The Ministry of Finance has been cited for compelling Ghana National Petroleum Corporation (GNPC) to cancel a $50 million indebtedness to the Corporation.
The money was withheld by the Finance Ministry in 2014 by the previous government and is yet to be paid.
The 2018 Public Interest and Accountability Committee (PIAC) report, which captures this activity, said it was inappropriate for the Finance Ministry to compel GNPC to expunge the debt.
The transaction was also not backed by any form of agreement spelling out the terms of the loan and a repayment plan.
CRUDE OIL DOLLAR
GNPC reports that on September 7th 2018, the Ministry wrote to inform the Independent Administrator preparing the Ghana 2016 EITI Report (with the Corporation in copy) that, provision had been made in the 2019 Budget for the settlement of the advance.
The Corporation further reports that on December 15th 2018, another letter was received from the Ministry asserting that per the Earmarked Funds Capping and Realignment Act, 2017 (Act 947), the Minister for Finance is empowered to cap all earmarked funds at 25% per annum.
Government, according to GNPC, indicated in that communication that it has not retained the Corporation’s flows thus far with the view to offsetting the $50 million advance with part of the capped amount of GH?1.001 billion, and that, the Corporation should expunge the $50 million advance from its books.
PIAC observes that the manner in which the Ministry procured the loan does not follow due process.
Chairman of PIAC, Dr Steve Manteaw, said the approach adopted by the Finance Ministry to expunge the supposed loan was inappropriate.
“The manner in which the Ministry is seeking to settle its indebtedness is capricious especially, as it is not based on mutual consent of the two parties,” he said.
Disregard for financial laws
The Finance Ministry has, therefore, been criticised for showing gross disregard to the petroleum laws and acts governing the oil revenue management.
The Committee recommends to Parliament to consider reviewing the situation where a law, and in this case the Earmarked Funds Capping and Realignment Act, 2017 (Act 947), is used to override provisions in existing laws without repealing relevant sections of those laws, when in the hierarchy of laws, all Acts of Parliament are supposed to have equal standing.
“The use of one law (the Earmarked Funds Capping and Realignment Act) to over-ride the provisions of another Act (the Petroleum Revenue Management Act), without repealing the applicable sections of the latter, raises questions bordering on the legality of the Ministry’s actions”.
The Committee also observes, that, given the situation where GNPC’s funds are currently capped at 30% of net petroleum revenues, a further 25% cap of the 30% using Act 947, reduces GNPC’s funds to a mere 7.5%
And since GNPC is expected to wean itself off the PHF by 2026, it is difficult to appreciate how they could achieve financial sustainability by the target year.
Other GNPC spending and unpaid advances
An amount of $4.14 million, representing 1% of total receipts, supported the construction of the Western Corridor Roads.
This expenditure was a request on GNPC by the government to assist the construction of key roads within the Western Corridor financially, in order to facilitate the evacuation of gas from the Ghana Gas Company at Atuabo.
It was a similar request made on GNPC by the government that led to the $50 million loan advance that has remained unpaid.
GNPC spent $3.8 million on the secretariat activities of Ghana – La Cote d’Ivoire Maritime Boundary Dispute.
The ITLOS dispute was between two sovereign States and not between a sovereign State and a national oil company for which reason it was wrong to have used GNPC’s resources to settle the cost of the litigation.
The $3.8 million spent by GNPC on the Maritime Boundary Dispute has still not been refunded to GNPC.
The Ghana Boundary Commission established by the State to deal with such matters must have a fully functioning Secretariat and made to handle its own budget.
Meanwhile, PIAC reiterates its call on Government to refund the $3.8 million to GNPC.
Debts owed GNPC
GNPC and the ABFA received $305.27 million (31%) and $235.10 million (24%) respectively of PHF allocations for the year 2018.
Ghana National Gas Company (GNGC) was established as a commercial entity to enter into a business arrangement with GNPC take the raw gas, add value, sell it, make a profit and pay back GNPC.
In 2018, GNGC received raw gas worth $85,214,825.34 from GNPC during the year, for which payment is outstanding.
Total GNGC indebtedness to GNPC currently stands at $315,530,008.87 as at the end of 2018.
GNGC’s receivable from the sale of lean gas, LPG, and condensates for the period was $224,704,210.61, of which only $85,211,856.99 was paid.
GNGC made no attempt to defray part of its debt to GNPC, even though the Company received revenue for the period under review.
The wanton political interference in GNPC’s affairs and the tendency to use it to finance quasi-fiscal expenditure, if not checked by Parliament, according to the report, will undermine the Corporation’s operational efficiency and threaten its sustainability.
While the Committee is satisfied with the quality of spending by the Foundation, it recommends to Parliament, to consider placing some restrictions on the proportion of GNPC’s budget that can be channelled into CSI.
This is important, to forestall any future excessive expenditure in this category.
Natural Resource Economist, Gideon Ofosu-Peasah, has said that in the face of the current spending by GNPC for the quasi-fiscal expenditure of the government.
For him, there should be a cap on the spending on corporate social investments.
“The focus of the business should not only be focused on its core mandate. It should also be concerned about its environment and society as well but it should be. If that will derail you from your core mandate then there should be a cap”.
Mandate of GNPC
Ghana National Petroleum Corporation (GNPC) was established in 1983 and started operations in 1985 to support the Government's objective of providing an adequate and reliable supply of petroleum products and reducing the country's dependence on crude oil imports through the development of the country's own petroleum resources.
In addition to the functions of petroleum exploration, development, production and disposal activities, the Corporation assumed responsibility for the importation of crude oil and petroleum products to meet national demand.
GNPC is Ghana's national oil company mandated to explore on its own or partner all contractors in the exploration and production of petroleum in Ghana.
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