Public Interest & Accountability
Committee

News Details

Collateralisation of Gas Revenues inconsistent with the Law – CSPOG points out
News date: 1st November 2016

It was intriguing much as it was disturbing to hear the revelations made by Mr Boakye Agyarko, policy adviser to the NPP Flag-bearer, Nana Akufo Addo, to the effect that the government intends to encumber the country’s gas resources for a period of 19 years through a loan agreement with the Chinese.

The initial reaction of the Civil Society Platform on Oil and Gas to the allegation was to treat it as a mere party propaganda, characteristic of an elections season. However the rather conflicting responses from the Deputy Minister of Power, Hon. John Jinapor, who denied everything said by Mr Boakye Agyarko, and the Finance Minister, Hon. Seth Terkper, who admitted almost every bit of the revelations, may not have done any good to the integrity of government. The matter even gets murkier with a press statement issued by the Head of Communications at the Power Ministry, Mr Edward Bawa, last Friday, and which sought to justify the government’s intended action.

Mr Bawa, in his statement issued on behalf of the Ministry, assured Ghanaians that “There is no basis for the assertion that Ghana's gas would be exported for $2 billion” adding that,  “All of Ghana's gas are being used and would continue to be used in Ghana for power generation.”

He advised that we do not confuse the use of proceeds or revenues from the sale of gas or its derivatives to support financing arrangements with the actual sale of lean natural gas and liquids.”

According to the statement, “The CDB facility simply anticipates the use of revenues from the sale in Ghana to power plants of lean natural gas to support financing. No natural gas would be sold to Chinese to facilitate the financing. Any excess lean gas which is not sold to power plants in Ghana would be dedicated to petrochemical industry development including fertilizer production to support Agriculture in Ghana. Any excess LPG or other natural gas liquids not used in Ghana can also be exported either to our neighbours or to any potential buyer.” The statement continued to urge Ghanaians to disregard the reports doing the rounds because they do not represent the facts.

But, we simply cannot disregard the reports as we are being asked to do. This is because, if we are to take as facts, the explanations provided by the Finance Minister in a Citi FM interview last Thursday, and which technically is not at variance with Mr Bawa’s statement, then there will be enough reason to be concerned about the development.
 
While we require further details to be able to do a thorough analysis, our initial review of these two explanations of government’s position vis-vis the law, leads us to conclude that, the intended action of government amounts to a potential violation of the Petroleum Revenue Management Act of 2011, Act 815 (as amended).

Section 2 of the Act, which establishes the Ghana Petroleum Funds, requires all revenues realised from petroleum activities to be deposited into the Ghana Petroleum Holding Fund (we don’t have the liberty to do otherwise) and to be managed by the Bank of Ghana. Transfers from the Fund, for the purposes of whatever expenditure, are supposed to be in accordance with the Act.

Section 5 of the Act, which deals with prohibited uses of the Petroleum Holding Fund, proceeds to categorically provide under clause (1) that, “The amount in the Petroleum Holding Fund earmarked for transfer into the Ghana Petroleum Funds, shall not be used: a) to provide credit to the government, public enterprises, private sector entities or any other person or entity and b) as collateral for debts, guarantees, commitments or other liabilities of any other entity.
And in clause (2) further provides that: “In order to preserve revenue streams from petroleum and ensure the object of this Act, there shall not be any borrowing against the Petroleum Holding Fund”.
What this means is that, it doesn’t matter whether it is the resource itself or the revenues derived from it, the law prohibits any form of its encumbrance.
While we are happy to grant the government the benefit of doubt, and to assume that they are acting, oblivious of the referenced legal provisions, we will not hesitate to seek judicial intervention in the public’s interest, if regardless of this caution, it continues to do what we are being told it has initiated.


Source: Civil Society Platform on Oil and Gas
 

 

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