ON-GOING CONSULTATIONS ON THE PROPOSED GHANA PETROLEUM REVENUE MANAGEMENT BILL
Press Statement on On-Going Consultations on the Proposed Ghana Petroleum Revenue Management Bill Held on the 18th March, 2010
Publish What You Pay Ghana, ISODEC
Ghana Research and Advocacy Programme
Coalition on Human Rights Oil and Gas
Ladies and Gentlemen of the press, good afternoon.
We have invited you here today to share with you certain disturbing trends we have observed so far in the on-going consultations on the Draft Ghana Petroleum Revenue Management Bill.
You will recall that in 2007, Ghana found oil and gas in commercial quantities. Every Ghanaian was excited at this development which gave room to the unfortunate expectations that with this discovery all the problems of our country would be solved.
It must be noted however that Ghana is not the first country to discover oil in Sub-Saharan Africa. We know other countries that are endowed with far more oil and gas reserves than ours. Indeed, relative to our neighbour, Nigeria, our reserve level is like a drop in an Ocean.
We are also fully aware of the level of environmental devastation and economic underdevelopment that have visited some countries with natural resource abundance. We must therefore show caution and moderation in our expectations about the likely impact of the oil and gas resources of our country.
We must state however that there are also success stories in the management of natural resources in Africa. Botswana for instance has achieved accelerated growth and development from diamond exploitation. Thus, Ghana’s oil may become a blessing or a curse depending on how we manage the entire oil and gas chain and revenues likely to accrue from the exploitation of these resources.
The International Monetary Fund (IMF) projects that Ghana will receive about US$1 billion in revenues per annum for the next 20 years from oil production in the Jubilee Field. This may however double if more discoveries are made. To ensure prudent and sustainable management of these revenues, the country requires strong independent institutions and a sound legal framework. This will also serve and protect public interest as well as prevent corruption and mismanagement of oil revenues. One of the initiatives for creating a sound legal environment for the management of petroleum revenues, which government has initiated, is the Ghana Petroleum Revenue Management Bill.
We must all commend government for the positive initiative of recognizing the important contribution the bill would make to oil revenue governance. We recognize also the transparency shown by government in ensuring public participation in the development of the bill through the on-going public consultations throughout the country. Particularly, civil society views with admiration the numerous assurances by the President of the Republic about his commitment to transparently manage expected oil revenues for the benefit of all Ghanaians.
Ladies and gentlemen, while commending the efforts of government so far, we also have serious concerns, which in our view will help enrich the consultations as well as address other critical issues with implications for transparency and accountability in the management of future oil revenues.
1. We know that oil revenue management is a complex terrain which requires knowledge and skills to understand its multifaceted perspectives and overall impact on the economy. To enable Ghanaians participate effectively and meaningfully, relevant information especially on the proposals that informed the development of the bill must be provided to Ghanaians. Government so far has been economical with the release of relevant information on the proposals for petroleum revenue management which in our view currently compromises the quality of the on-going consultations.
We know that a draft bill on petroleum revenue management has been developed. But this has neither been published nor circulated for public scrutiny to facilitate informed contributions from Ghanaians. The on-going consultations are therefore speculative without any strong foundation. We wish to ask why government published the draft Local Content and Local Participation Policy before the start of public road-shows, and yet failed to do same for the Draft Ghana Petroleum Revenue Management Bill.
2. The on-going discussions do not address transparency and accountability issues. The focus so far has been on how and in what to spend expected revenues but other critical governance issues have not featured in the current discussions. For instance, we wish to know what institutional arrangement the bill provides for managing revenues.
Is there going to be an Oil Fund?
How independent will be the Board of the Fund if any?
Will the President of the Republic chair the Board?
How will appointments to the Board be done?
Will Parliament need to approve of the appointments of Petroleum Revenue Board members?
What rules are provided for moving money into and out of the Fund?
What percentage of revenues will be allocated to the Fund and how is this determined?
