Ghana will need to ensure that companies and commodity traders in the oil sector disclose their commodity trading activities with disaggregated data, and not on only the Ghana National Petroleum Corporation (GNPC).
Although available oil sales data has been used to hold GNPC accountable for their commodity trading activities, there is limited public awareness of this data and how it can be used for accountability purposes.
Besides, the data as disclosed is far from comprehensive.
According to the West Africa Regional Manager (Anglophone) at Natural Resource Governance Institute (NRGI), Ms Nafi Chinery, a disclosure by the above stated actors had become necessary because despite being a new producer, the oil sector represented a significant source of revenue in Ghana.
She said oil revenues totalled $938 million in 2019 and approximately $802 million representing 86 per cent of oil revenues came from cargoes oil sold by GNPC- the equivalent of six per cent of government revenue in 2019.
“However, the cost challenge of the COVID-19 pandemic which reduced government revenue, makes it more important than ever that government itself, citizens, CSOs, media and other oversight actors are able to analyse GNPC’s oil sales activities to inform government’s approach to addressing Ghana’s urgent resource governance challenges,” she added.
“This includes debt sustainability and GNPC and the governance oil sales revenue maximisation and allocation strategy,” she said in an address read on her behalf during a webinar on a new report on Ghana’s oil sales data, on December 15, 2020.
The report, entitled ‘Ghana’s Oil Sales: Using Commodity Trading Data for Accountability’, was conducted by the NRGI.
She noted that Ghana was a good example of oil sales experiment with innovative learning despite the opacity often associated with commodity trading worldwide and it had made considerable progress in reporting on its commodity trading activities
The GNPC, Ministry of Finance (MOF), the Bank of Ghana, the Public Interest and Accountability Committee (PIAC) and Ghana Extractive Industries Transparency Initiative (GHEITI) all disclose information on the state’s oil sales activities.
However, Ms Chinnery said Ghana still faced some accountability challenges as a new oil producing country.
She said the NRGI aimed to contribute to ensure countries rich in oil, gas and minerals achieve sustainable, inclusive development and that people receive lasting benefits from the extractive sector.
“This new report goes beyond the often discussed what needs to be done to enhance accountability and transparency of oil sales data in Ghana and focuses on the too often forgotten how can this be done effectively,” she said.
She added the report was both a call to action and a roadmap for reform.
Some highlights of the report
GNPC sells oil through both term and spot contracts and has two term contracts.
These are Unipec Asia, which is operating in Jubilee field (2012-2028 with five cargos per year), and tied to loan repayment which is part of the umbrella loan agreement of US$3 billion from China Development Bank; and Litasco, operating in the TEN field (2017-2023 with four cargos per year), and tied to loan repayment as part of larger agreement with Litasco, including bank guarantee of US$279 million.
In 2019, revenue from these two sales contracts equalled six per cent of government revenue. These two deals alone generated 59 per cent of the government’s total oil revenue for 2019.
The Petroleum Revenue Management Act (PRMA) dictates where oil sales revenues are distributed and distribution of oil sales revenue has received increased national attention during COVID19.
Civil society groups have cautioned against using the Ghana heritage fund to plug revenue shortfalls.
The report recommends that buying companies disclose information on oil sales purchases in Ghana and facilitate the disclosure of sales contracts.
For commodity trading hubs, it suggested that authorities in trading hubs such as the United Kingdom (UK), Switzerland, the United States and Singapore should require commodity trading companies to disclose the payments they made to governments for the purchase of commodities.