The discovery of the Jubilee oil field in 2007 transformed the Ghanaian oil industry. It has been followed by a slew of other discoveries and additional projects are scheduled for production start-up in the coming years.
As the commercial oil and gas sector expands, a key objective of the state will be the optimisation of “government take” from the industry. This currently occurs through a variety of mechanisms including direct taxation, royalties and state participation in industrial projects.
Designing an optimal strategy for government take is a complex task which has even more importance for developing countries where a properly managed resource boom could drive significant economic growth. Governments have a desire to obtain maximum petroleum receipts as soon as possible but must balance this against the need to create an attractive investor environment for the growth of the sector. Getting the balance right in the early years is crucial. Greedy governments may generate some short-term returns but will stifle the necessary further investment that would permit a fuller exploration and development of the country’s hydrocarbon endowment. Conversely, unduly low taxation represents an obvious missed opportunity.
Fiscal design cannot be conducted in the absence of regional context, oil and gas capital is internationally mobile and competition between states for investment is fierce. Governments cannot design their own fiscal terms without carefully monitoring what is going on next door.
It is in this dynamic setting that Ghana is currently reviewing its petroleum legislation. The structuring of government take is an important part of the debate. This paper seeks to appraise the existing Ghanaian mechanisms of government take and makes recommendations on how the approach to the AOE could be revisited for future negotiation and the issue of revenue delay to the state for further analysis by policymakers. Read the full study