MINISTRY OF FINANCE GHANA EXTRACTIVE INDUSTRIES’ TRANSPARENCY INITIATIVE (GHEITI) FINAL GHEITI report ON the oil/gas sector -2014 DECEMBER 2015 Prepared by: Boas & Associates P. O. AT 1367 ACHIMOTA-ACCRA GHANA MOBILE: 233 244 32 6838 EMAIL: [email protected] TABLE OF CONTENTS LIST OF ABBREVIATIONS/ACRONYMS……………………………………………………………………….....i 1.0 BACKGROUND .................................................................................................................................................... 1 1.1 BRIEF ON EITI IN GHANA ............................................................................................................................ 1 1.2 CONTENT AND OBJECTIVE OF THE REPORT ........................................................................................... 2 2. 0: APPROACH AND METHODOLOGY .............................................................................................................. 4 3.0 THE OIL /GAS INDUSTRY IN GHANA ............................................................................................................. 6 3.1ACTIVITIES WITHIN THE OIL & GAS SECTOR .......................................................................................... 8 3.2 GHANA’S REGULATORY FRAMEWORK FOR THE PETROLEUM SECTOR ........................................ 12 4.0 RECONCILIATION ............................................................................................................................................ 43 4.1 DATA COLLECTION & ANALYSIS ............................................................................................................. 43 4.2 MATERIALITY ............................................................................................................................................... 44 4.3 REPORTING ENTITIES ................................................................................................................................. 49 5.0 RESULTS OF RECONCILIATION…………………………………………………………………………......60 6.0 PETROLEUM EXPENDITURE ACCOUNTNG………………………………………….……………………78 6.1. DISTRIBUTION OF PETROLEUM RECEIPTS……………………………………….…………………...79 7.0 MAIN FINDINGS AND RECOMMENDATION……………………………………….………………..…..104 8.0 CONCLUSION…………………………………………………………………………...…………………....108 9.0 APPENDICES……………………………………………………………………………….…………………109 APPENDIX 1: TERMS OF REFERENCE…………………..……………………………………………….….....110 APPENDIX 2: DETAILS OF RECONCILIATION………………………………..……………………………...115 APPENDIX 3: ACQUISITION OF OIL BLOCK……………………….…………………………………...……118 APPENDIX 4: TRAINING AND TECHNOLOGY.................................................................................................119 2014 Oil & Gas Sector GHEITI Report LIST OF ABBREVIATIONS/ACRONYMS CAGD Controller and Accountant General’s Department CAPI Carried and Participating Interest EITI Extractive Industries Transparency Initiative GHEITI Ghana Extractive Industries Transparency Initiative GRA Ghana Revenue Authority PITL Petroleum Income Tax Law PRMA Petroleum Revenue Management Act GNGC Ghana National Gas Company GNPC Ghana National Petroleum Corporation MoF Ministry of Finance ii | P a g e Boas &Associates 2014 Oil & Gas Sector GHEITI Report EXECUTIVE SUMMARY The Extractive Industries’ Transparency Initiative was launched at the World Summit of sustainable development in Johannesburg in September 2002. Ghana signed on to the initiative in London on 17th June 2003. The main objective of the initiative is to enhance transparency around the generation and spending of revenues from the extractive sector, so as to improve development outcomes, reduce the potential for corruption or large scale embezzlement of funds by host governments, and to stimulate debate about uses to which these revenues are put. The initiative which is governed by a multi stakeholder group made up of representatives of government, extractive companies(publicly and privately owned) and NGO’S, prepares annual EITI report that reconcile extractive sector payments to government receipts. The following is the summary of activities undertaken and the results obtained in the 2014 oil and gas sector reconciliation report as provided by Messrs Boas & Associates, the independent Administrator hired to produce the report. APPROACH AND METHODOLOGY The assignment was broadly categorised into two parts, i) Preliminary Information gathering stage which involved document review and determining fully the parameters for reporting, including the provision of contextual information. ii) The Reconciliation phase, which is the main thrust of the assignment involved, data collection, initial reconciliation and the production of the report. i | P a g e Boas &Associates 2014 Oil & Gas Sector GHEITI Report Reporting entities The following companies and government