of 35%. These terms are not different from the previous contract with AKER ASA on the same block in spite of the significant reduction in the risk profile on the block. The abrogation of the contract with Aker ASA and the subsequent award of same area to AGM without favorable variations in the fiscal terms raise more questions that demand answers.

Is it $15 million or $ 23 million to GNPC?

Another area of concern is the Government announcement that Kosmos had paid $15 million as fine for data disputes and the spilling of 706 barrels of toxic mud. However, it turned out that kosmos paid more than announced, stating in its 2011 Annual Report that ?as part of such agreement and with respect to one particular issue, we (Kosmos) agreed to pay GNPC $8 million upon signing the settlement agreement and $15 million upon the first to occur of certain liquidity events, including the successful completion of our IPO?. Thus, the company paid a total of $23 million.

Kosmos also showed that contrary to government?s announcement that the $15 million was for both the data and spill disputes; the payment was indeed for one of the disputes. There were five disputes between kosmos and government including ?disagreements over sharing information with prospective purchasers of our interests, pledging our interests to finance our development activities, the failure to approve the proposed sale of our Ghanaian assets and assertions that could be read to give rise to taxes payable under the Ghanaian Tax Law in connection with this offering?. It is worth noting that a Committee set up by the Ministry of Environment had earlier imposed a fine of $25 million on kosmos as penalty for the spill of mud. All these leaves Ghanaians with many questions than answers.

?We demand answers from Government and GNPC on the exact amount of fines paid by Kosmos; and whether the fine was in respect of the data and spillage as announced by Government or covering only one dispute as reported by Kosmos?

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