A MODERN CONCESSION. WHY GHANA? THE STAR OF AFRICA. BY GHANA INSTITUTE OF GOVERNANCE AND SECURITY(GIGS)

“Africa’s natural resources wealth rights belong to the continents citizen, but the citizens are being robbed of its benefits by revenue diversion, corruption, jobless growth, and rising inequality”. Kofi Annan, Africa Progress Panel 26th September, 2013.

The Ghana Institute of Governance and Security deem it necessary to raise serious concerns and objections to the Petroleum Exploration and Production Bill in its current form.

We have observed serious challenges and implications passing this Bill in this current form to regulate the Upstream Oil Industry in Ghana having dire adverse consequences on governance and Security, a situation which will eventually lead to insecurity and instability which is already showing its ugly head.
Fiscal Provisions in the Bill will never ever make Ghana derive the full maximum benefits from the Oil and Gas Resources God has given us
We want to bring to the notice and knowledge of the people of Ghana and all Ghanaians resident and scattered across the world that if this Bill is passed into law by our representatives in Parliament, it would amount to a death sentence on the economic destiny of Ghanaians, reducing the present as well as the future generations into eternal and perpetual modern day economic slavery.

We have examined and studied the contents of the Petroleum Exploration and Production Bill 2014, though we admit it is a partial improvement in terms of procedural issues over PNDC law 84, it is not in anyway better and superior to it in terms of fiscal regime or arrangement. Whereas the Spirit and Intent behind the PNDC law 84 is Production Sharing Agreement, a progressive, fairer and equitable fiscal arrangement in sharing oil revenue currently in the world over, the Petroleum Exploration and Production Bill 2014 is modeled on Modern Concession - a hybrid system between the traditional Concession and Production Sharing Agreement, partially in implementation. Records available at Oxford Institute of Energy Studies indicated earlier agreement entered into by Ghana in the 1990s based on this Law was Production Sharing Agreements.
The modification of the traditional Concession to include Carried and Participation Interests may be an improvement, but not in any way superior and better than the Production Sharing Agreement. A wolf in a sheep skin. The Modern Concession is as equally exploitative as the traditional Concession.
The Modern Concession was designed by the World Bank in conjunction with the British and American Oil Companies as an antidote to the Production Sharing Agreement which was started from the East -Indonesia precisely in 1960. The Modern Concession is what the World Bank, IMF, Oxfam America and Revenue Watch Institute are imposing on newly emerging oil producing countries in Africa but have been met with stiff resistance elsewhere except Ghana. For example, Kenya, Uganda, Tanzania and Mozambique, who are also frontier nations yet to start producing, signed unto Production Sharing Agreements. Why not Ghana, the Star of Africa? Ghana is being used as experimental Guinea Pig in Africa. Tullow is comfortable entering into Production Sharing Agreements with Uganda, Kenya, Ethiopia, Equatorial Guinea, Gabon, Cote D’ivoire, Congo-Brazzaville and Mauritania. Why not Ghana?


