A new report reveals the importance of Ghana’s two long-term oil sales agreements and the impact of the coronavirus pandemic on this important source of government revenue.
GNPC has a long-term agreement, signed in 2017, to sell four cargos per year of oil from the country’s TEN field to Russian trader Litasco.
A second agreement, signed in 2012, obliges the state oil company to sell five cargos per year to Chinese state-owned Unipec Asia, tied to the Ghanaian government’s USD 3 billion dollar loan from China Development Bank.
In 2019, revenue from these two sales contracts equaled six percent of government revenue. These two deals alone generated 59 percent of the government’s total oil revenue for 2019.
Ghana is one of the most transparent countries in reporting on its commodity trading activities, the report concludes.
Ghana National Petroleum Corporation (GNPC), the Ministry of Finance, the Bank of Ghana, the Public Interest and Accountability Committee and Ghana Extractive Industries Transparency Initiative all disclose information on the state’s oil sales activities.
As of the end of April 2020, GNPC had sold 73 cargos of oil, made up of 71.1 million barrels with a total value of $5.2 billion.
In its new analysis, the Natural Resource Governance Institute (NRGI) uses these publicly available data to show the importance of GNPC’s oil sales, and the need for greater accountability, as the country faces the challenge of responding to coronavirus and debt sustainability issues exacerbated by the pandemic.
The coronavirus pandemic and oil price crash have hit this important source of government revenue hard, with the funds received for similarly-sized cargoes sold by GNPC dropping from $126 million in 2012 to just $12 million in April 2020.
“The impact of the coronavirus pandemic and oil price crash on Ghana’s economy means that ensuring GNPC maximizes its oil sales revenues is more important than ever,” says Nafi Chinery, West Africa manager for NRGI.
“Oil sales transparency on the part of GNPC and the government has been an important step toward enabling citizens groups to demand effective and accountable management of revenue flows. Information on Ghana’s long-term sales contracts tied to resource-backed borrowing is especially important in the context of broader debt relief and renegotiation discussions,” he added.
The report, Ghana’s Oil Sales: Using Commodity Trading Data for Accountability, demonstrates how these data can be used by civil society organizations (CSOs), government officials, journalists and other oversight actors to hold the government, GNPC and trading companies accountable.
It also includes recommendations for the government, GNPC and commodity trading companies aimed at improving governance of the country’s oil sales activities.
The authors urge traders purchasing oil from GNPC to disclose their payments on a cargo-by-cargo basis. Two international oil traders operating in Ghana, Trafigura and Glencore, have disclosed their payments to the state.
However, no company has provided payment data disaggregated by cargo, which NRGI maintains is necessary if citizens are to use this data for accountability purposes.
“Commodity traders purchasing the state’s oil in Ghana should follow the example of the government and GNPC and disclose information on their purchases on a cargo-level basis,” says Alexander Malden, co-author of the report.
“We call on traders to disclose cargo-specific payments to GNPC using the new Extractive Industries Transparency Initiative (EITI) Guidance for buying companies and relevant template in order to build citizen trust in and understanding of this often opaque activity.”
NRGI also urges the government to disclose its long-term sales contracts agreements.
“Our research demonstrates the importance of the government’s long-term sales contracts as a source of government revenues,” says Denis Gyeyir, report co-author.
“The precise terms within long-term sales contracts agreements, such as those signed with Unipec Asia and Litasco, are very important in determining whether they represent a good deal for the country. We commend the government for its release of information on the terms of the agreement with Unipec Asia, but officials should disclose the long-term sales contracts with both Unipec Asia and Litasco in their entirety, and commit to disclosing any future similar agreements.”