In our series on the report of the 8-member ad hoc committee established to give hearing to the man at the target of a censure motion filed by the minority in Parliament, Ken Ofori-Atta, the New Crusading GUIDE, today focuses on Ground Three of the motion.
Read the committee’s report on Ground Three, which many a critical mind say fell on arrival:
REPORT OF THE AD HOC COMMITTEE ON THE MOTION OF CENSURE AGAINST THE HON MINISTER RESPONSIBLE FOR FINANCE, MR. KEN OFORI-ATTA
GROUND THREE
Illegal Payment of Oil Revenues into Offshore Accounts in Flagrant Violation of Article 176 of the 1992 Constitution
- In their testimony before the Committee, the Proponents of the Motion testified that the Hon. Minister for Finance made illegal payments of oil revenues into offshores accounts in flagrant violation of Article 176 of the Constitution. As stated by the mover of the Motion “We are determined that the Minister for Finance, Ken Ofori-Atta, must be subjected to a Vote of Censure. This is because he made illegal payments of oil revenues into offshore accounts in flagrant violation of Article 176 of the 1992 Constitution” (see page 99 of the Verbatim Report of the Proceedings of the Committee of Tuesday, 15th November 2022).
- Article 176 of the Constitution provides as follows:
“(1) There shall be paid into the Consolidated Fund, subject to the provisions of this Article –
- All revenues or other moneys raised or received for the purposes of, or on behalf of the Government: and
- Any other moneys raised or received in trust for, or on behalf of the Government.
(2) The revenues or other moneys referred to in clause (1) of this article shall not include revenues or other moneys –
(a) that are payable by or under an Act of Parliament into some other fund established for specific purposes: or
(b) that may, by or under an Act of Parliament, be retained by the department of Government that received them for the purposes of defraying the expenses of that department”.
- The Proponent referred the Committee to the Public Interest and Accountability Committee (PIAC) Semi-Annual Report on the Management and Use of Petroleum Revenues January – June 2022, to support their submission. According to them, the report noted on page xiv, paragraph 1 of the Executive Summary, as follows:
“Following the acquisition of 7 per cent interest in the Jubilee and TEN Fields by GNPC in 2021 (later ceded to its subsidiary – JOHL). JOHL made its first lifting (944,164bbls) on the Jubilee Field in H1 2022, amounting to US$100,748,907.95. This amount was not paid into the PHF.
Recommendation
PIAC recommends that the proceeds of lifting by JOHL should be paid into the Petroleum Holding Fund (PHF), as the Committee is convinced that the proceeds form part of Ghana’s petroleum revenues”.
- The Proponents argued that the proceeds from the sale of the oil liftings by JOHL constitute public funds and therefore in line with Article 176 ought to have been lodged in the Consolidated Fund. This was the submission of the mover of the Motion before the Committee on Tuesday, 15th November 2022:
“So, for this US$100 million, the Constitution requires that it is public money, and the fact that it is being gotten from oil revenue, it says that it should be paid into the Consolidated Fund.
Now the reason why we are concerned and think that the Hon. Minister for Finance did not act in a manner that is responsible enough is that his money was set aside in the name of Jubilee Holding, which itself has not been captured as a GNPC subsidiary as they report to Parliament. So where is this US$100 million? It is a breach of Article 176 of the 1992 Constitution”.
- The Committee, in its quest to corroborate the testimony of the Proponents, invited PIAC and GNPC to lead evidence in respect of the matter in issues.
Evidence of PIAC
- PIAC confirmed that they authored the report referenced by the Proponents and that in their view, the proceeds realised by JOHL from the oil liftings should have first been paid into the Petroleum Holdings Fund (PHF) and not any other account. PIAC anchored its position on Sections 6 and 7 of the Petroleum Revenue Management Act, 2011 (Act 815) (as amended), which provides as follows:
“(6) The following shall constitute the gross receipts of the Petroleum Holding Fund:
- royalties from oil and gas, additional oil entitlements, surface rentals, other receipts from any petroleum operation and from the sale or export of petroleum.
- any amount to receive from direct or indirect participation from the Government in petroleum operation.
