Petroleum Commission’s Hybrid System is a rotten

It's Official: Petroleum Commission’s Hybrid System is a Rotten "Tuo-Zaafi" Fiscal Proverb!


By: Prof Lungu


"...According to the Ghana Petroleum Commission, Ghana can "achieve" the same oil revenue using any "fiscal regime", (Ghana Hybrid System, PSA, Concession, or Joint Venture). But, a Joint Venture is merely a political strategy, and it was directly the hopelessness of concession type agreements that spurred Malaysia to develop the PSA to better ensure Malaysia received a fair share of its oil revenues, in 1976...We, of the FTOS-Gh/PSA Petition/Campaign, recognize the Petroleum Commission's fallacious position as analogous to the Ghanaian case of a rotten "Tuo-Zaafi" fiscal proverb...(Prof Lungu, 8 Mar 16).



Recently, on 20th February to be exact, an official meeting was held in Ada, Greater Accra Region, to account for the means for collecting money for Ghana's oil. As far as we know, the meeting was called to precisely discuss the wisdom in Ghana continuing with the so-called "Hybrid System" as the government-approved "fiscal regime" to collect as much of the money due Ghana for Jubilee Oil, and others that will come up the line. The "Ghana Hybrid System" is to be compared and contrasted with the world standard Production Sharing Agreement (PSA) advocated by members of the Fair-Trade Oil Share Ghana (FTOS-Gh/PSA) Petition/Campaign.

The 20 February meeting was attended by several Members of Parliament, leadership and staff of the Petroleum Commission, members of the Ghana United Nations Association (GUNA) Board, and the Ghana Institute for Governance and Security (GIGS), as representative of the Fair-Trade Oil Share-Gh (FTOS-Gh/PSA) Petition/Campaign.

During the meeting, the Petroleum Commission presented a somewhat confusing 48-page PowerPoint slide to support their idea that the so-called "Ghana Hybrid System" is superior to a PSA fiscal regime.

Following a de-brief, the FTOS-Gh Team provided an initial response to the Petroleum Commission, Part I, on 26 Feb. Further, in the interest of improving communications and widely circulating information about the Ghana Oil money impasse, we completed our Part II response and posted the papers (PDF and Slide Show) on http://ghanahero.com/FTOS_GH_Campaign.html.

Finally, just yesterday, we posted slides from the Part II to Twitter (https://twitter.com/professorlungu).

In this mini paper and others that will follow on this item, we will focus on just one aspect of our response to the PC for the benefit of readers on other online platforms. It is part of our continuing effort to bring this very technical subject to a level the average person can understand. Hopefully, as we continue to make the case for the PSA and focus more on the true world standard for collecting oil money due a country, this will help everyone make their own decision about the choice between the world standard (PSA), versus the so-called Ghana Hybrid (a system derived by some Ghanaians that is a mish-mash of several ideas without coherence, a system missing the more fundamental elements of a PSA, a system that has caused Ghana to lose over $6 billion during the last five years.

According to the Ghana Petroleum Commission, Ghana can achieve the same revenue using any "fiscal regime", (Hybrid, PSA, Concession, or Joint Venture). But, it was directly the hopelessness of concession type agreements that spurred Malaysia to develop the PSA to better ensure Malaysia received a fair share of its oil revenues, in 1976. Critically, a Joint Venture (JV) is merely a political strategy without any resource naturally at bottom begging for answers to a million questions!

So, in summary, the claim by the Petroleum Commission that Ghana can achieve the same income by whatever fiscal regime it adopts is an arcane and preposterous idea. That idea appears to have been borrowed from an insignificant section of the literature on Oil and Gas fiscal regimes.

That fair weather oil income idea is at once unintelligent and contrary to the interests of a sovereign state that actually owns the oil within its borders. In fact, it is precisely the kind of idea that tend to be advanced by entities that do not directly own the resource (e.g. World Bank, arm-chair academicians, policy and political elites, oil lobbyists, and non-profit organizations funded by other countries and interests, etc.), by those who do not hold that type of resource in trust for others.

The suggestion that Ghana can achieve the same income from oil by whatever fiscal regime it adopts actually channels the Wachtler Ham-Sandwich proverb. According to that proverb, in front of a Grand Jury, a prosecutor can indict even a "Ham Sandwich", to same and equal effect.

We, of the FTOS-Gh/PSA Petition/Campaign recognize the Petroleum Commission's fallacious position as analogous to the Ghanaian case of a "Tuo-Zaafi" fiscal proverb.

Yes, the "Tuo-Zaafi" fiscal system will also bloat and yield the same result, to same effect. Just make sure you demand "Royalties" and "Taxes", and adjust the books according to quantity of oil reported to you as lifted, then normalize all of that with the price of oil on the market.

The Petroleum Commission is in essence arguing that there was absolutely no need for Malaysia to develop the PSA fiscal regime for its sovereign oil and gas.

But the entire world knows the answer to that question. In fact, according to our records, 1 country shy of 100 (99 countries), have in fact adopted the PSA. But, the foreign oil companies in those countries have not vacated the oil fields because those countries elected to adopt the PSA as the first step, and best fiscal system, through which they intend to get their fair share of their depleteable oil resources.

In short, from the start, compared to all the others, the PSA is the “Better Mouse Trap” invented for sovereign oil, barrel-by-barrel.

THE FTOS-GH/PSA DEMAND: Withdraw and remove the Ghana Hybrid System-infested Petroleum Exploration and Production (E&P) from the Parliament of Ghana. Replace with world standard Petroleum Sharing Agreement (PSA) provisions and demonstrate good faith, responsible stewardship, and trusteeship of Ghana's Oil and Gas, for Kwame Nkrumah's Ghana.

Get with the program, Ghana Petroleum Commission!

(In Part 2 of this mini paper series, we will take up the matter of large sums of money paid to several entities in Ghana, entities that nonetheless are performing as "gatekeepers" with respect to the decision by Ghana to adopt the PSA vs. the so-called Ghana Hybrid System).

FTOS-Gh Interest Items:

1. Fair-Trade Oil Share-Ghana (FTOS-GH/PSA Petition/Campaign):
Read about it, join it, sign it: https://www.change.org/p/ghana-fair-trade-oil-share-psa-campaign-ftos-gh-psa).

2. http://www.GhanaHero.Com/FTOS_Gh_Campaign for more information.
(Join the action! Read mo! Listen mo! See mo! Reflect mo!).

Prof Lungu /GIGS/ANON/GUNA/FTOS-Gh/PSA/
©Prof Lungu is Ghana-Centered/Ghana-Proud.
@professorlungu - Twitter (#FTOS_Gh)
Subj: It's Official: Petroleum Commission’s Hybrid System is a Rotten "Tuo-Zaafi" Fiscal Proverb!
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