Time to address petroleum revenue management challenges - PIAC

The Public Interest and Accountability Committee (PIAC) has said that 10 years is ripe for the country to do an introspection of how it has managed revenues from its oil resource.

Although PIAC has over the years raised critical issues relating to the management and use of petroleum revenues, it said was time to highlight all the issues in a single document to ensure that they were given urgent attention and commitment for redress.

Subsequently, an issue paper released by the committee catalogues a number of issues that need urgent attention in the petroleum revenue management space.

In an interview on May 6, 2021, the Technical Manager of PIAC, Mr Mark Agyeman, explained the paper sought to draw the attention of the appropriate authorities to deal with the issues.

“Bringing these issues to the fore is a good way to insulate the upstream petroleum sector from the ‘resource curse’ phenomenon that characterised the mining sector,” he stated.

He noted that generally, the country had tilted towards managing it well just that there were lingering issues that could better improve the management and resource utilisation.

Read: PIAC advises Finance Ministry on petroleum revenue

He said although some of the things were on paper, the reality on the ground was different.

“On paper, the Ministry of Finance is supposed to select four priority areas, disburse money to them and it is supposed to undertake projects. But the reality is that are they translating into better life for the people? He quizzed.

According to him, a look at the framework underpinning the Annual Budget Fund Amount (ABFA) expenditure hinges on three key things: the usage of petroleum revenue should lead to the maximisation of economic benefits for the country; it should lead to even and a balanced development nationwide; and it should increase economic opportunities for the people.

“Ask if every dollar spent from petroleum revenue is leading to any of these three or all of them. That should be the guiding principle for the Minister of Finance,” he said.

Read: Implement PIAC recommendations for effective accountability - Dr Manteaw

ABFA administration

Another lingering issue he cited was the thin spread of projects, which saw ABFA being spent on over 4000 projects in 2020, with some getting as little as GH¢5000.

“What will be the impact of GH¢5000 on a project that cost GH¢30 million?” he asked.

He added that the uneasy and non-balance allocation of ABFA to the priority areas was also an issue.

The issues

The paper highlights four main issues: Management and Utilisation of ABFA; Revenue Collection; Management and Utilisation of the Ghana Petroleum Funds; and Challenges associated with the implementation of the Petroleum Revenue Management Act, 2015 (Act 815) PRMA.

According to PIAC, an area of concern in the management and utilisation of the ABFA has been the allocations to the various priority areas.

It said though governments over the years have duly selected up to four priority areas, the sectors were not weighted equally, thus resulting in a situation where some priority areas received a larger percentage of the ABFA than others.

“Once recognised and selected, priority areas should receive fairly equal amounts of funding. This, however, does not happen to be the case. For instance, from 2017 to date, physical infrastructure and service delivery in health has been the most poorly-resourced priority area as compared to the others.”

“Only 2.61 per cent was disbursed to the health priority area in 2017, 2.7 per cent in 2018 and 3.65 per cent in 2019,” it stated.

Payments

The committee notes that over the years, some International Oil Companies (IOCs) have developed the practice of non-payment and deferred payment of surface rentals, which is a source of petroleum revenue stream.

In particular, despite its findings and recommendations, Oranto/Stone Energy, an IOC, failed to honour its Surface Rental obligation, which stood at US$67,438.36 in February 2013, and accumulated penalties amounted to US$7.39 million at the end of December 2019.

Similarly, the practice of IOCs deferring Surface Rental payments into the Petroleum Holding Fuind (PHF) limits accruals to the fund.

“Though some improvements have been recorded since 2017, the practice undervalues the PHF, and does not comply with the provisions of the PRMA. Although non-payment and deferred payment attract penalties, it denies government the needed revenue for front-loaded expenditure,” it stated.