- Corporate income taxes in cash from upstream and mainstream petroleum companies.
- any amount payable by the National Oil Company as cooperate income tax, royalty, dividends or any other amount due in accordance with the laws of Ghana; and
- any amount received by Government direct or indirectly from petroleum resources not covered by paragraphs (a) to (d) including where applicable capital gains tax derived from the sale of ownership exploration, development, and production rights.”
(7) Revenue due from the direct or indirect participation of the Republic in petroleum operations, including the carried and participating interest, shall be paid into the Petroleum Holding Fund.”
- This was the evidence of the Vice Chairman who testified on behalf of PIAC, Mr. Nasir Alfa Mohammed:
“Mr. Chairman, as we indicated, PIAC took a lot of this into consideration in arriving at this conclusion. Now the portions of the Act, that I referred to; Section 6 and the amended version of Section 7, both indicate clearly that even revenues accruing to the Republic from the direct or indirect participation of the Republic shall, first and foremost, be paid into the Petroleum Holding Fund.
Mr. Chairman, it is the considered view of the Committee that it matters not that other issues may be introduced into the whole conversation. What matters for us, our understanding of the law, is that the PRMA is the primary law that governs the utilisation and management of the petroleum revenues, and it says that any revenue accruing to the State whether directly or indirectly, should first be paid into the Petroleum Holding Fund.
Mr. Chairman, we also know that GNPC is the primary commercial arm of the Republic of Ghana in petroleum activities, and so, when this happens, we are dealing with GNPC per se. if we look at the whole JOHL transactions, it was GNPC that undertook those transactions.
Therefore, our position PIAC is that, whether that lifting was done by a 100 per cent subsidiary of GNPC or not, it ought to come first into the Petroleum Holding Fund from where disbursements can be made for whatever reason.” (see page 14 of the Verbatim Report of the Proceedings of the Committee on Thurs, 17th November 2022).
- PIAC could however not confirm or deny whether or not the proceeds from the sale by JOHL were paid into the offshore accounts and whether the Minister for Finance was responsible for such payment. This was the evidence of the Vice Chairman of PIAC in response to questions from the Committee:
“Mr. Boamah: I believe you were invited here to throw light on a few things with regard to what the Proponents of the Motion alluded to, especially in paragraph 3. I do not know if you have a copy of the Motion.
Mr. Mohammed: No, Mr. Chairman.
Mr. Boamah: I can read to you. The terms of the Motion are as follows:
‘That this House passes a vote of censure on the Minister responsible for Finance, Ken Ofori-Atta, in accordance with article 82 of the 1992 Constitution on the following grounds: … (3) illegal payments of oil revenue into offshore account in flagrant violation of Article 178 of the 1992 Constitution’. You have worked at the PIAC Secretariat. You are the Vice Chairman, so you are seized with a lot of information. In preparing this half year report, did you come across any illegal payment into any such offshore account from the Minister for Finance?
Mr. Mohammed: Mr. Chairman, what we have found was that monies that we are convinced are legitimate revenue that were meant to be deposited in the Petroleum Holding Fund did not or were not deposited in them.
Mr. Boamah: But is it the responsibility of the Minister for Finance to make those payments?
Mr. Mohamed: Mr. Chairman, I doubt PIAC is in the position to categorically say that is the case.” (Verbatim Report of Proceedings of the Committee of Thursday, 17th November 2022, at page 48).
Evidence of GNPC
- The Ghana National Petroleum Corporation (GNPC) however disagreed with the conclusions by PIAC that oil liftings amounting to US$100,748,907.95 by JOHL are revenues that ought to have been paid into the PHF. They argued that JOHL, though a subsidiary of GNPC, is a separate legal entity whose operations are governed by its constitution and the Companies Act, 2019 (Act 992). GNPC noted that the revenue streams due the PHF from JOHL are dividends paid by the company to the sole shareholder which is GNPC.
- According to GNPC, JOHL was established by Anadarko to hold its 7% interest in DWT/WCTP which was subsequently acquired by GNPC. They indicated that the decision to acquire JOHL was part of GNPC’s Works Programme which was approved by Parliament. They further stated that GNPC received a loan from the Ministry of Finance which was used to acquire JOHL.
