Set clear surface rental regime for IOCs – ACEP boss

The Executive Director of the Africa Centre for Energy Policy (ACEP), Benjamin Boakye, has proposed an upfront payment mechanism for surface rentals in a bid to curb rising defaults by oil companies.

This is because as of the end of December 2022, surface rental arrears due the country had amounted to US$2.7million – up from US$2.5million as at the end of 2021, representing a 7.6 percent increment.

However, to avoid the country losing revenues to oil companies – especially international oil companies (IOCs) – exiting without honouring some of their financial obligations under petroleum agreements, a phenomenon that has cost the country millions in the last few years, Mr. Boakye is advocating a regime wherein companies holding blocks will be required to pay surface rentals at the beginning of each year.

Typically, companies are required to pay surface rental fees within the year; but the ACEP Executive Director wants a specific month or quarter, preferably the beginning of each year, to be given for companies to settle their fees.

“I would imagine that if we really want the money, we have to make them pay from beginning of the year. We don’t have to wait until they make payment. This is because when they leave it becomes difficult to find them,” he added.

His comments come on the back of recent developments wherein some companies that decide to exit the country in the middle of a year do so without settling their surface rental obligations to the state.

For instance, a 2022 report by the Public Interest and Accountability Committee (PIAC) raised concerns over rising surface rental arrears, as surface Rental payments received in 2022 totalled US$687,759.16 compared with US$826,815.52 for 2021 – indicating a 16.8 percent decrease.

According to PIAC, the Ghana Revenue Authority (GRA) said the amount received is attributable to nine out of the current fourteen companies for the oil blocks under their operation.

Out of the surface rental arrears, an amount of US$1,803,124.41 – representing 65 percent of the total arrears, relates to four contractors whose petroleum agreements (PAs) were terminated by the Minister for Energy in 2021.

The four – Swiss African Oil Company Limited (SWAOCO), UB Resources, Brittania U and Sahara Energy Fields Ghana Limited – whose contracts were terminated for non-performance, at the time were said to be in arrears of US$1.88million in the 2021 fiscal year.

This amount accounted for about 73 percent of an outstanding surface rental of US$2.5million during the period.

However, the Committee in its latest report noted that efforts made by GRA to retrieve the arrears are yet to yield the desired results.

Given this impasse, it recommended that GRA intensifies its efforts in the collection of surface rental arrears – particularly amounts owed by the four contractors whose petroleum agreements were terminated in 2021.

It is against this background that the ACEP boss noted that there must be strict regulations on when payments are to be made.

It is also important to reiterate that PIAC started calling on the GRA to as a matter of urgency initiate action to recover the arrears with the appropriate interest, as provided for under the Petroleum Revenue Management Act (PRMA) as far back as 2019/2020.