Will the bill incorporate the Extractive Industry Transparency Initiative?
We believe that Ghanaians would have made informed contributions not only on spending options but also on these governance perspectives if the draft bill was published or circulated before any road-shows were organized. Further, if the draft bill was published, Ghanaians in the end would have known whether the final bill that will eventually be laid before Parliament truly reflected our concerns.
Ladies and Gentlemen, while we are worried about lack of disclosure of the draft bill, we are even more disturbed about critical policy concerns which are central to the management of resource revenues and which we are not sure the proposed Petroleum Management Bill addresses. We make these suggestions based on our analysis of various options from the experiences of other resource-rich countries.
i. Oil revenues are depletable, hence the need for alternative sustainable investments of these revenues to enhance economic growth even after the revenues are depleted. Such alternative investment scenarios must be based on sound empirical foundation especially in terms of the effects on the economy and poverty reduction.
ii. Investments of oil revenues should be made in projects and programmes that will not erode the value of these revenues. Thus such investments should not suffer from policy inconsistency resulting from changes in government.
iii. We should ensure that the level of consumption of goods and services in the country is maintained without being tied to revenue volatility.
iv. We should insulate our economy from dependence on oil revenues. Our economy is diversified and any attempt to depend on oil revenues may cause contraction in other viable sectors of the economy.
Ladies and gentlemen, you will agree with me that we need public participation in the development of policies and legislations, but participation that is not meaningful falls short of basic requirements of public policy making. We are therefore calling on government to publish with immediate effect the draft Petroleum Revenue Management Bill just as it did for the Local Content Policy.
We also call on all Ghanaians and civil society in particular to actively participate in the discussions. But we advise that such participation should be backed by sound research and evidence based analysis of the impact of various proposals on the economy.
In our considered opinion, the development of a Petroleum Revenue Bill is one of the best things to happen to our emerging oil and gas sector. We applaud the move by government to solicit the views of Ghanaians on how to manage expected revenues from oil production. But we also wish that government will open up on the various options, backed with the relevant information so that Ghanaians can contribute effectively to the process. We do not want to believe that government has a position on the option to use for managing oil revenues but is merely using the forums to show that Ghanaians were consulted in the development of appropriate laws for the oil and gas sector.
Also, as government begins similar forums on the already published Local Content provisions in six districts of the Western Region, we wish to call for an extension of those forums to other regions of the country to ensure national consensus since the petroleum value chain is beyond the upstream level.
Ladies and gentlemen, you will remember that our President, the President of the Republic promised to publish all documents on the petroleum sector including petroleum agreements to ensure transparency in this sector. This is highly commendable because it is in line with the Extractive Industry Transparency Initiative which Ghana subscribed to. Therefore, it is our wish that the draft Petroleum Revenue Management Bill and all other documents on the oil and gas subsector are published to fulfil the promises of government. We believe in the words of our President and we know he will live up to his words.
As you are also aware, we have existing laws which define the regulatory mechanism for the petroleum sector. Under the current arrangement, GNPC is the adviser to MoE on technical aspects of upstream petroleum regulation. This raises issues of conflict of interest since GNPC has commercial interest as well, and is therefore likely to influence qualifications for exploration licensing. There are also other environmental and social issues in the petroleum sector which require strict regulations. It is therefore appropriate to create an independent regulatory body by an Act of Parliament for the petroleum sector. This has delayed so far in view of the fact that first oil is expected by the last quarter of this year. Government therefore has to move fast but diligently and through comprehensive national consultations to pass the Petroleum Regulatory Bill.
Finally, as we all know, the media is the fourth estate of the realm. You have a very crucial role to play in ensuring transparent and sustainable management of our emerging oil and gas industry. Some of you have already had the benefit of visiting oil installations at the Jubilee Field at the instance of government. We expect that Civil Society and the media will join hands to serve as watch dogs over the managers of our oil industry but more so, on the management of petroleum revenues for the larger interest of our people.
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