- The position of GNPC was canvassed by its Deputy Chief Executive, Mr. Joseph Dadzie in response to questions from the Committee as follows:
Mr. Dadzie: What it is and I think PIAC spoke about the acquisition and I think there are some few issues we needed to clarify. The fact of the matter is JOHL was not set up by the GNPC; JOHL was set up by Anadarko. It was set up because Anadarko decided to sell its stake in the Ghana asset and reached an agreement with Cosmos to purchase it. Government of Ghana then made a submission that we wanted a part of that stake and we agreed on seven per cent after negotiations.
What happened was that they had a timeline; typically, with these Mergers and Acquisition’s (M&A), we work according to strict timelines for consummation of that transactions. Also, because GNPC had to go through the needed approval process. Anadarko Petroleum decided to set up JOHL, carve out the seven per cent so that when GNPC was ready for acquisition and went ahead to consummate that transaction with Cosmos. When we got the necessary approval and were ready, we had to buy JOHL so, the structure of the transaction was not a GNPC defined structure rather, it was a structure that was defined by the seller and we obviously had to buy the company. What we bought was the company shares, we did not buy – to clarify what PIAC was saying, we did not buy the stake or the participating interest but we bought the company which held the seven per cent of Jubilee and Ten Fields.
Dr. Ayine: Where did you get the money to buy the shares in the company?
Mr. Dadzie: We wrote to the Ministry of Finance to grant us a loan towards the purchase and we were very clear that we were going to pay back the money.
Dr. Ayine: Very well. Do you have the letter that you wrote to the Hon. Minister of Finance?
Mr. Dadzie: Yes, we have copies of the letter.
Dr. Ayine: All right. Can you make that available to the Committee?
Mr. Dadzie: Yes, Mr. Chairman, we will do so.
Dr. Ayine: The Ministry of Finance made an advance of funds to you for the acquisition, right?
Mr. Dadzie: Yes, Mr. Chairman.
Dr. Ayine: So, was it a loan?
Mr. Dadzie: Yes, it was a loan.
Dr. Ayine: Was it an interest-free loan?
Mr. Dadzie: No, we were going to pay an interest on it.
Dr. Ayine: Do you have the exact terms of the loan in document form?
Mr. Dadzie: We did not sign an actual loan agreement but the correspondence alluded to the fact that –
Dr. Ayine: Yes, that can constitute a contract. The correspondence can result in a contract. Did you obtain any approvals from Parliament?
Mr. Dadzie: We got approval from our Sector Ministry and Ministry of Finance. In our work program we had indicated because, the sale of Anadarko Petroleum stake had been on the table for some time, COVID-19 interrupted it. In our 2021 work programme we had indicated that we were looking at acquiring part of the Anadarko stake and that was contained but obviously, we were not sure of the amount we were going to pay for it.
Dr. Ayine: So, you merely stated that you were interested but did not state how much you needed for purposes of the acquisition?
Mr. Dadzie: No, Mr. Chairman because we did not know how much it was going to cost.
Dr. Ayine: And Parliament approved the work programme without the specific amount being stated in the work programme, right?
Mr. Dadzie: That is correct, Mr. Chairman”.
- Mr. Dadzie further stated as follows:
“Dr Ayine: With respect to the lifting of the oil you have already confirmed that JOHL lifted over 900,000 barrels of oil, right?
Mr. Dadzie: Mr. Chairman, in fact, in total, we had about $153 million –
Dr. Ayine: Million barrels?
Mr. Dadzie: Dollars, I am giving the value. We consummated this transaction in October and because the assets were producing fields, we were lifting barrels. The arrangement that existed before we acquired the stake was a pool transaction so basically, what Anadarko was going was pooling their barrels together with PetroSA and selling. Therefore, once we acquired JOHL which held seven per cent in an already producing field, we were entitled to the barrels so we got our share of the barrels that were sold and that pooled the arrangement that existed.
Dr. Ayine: So those barrels ordinarily would have come to GNPC, right?
Mr. Dadzie: No, it went to JOHL.
