CASE STUDY

Improving Revenue Capture in Ghana

Ghana Technical assistance on policy recommendations and initiatives for improving revenue capture in the oil and gas sector.

Over the course of three years, starting in 2017, Crystol Energy collaborated with Oxford Policy Management Limited (OPM) on Ghana Oil and Gas for Inclusive Growth (GOGIG) – an initiative sponsored by the UK’s Department for International Development (DFID). The sizeable programme aimed to foster inclusive economic growth and poverty reduction through the effective management of oil and gas sector, including: strengthening regulations, improved revenue capture, improved revenue management and enhanced sector oversight.

Crystol Energy’s contributing on several fronts, which helped to develop the administrative capacity in energy among government and non-government actors in Ghana, including the Ministry of Finance, Office of the Minister of Planning, Ministry of Energy and Petroleum, Ghana Revenue Authority and Civil Societies.

We delivered the following:

Ghana Oil and Gas Fiscal model:

Crystol Energy developed a user-friendly and relatively easily accessible financial model that elucidates on the detailed economics of individual oil and gas projects in Ghana, computes revenues accruing from their activities under the relevant fiscal arrangement and illustrates how they vary with changing economic conditions. We also produced a detailed technical manual that takes the user step by step through the model. We built the model taking into consideration direct inputs and feedback from various stakeholders in Ghana, both government and non-government actors, and their technical capacities. The model achieved several benefits and purposes, including: it can be utilised across a wider spectrum of users and has subsequently provided a common ground that brings various stakeholders together, reducing the asymmetry of information and encouraging open and constructive dialogue between them.

The model can also and can support capacity building programmes; it is tailored to the prevailing capabilities of potential users – from government officials to civil society players and it can be deployed as a benchmark for the more seasoned users. The findings of the model also helped to resolve a dispute between the government and investors on the trigger year of the windfalltax. The model and manual are currently used by a broader spectrum of users from government agencies to civil society, and for capacity building programmes.

Dispute resolution:

There were considerable disagreements in government and civil society about the year in which Ghana’s Additional Oil Entitlement (AOE), the petroleum windfall tax, has/will be triggered for the Jubilee field. Some stakeholders believed that the AOE was triggered for the field in 2013 at the peak of oil prices, and the oil companies owed the government several hundreds of millions of US Dollars. Crystol Energy was engaged to provide an independent assessment of the AOE, its design, structure, strengths and weaknesses.

We also presented three alternative models for computing windfall taxes based on best practice. Our work significantly contributed to the AOE debate and helped to resolve the stalemate. We held various rounds of consultations with the Ghana Revenue Authority (GRA) and other stakeholders on the findings and recommendations. We also organised training sessions for the GRA on how to use our financial model to conduct benchmark calculations.

Developing Information Reporting and Disclosure Framework for the Ghana National Petroleum Company (GNPC):

Ghana’s state-owned company suffered a high administrative burden of reporting to more than 20 stakeholders, each with different requirements in terms of both content and format. The company therefore wanted to achieve a more efficient and transparent process for its reporting. Crystol Energy mapped the mandatory and non-mandatory information requirements of GNPC to identify potential new reporting lines or information requirements and develop a comprehensive framework which captures the scope of such requests for information into standard reporting tools. Our recommendations were adopted into a comprehensive information disclosure policy for GNPC as well as improving the company’s internal and external reporting functions using standardised templates and reports, in line with international best practice.

Petroleum Cost Auditing, Cost Engineering and Accounting Training to the Ghana Revenue Authority (GRA).

The aim of this assignment was to improve the administrative capacity of the Petroleum Directorate of the GRA on petroleum cost accounting and cost-engineering and its application to their ongoing auditing of oil and gas operations. Crystol Energy organised and delivered a training course in Ghana, accordingly. The training aimed to deepen the understanding and develop the analytical skills of the GRA concerning upstream oil and gas economics, taxation, cost accounting and cost auditing. The course combined principles and practice, and participants actively engaged in case studies and group discussions. 25 staff from the Petroleum Unit, Transfer Pricing Unit and Main Audit Department of the GRA actively participated in the training.

Feedback on the workshop from the participants include:

“The course came at the right time when GRA is getting ready to undertake more audits in the oil and gas sector.”

“It was well presented. The material used reflected industry information.”

“The link between theory and practice. The instructor was good; he was able to convince me.”

Dr Theo Acheampong from Crystol Energy with the participants from the GRA, in Accra

Ghana Oil and Gas Documentary Series:

Crystol Energy drafted the concept note for a documentary series, on Ghana’s gas resources to create awareness by way of public education on the natural gas sector and its potential to drive inclusive growth and development. Bearing the educational aspect in mind, Crystol Energy’s guidance and inputs ensured the documentary was presented in an accessible language to get the message across to the average viewer and listener, which included energy industry stakeholders, civil society, the media and general public. We worked with the producers, Channel Two Communications, to delineate the outputs into a three-part documentary series, each lasting about 15 minutes.

Documentary theme one sets the scene by introducing the viewer to natural gas and global trends, while issue two focuses on the Ghanaian context, first in terms of general energy needs including hydroelectric power, the shift to thermal power, the discovery of oil and gas offshore Ghana. Finally, the third theme focussed on investment in natural gas and factors that will drive that investment, taking into consideration the nation’s industrialisation and socio-economic development agenda.

You can watch the documentary series on the following links:

Episode 1 (Energy and Economic Growth)

Episode 2 (Energy in Ghana)

Episode 3 (Natural Gas Resources and Development)

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