Agencies’ were required to report. (See Table A) Table A: Participants in the 2014 reconciliation process OIL & GAS COMPANIES GOVERNMENT AGENCIES Tullow (Ghana) Limited Ghana Revenue Authority Kosmos Energy Ghana HC Ghana National Petroleum Corporation(GNPC) Ghana National Petroleum Ministry of Finance /Bank of Ghana Corporation(GNPC) Saltpond Offshore Producing Co. Ltd Petroleum Commission Anadarko WCTP (Ghana) Limited Ministry of Energy and Petroleum Petro SA Revenue Streams The following revenue streams were to be reported on in the 2014 Reconciliation report. Surface Rental Royalty Corporate Tax Carried Interest Additional Participating Interest Dividend by NOC Training /Technology Fund Results of reconciliation With the exception of Anadarko WCTP Ltd, all companies and government Agencies that paid or received any of the relevant revenue streams in 2014 duly reported. ii | P a g e Boas &Associates 2014 Oil & Gas Sector GHEITI Report The reconciliation by companies is shown below: DETAILS OF RECONCILIATION REPORTING PERIOD: 2014 Initial Amounts US$ Resolved Final Amounts Unresolved No. Company Company Government Initial Discrepancy Company Government Company Government (Over) OIL & GAS 1 KOSMOS 85,379,904 85,204,904 175,000 - 175,000 85,379,904 85,379,904 - 2 TULLOW 63,770,404 115,040,762 (51,270,358) 51,520,358 250,000 115,290,762 115,290,762 - 3 GNPC 700,540,000 691,991,103 8,548,897 (8,560,104) - 691,979,896 691,991,103 (11,207) 4 ANADARKO - 84,370,881 (84,370,881) - - - 84,370,881 (84,370,881) 5 SALTPOND 151,986 - 151,986 - 151,986 151,986 151,986 - 6 PETRO SA - - - - - - - - TOTAL 849,842,294 976,607,650 (126,765,356) 42,960,254 576,986 892,802,548 977,184,636 (84,382,088) DISCREPANCY A net discrepancy of US$(84,382,088) was obtained at the end of the reconciliation exercise. Over 99% of the discrepancy was caused by the fact that Anadarko did not submit a reporting template. An amount of US$84,370,881 reported by GRA as having been paid by Anadarko was therefore not corroborated. RECOMMENDATIONS Some of the recommendations made in the report are stated below. LACK OF ON LINE REPOSITORY IN THE PETROLEUM SECTOR The Petroleum Commission is advised to establish as quickly as possible an online repository where the information on upstream Petroleum blocks are found. PERFORMANCE OF THE GHANA PETROLEUM FUNDS To effectively monitor the performance of the Ghana Petroleum funds it is necessary to adhere to the provisions of section 30(1) c of the PRMA, 2011, Act 815, by developing an investment guide. UTILIZATION OF THE ANNUAL BUDGET FUNDING AMOUNT The reporting on the activities funded by the ABFA should meet the requirements of section 48 of Act 815, i.e. the stage of implementation must be stated as well. iii | P a g e Boas &Associates 2014 Oil & Gas Sector GHEITI Report LICENSING REGIME AND THE PUBLICATION OF CONTRACTS To ensure transparency and efficient management of the petroleum resources, the Ministry of Petroleum should introduce Licensing rounds including bidding and also make available on its website details of contracts with operators. COMPUTATION OF REVENUE STREAMS BY GNPC AND GRA Singular methodology should be employed for royalty and CAPI computations. CARRIED INTEREST PAYMENT –SALTPOND OFFSHORE PRODUCING FIELDS The Petroleum Commission, the GNPC and the GRA should ensure that carried interest is paid from the Saltpond Offshore Producing Fields. THE E&P BILL The E&P Bill should be passed without delay to ensure good governance in the petroleum sector. OUTSTANDING SURFACE RENTAL PAYMENTS The Petroleum Commission and the GRA should ensure that outstanding surface rentals are paid. iv | P a g e Boas &Associates 2014 Oil & Gas Sector GHEITI Report 1.0 BACKGROUND The Extractive Industries’ Transparency Initiative (EITI) was launched at the World Summit on Sustainable Development in Johannesburg, September, 2002. It aims to enhance transparency around the generation and spending of revenues from the extractive sector so as to improve development outcomes, reduce the potential for corruption or large-scale embezzlement of funds by host governments; and to stimulate debate on utilisation. The Initiative encourages governments, extractive companies, International Agencies and NGOs to work together to develop a framework to promote transparency in payments in the extractive industries. 1.1 BRIEF ON EITI IN GHANA The Government of Ghana formally committed itself to implementing EITI in 2003, when it signed on to the initiative in London. The EITI Steering Committee is the governing body of the EITI in Ghana. Various stakeholders in the Extractive industry are represented on the committee. The members of the committee comprise of representatives from the under listed agencies or bodies: Ministry of Finance