ENSURING COST EFFICIENCY IN THE UPSTREAM PETROLEUM SECTOR THE ROLE OF THE COMMISSION

outline A LEGAL MANDATE OF THE COMMISSION WHAT IS COST EFFICIENCY WHY COST EFFICIENCY COST EFFICIENCY, EFFORTS AND ACHIEVEMENTS IN THE PAST THE NEW DIRECTION ON COST EFFICIENCY

A LEGAL MANDATE OF THE COMMISSION Petroleum Commission Act , 2011 (ACT 821) Section 3(a) states that The Commission shall: “Promote planned, well executed, sustainable and cost efficient petroleum activities to achieve optimal levels of resource exploitation for the overall benefit and welfare of citizens”

WHAT IS EFFICIENCY? From accounting point of view efficiency can be explained as using a specified quantity of resources to achieve more than the intended output or using less of the specified quantity of resources to achieve the intended output

In the generic sense, no producer determines its own price, rather oil price is benchmarked against notable world market brands such as the Brent or WTI Specifically in Ghana, we operate a fiscal regime that straddles between concessionary system and production sharing contracts (PSC) Additionally, our petroleum agreements and tax laws allow for full recovery of cost of petroleum operations in so far as they are incurred wholly, exclusively and necessary for the conduct of petroleum operations, Even damages are recoverable unless negligence can be proved. UNDER THESE LIBERAL, OPERATIONAL AND LEGAL FRAMEWORK, WE CANNOT AFFORD NOT TO ENSURE COST EFFICIENCY WHY COST EFFICIENCY?

WHY COST EFFICIENCY ?

Cost efficiency returns higher shareholders value to investors A competitive advantage to the firm that is cost efficient Why Cost Efficiency?

COST EFFICIENCY EFFORTS AND ACHIEVEMENTS IN THE PAST Notwithstanding capacity and resources constraints ,The Commission has chalked remarkable gains when it comes to its mandate on cost efficiency, especially in the following areas: Plan of Development (PoD) engagement with IOCs Contracting and procurement Auditing and financial reviews

COST EFFICIENCY EFFORTS AND ACHIEVEMENTS IN THE PAST The Commission has also realised savings of about $ 40 million in: Contracting and procurement Auditing and financial reviews

THE NEW DIRECTION ON COST EFFICIENCY More engagement prior to PoD submission More involvement in contracting and procurement stages Reduce revenue leakages(through transfer pricing, non deduction of withholding taxes and inapplicable tax exemption) A 360 regulatory compliance Cost auditing in accordance with accounting guidelines in the Petroleum agreement and Section 51 of ACT 919 THE NEW DIRECTION ON COST EFFICIENCY

OUR OBJECTIVE We pursue this cost efficiency mandate with the clearest of convictions, that at the end of the day, the exploitation of our petroleum resources will be to the benefit of the citizens of Ghana, and more importantly, our cherished investors will return higher values to their shareholders and further soar the attractiveness of the country as the preferred investment destination

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