We have observed Ghana is about passing a law to legalize and perpetuate the robbery of her citizens in the name of investment Kofi Annan complained about in the opening quote; a law that would plunge the current generation and the future ones into eternal economic bondage and modern day slavery, endangering Peace and Development. The passage of this Petroleum Exploration Bill in its current form with the fiscal provisions and other unfavorable sections it contains into law to regulate our Upstream Oil Industry would amount to surrendering our Sovereignty and Constitutional Ownership, and giving away our Birth Rights over our oil and gas resources wealth to the British and the Americans once again, in the same manner we treated our gold and other minerals in the name of investment in the past and up to today. We have lost on Gold; we cannot afford to lose this time round on the Black Gold.
We are not against investment, what we are seeking for the people of Ghana are fairness and equity in sharing the oil revenue as being done in other oil producing countries in the world, and in consonant with the UN Resolution on Permanent Sovereignty over Natural Resources, General Assembly Resolution 1803 of 1962, reprinted in General Assembly Resolution 3171 of 1963 and the Charter of Economic Rights and Duties of State, General Assembly Resolution 3281 of 1972, for Peace and Development to prevail in our country.
The announcement of the discovery of oil in 2007 sent expectations of Ghanaians high all over the world. However, the general consensus of public opinion on the operations of the oil and gas industry in the country after four (4) years has so far been negative because of the hardship and financial crisis facing the whole nation and her citizens.
Before production began in December, 2010, views were solicited from Ghanaians as to how the first US $5billion for the first five (5) years would be spent. Four (4) years down the line since production began, just a little over half of the amount of the $5billion have been realized. By the end of the third-quarter ending 30th September, 2014 Ghana earned a total of $2.557 billion out of $12.510 billion representing 20.50%, far below the International Standard of 42% - 60% “Minimum Government Take” set by the US Government Accountability Office (GAO) out of total production revenue that should accrue to a host Government under any fiscal arrangement or contract for allowing its Oil and Gas resources to be exploited. Estimated Government Take in Sub-Sahara Africa is between 44% - 85% DCMNR(2006).
The foreign oil companies, our contractors, made away with US $9.953 billion representing 79.50% in the name of investment under the current prevailing system - the Modern Concession. The whole initial investment of US $4 billion which they claimed they made which Ghana also contributed to, have been fully recouped in three years.
Ghana lost over US $3billion operating under this hybrid system as at 30th September, 2014. This trend will remain forever and extended to other fields adopting the Modern Concession with little significant change after full capital development cost recovery.
The current prevailing hybrid system - the Modern Concession which the Draft Bill seeks to consolidate into law, under which the oil companies are currently operating in the country, is the cause of this abysmal situation and on careful analysis would not be in the best interest of the People of Ghana. Ghana’s adoption of the Modern Concession would make it difficult for her to derive the full maximum benefits from the Oil and Gas resources if the Bill is passed into Law.
We believe the introduction and application of pure Production Sharing Agreement would be in the best National Interest. If Ghana was operating under the pure Production Sharing Agreement, the country would have earned between US $5 billion and $6 billion as at 30th September, 2014, thus ameliorating the hardships and the crisis which has engulfed the whole nation, endangering Peace and Stability.
Currently, there are 81 countries in the world - 34 in Africa - producing Oil and Gas under this progressive fiscal arrangement. Is Ghana claiming to be wiser than all these 81 countries moving away from progressive, fairer and equitable Production Sharing Agreement to the exploitative Modern Concession?
What is happening is an attempt to give retrospective legal backing to these agreements and contracts by introducing into this Petroleum Exploration and Production Bill, Modern Concession fiscal provisions to consolidate and give legal effects to these obnoxious and exploitative agreements and contracts signed up to date.
One dire implication of passing this Bill into Law is taking away all the sole rights and controls granted GNPC under Laws 64 and 84 and placing the ownership of all the Oil Blocks in private hands contrary to Section 1(1) of Law 84, Article 257, Section 6 of the Constitution of the Republic of Ghana and 1962 General Assembly Resolution on Permanent Sovereignty over Natural Resources (GAR 1803).
In a Paper titled “From Concession to Service Contracts” by Ernest E. Smith and Tulsa Law Review Vol. 27 Issue No.4 International Energy Law Symposium 1992, Modern Concession Contracts are alleged to be subject to undue influences and corruption. We have no doubts in our minds, the hard and circumstantial evidences available indicate that that is exactly what is happening in Ghana.
