Foreign oil companies not cheating Ghana – Alex Mould – Business

A former Chief Executive Officer of the Ghana National Petroleum Commission (GNPC), Alex Mould has denied that Ghana is being cheated by foreign oil companies due to the method used in taken taxes from them.

According to Mr Mould, it is myopic to think the multinational companies are shortchanging Ghana. He explained that the multinational companies have to recoup their investments, adding that Ghana would begin making more money from the oil fields after the investments are made by the oil companies.

“That will be a very myopic way of looking at it. You have to remove a few things from that. You have to remove all the investments and cost of producing the fuel from that. After that, look at the taxes that are paid, we don’t pay the taxes from oil. So that is why I say it is a little more complicated than what the gentleman has portrayed. So the citizens of Ghana should be rest assured that the government is doing everything possible to increase the yield for the country.”

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“Most of the countries he is talking about, most of the equity have been paid back. So the investment cost has been paid back, and that is why it seems they are benefiting by about 75%…These are fields that are either ten years or more than five years because when you put an investment in, you are allowed to recoup that investment in the first five years.”

His was reacting to allegations made by oil and gas policy think tank, Centre for Natural Resources and Environmental Management (CNREM) that Ghana lost about $902.45 million in the oil sector because some of the oil companies in the country paid fewer taxes and royalties to the state.

The Executive Director of CNREM, Solomon Kwakumey attributed this to the payment practice of the country.

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According to Mr Kwakumey, if Ghana were to be practising the production sharing agreement, at the end of the 7th year of oil production, the country would have “been earning over 11 billion dollars as against the under 4 billion dollars that Ghana has earned for the seven years of operation.”

“The hybrid system is skewed towards the collection of taxes and royalties. It is very difficult to collect taxes from multinationals. Secondly, under the hybrid system, we transfer our sovereignty and ownership of the oil to the foreign oil companies. The hybrid system is just a small modification of traditional concession…just as the way we have given out our gold concessions where we get only taxes and royalties from the mining companies; it is the same old thing being applied in the oil sector.”

However, Mr Mould said government chose the hybrid system because it is more transparent than the production sharing mode.

“The reason why we used the hybrid system was that we believed that the hybrid system was more transparent for both the investor and the government. The [multinational oil companies] have refined that system to our benefit as the years have gone by.”

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