Dr. Ayine: If you did not acquire Jubilee Holdings, would those barrels of oil have come to you?
Mr. Dadzie: They would have gone to whoever had it.
Dr Ayine: But through the acquisition, the barrels of oil lifted now belong to JOHL. The monies were obviously paid directly to Jubilee Holdings, right?
Mr. Dadzie: Yes, Hon. Chairman.
Dr. Ayine: Are those monies ought to have been paid first into a Petroleum Holding Fund?
Mr. Dadzie: Yes, that is the point of departure or the area of disagreement. We believe that JOHL –
Mr. Hammond: What. Who are you disagreeing with? Where are you departing from? He asked you a question, so deal with it.
Mr. Dadzie: I am alluding to what PIAC said. We disagree with PIAC’s assertion that it should have been paid to PHF.
Dr. Ayine: Could you explain to the Committee why you disagree?
Mr. Dadzie: Hon. Chair, as was discussed during the PIAC testimony or submission, JOHL is a 100 per cent subsidiary of GNPC. It is a company registered under the Companies Act and the constitution of JOHL is government by the Companies Act and for that reason, 100 per cent of the revenue cannot be paid into PHF.
The company must operate and if at the end of the day it declares profit and the directors decided that dividends must be paid, that money is paid to GNPC and that money paid of course would be paid into the PHF.
So, we believe that JOHL is governed by the Companies Act and not by the Petroleum Revenue Management Act, 815 (PRMA).” (Verbatim Report of Proceedings of the Committee of Thursday, 17th November 2022 at pages 75-76).
- The Corporation further confirmed that the payments were made into JOHL account whit Ghana International Bank, London, by the buyer of the crude, on the instructions of JOHL. It is the position of GNPC that the Minister for Finance played no role in the payment of the oil liftings worth US$100,748,907.95 into the offshore account JOHL. This was the evidence of Mr. Dadzie when he appeared before the Committee on Thursday, 17th November 2022:
Mr. Hammond: Thank you very much, Mr. Co Chairman.
I entirely understand the concept so I do not intend to trouble …………. All I need to understand is that in all of these what relates to the Hon. Minister for Finance in terms of the allegations made against him?
Mr. Dadzie: As far as JOHL is concerned, the Hon. Minister for Finance is not responsible for the revenue. Obviously, we have to at the end of the day submit our financials – GRA, we have to pay whatever assessed tax that we need to pay. Mr. Chairman, permit me to say that in 2021, JOHL paid Gh¢17 million to GRA as tax on its operation so as far as the revenue is concerned, I do not think the Hon. Minister for Finance has any direct control –
Mr. Hammond: I have read the GNPC Act, the Companies Act and the other Acts under consideration. My understanding is entirely the same as your understanding so I would pass it on to my other Hon. Colleagues.
Dr. Ayine: If that is the case, just a quick one, was any money paid into an offshore account? The US$100 million was it paid into an offshore account?
Mr. Dadzie: Mr. Chairman, the word offshore when we use, for those who are bankers, we could even have an offshore account in Ghana. When we say “offshore”, I get a bit confused because the Bank of Ghana has certain categorisations of what we call foreign currency, and so what we call FCA have offshore account, but to the extent that the question relates to receipt from sale of crude oil, yes, it was paid into an account held at Ghana International Bank in London.
Dr Ayine: All right. Who made the payment?
Mr. Dadzie: The buyer of the crude. Even in the case of PHF the buyers of the crude pay directly into the PHF; so, they pay directly into whichever account is there for them to pay into.”
- Subsequently GNPC submitted to the Committee a swift message of the payment showing that it was Tullow Oil Ghana Ltd that paid the funds into JOHL account with Ghana International Bank.
- The Committee, having regard to the above evidence by PIAC that they could not confirm that the Minister for Finance was responsible for the non-payment of the oil liftings by JOHL into the PHF, and the evidence of GNPC that the payments were made into JOHL’s offshore account by the buyer of the crude under the instructions of JOHL and that the Minister for Finance played no role, decided that the Hon. Minister was not enjoined to lead evidence in defence of the said Ground Three. The decision was communicated to the Hon. Minister and he obliged.
