Accra: The Institute of Economic Affairs (IEA) has urged President John Dramani Mahama to reconsider the decision to extend Tullow Petroleum's agreement with Ghana. The IEA has expressed concerns over the Memorandum of Understanding (MoU) signed by the Government of Ghana, which aims to extend the petroleum licenses of Tullow Oil and its partners until 2040.
According to Ghana News Agency, the IEA criticized the MoU, highlighting a lack of good faith, transparency, probity, and accountability. The institute stated that this decision contradicts the government's commitment to improving governance in the extractive sector. The IEA pointed out that Tullow's operational relationship with Ghana has been fraught with challenges, including several high-profile international arbitration disputes.
One prominent issue cited by the IEA involved a Branch Profit Remittance Tax (BPRT) liability of USD 320 million, assessed by the Ghana Revenue Authority (GRA) for the period 2012-2016. Tullow disputed the claim through international arbitration, and the International Chamber of Commerce (ICC) in London ruled in favor of Tullow, stating that the company was not liable for the tax. Furthermore, the ICC directed Ghana to cover significant legal and arbitration costs.
The IEA also expressed alarm over another ongoing tax dispute involving Tullow, in which the company is contesting an additional GRA-assessed liability of USD 387 million. This dispute concerns disallowed interest deductions from 2010 to 2020, and Tullow has again opted for arbitration at the ICC.
Given these unresolved issues, the IEA urged the government to suspend the process of extending Tullow's petroleum licenses, originally set to expire in 2036. The institute emphasized that petroleum is a depletable national asset and that any extension should be preceded by a comprehensive review and restructuring of the existing agreement. This would ensure alignment with Ghana's long-term development goals.
The IEA recommended that the current contract, which it described as colonial-era, be restructured into a service contract similar to those in countries like Norway, Saudi Arabia, and Qatar, where the state maintains control while leveraging private sector expertise. The IEA cited the contrasting experiences of the UK and Norway in North Sea oil exploration as valuable lessons, noting significant differences in revenue generated per barrel and overall economic benefits.