We call upon and appeal to the legal luminaries and Public Interest Lawyers of the Ghana Bar Association to proceed to the Supreme Court to test the sanctity of these Agreements and Contracts in the interest of the present and as well as the future generations of Ghana.
What we found disheartening is South Sudan, the newest country in the world, has a better and robust Petroleum Exploration and Production Law than what Ghana the “Star of Africa” is proposing to pass. Commentators and Writers on the Upstream Petroleum Industry all over the world are worried and surprised about what Ghanaians are doing to themselves in this 21st Century with the discovered oil in their country, because no country in the developing world is signing such agreements and contracts to exploit their Oil and Gas resources under any form of Concession.
In view of the above observations, we humbly appeal to the President to withdraw the Bill and, as a matter of urgency, invite immediately independent international experts in these matters to review the Draft Bill to reflect Production Sharing Agreement fiscal provisions, the only way to achieving full maximum benefits from our Oil and Gas resources.
All agreements and contracts entered into up to date and approved by our Parliament, our Law makers have modeled them to suit Modern Concession Laws which were not in existence on our statute books at the time of signing these agreements and contracts. These Agreements and Contracts are not compatible and in conformity with the tenets of the existing Laws governing the Upstream Oil Industry: they are therefore unconstitutional, illegal and ultra vires because they are at variance with the existing Laws. They are also in contravention with UN Charters and Resolutions on Natural Resources.
In view of the above, we also request a review of all existing contracts and agreements so far entered into by the independent international experts to reflect Production Sharing fiscal regime to Uphold and Protect the Ownership Rights of the People of Ghana enshrined in Article 257, Section 6 of the Constitution of the Republic of Ghana, and in consonant with UN Charters and Resolution on Natural Resources.
We do sincerely believe that if the President understood the dire consequences and ramifications of this Draft Bill becoming a Law to regulate our Upstream Oil Industry, the President and Cabinet would not have approved of it. The Government and the whole Ghanaian society have been deceived and brainwashed to believe that what Ghana is doing is the best that can be achieved and that the Bill is a good Bill in the interest of the mass of Ghanaians instead of a few. We have seriously taken keen view about these developments and we consider the issue should be put to public discussion and debate to determine what would be beneficial to Ghana’s wider interest and needs in order not to compromise the security of the nation.
Please Mr. President, we humbly appeal and plead with you to grant us listening ears, so that we can explain issues properly to your understanding to enable you save our dear country from falling into the deep, massive and unprecedented economic robbery in the name of investment, thus escaping blame and condemnation from the present as well as the future generations.
We appeal to the Regional and National House of Chiefs, the Trade Union Congress, the Catholic Bishops’ Conference, the Muslim Council, the Association of Pentecostal and Charismatic Churches, the National Peace Council, the Association of Ghana Industries, the National Union of Ghana Students, the Council of State and other Organizations to call upon the President to withdraw the Bill, because the passage would amount to complete eternal economic and modern day slavery, thus stalling economic emancipation and independence of the people of Ghana.
Lastly, we appeal to Parliament, the conscience of the Nation, and the representatives of the people of Ghana, especially the Leaderships of the House and members of the Select Committee on Energy and Petroleum to critically examine the Bill and the documents we have made available to them, so that the right and sound decisions are arrived at, in order not to jeopardize the destiny of Ghana. We pray and plead with Parliament to return the Bill to Government and demand the adoption of pure Production Sharing Agreements in the interest of the people of Ghana. As evidence on the grounds proves, it is the most popular, fairer, convenient and equitable fiscal regime in sharing Oil Revenue in the world since 1960.
Information and Data available to us indicate that Ghana could earn between US $60 billion and US$80 billion from the Jubilee Field alone adopting the Production Sharing Agreement as against the US$20.269 billion and US$19.390 billion estimated by IMF and the World Bank respectively under the current prevailing system - the Modern Concession.
Ghana would not be in this present mess and crisis if over US$5 billion had flowed into the economy to date as a result of adoption of Production Sharing Agreements.
Let us adopt the Production Sharing Agreement to maximize the most potential benefits from the Oil and Gas resources for the manifestation of Peace and Development.
Thank you.
Solomon Kwawukume
Senior Research Officer
Oil and Gas