Sanction oil firms over unpaid surface rents – Auditor-General to PC, GRA

By Kizito CUDJOE

The Auditor-General has directed the Petroleum Commission (PC) and Ghana Revenue Authority (GRA) to impose statutory penalties on International Oil Companies (IOCs) which fail to pay surface rental fees on time, warning that persistent defaults are eroding petroleum revenues and exposing weaknesses in enforcement of the country’s upstream fiscal regime.

This directive follows findings in the Auditor-General’s report on management of petroleum funds for the period January 1 to December 31, 2024, which show that several operators delayed or defaulted on mandatory surface rental payments into the Petroleum Holding Fund (PHF) – despite clear legal timelines and penalty provisions under petroleum revenue laws.

Under Regulation 5 of the Petroleum Revenue Management Regulations, 2019 (L.I. 2381), operators are required to self-assess surface rentals annually and pay amounts due into the PHF by February 28 of each year. In the case of new petroleum agreements, payment must be made within 60 days of ratification.

The Auditor-General noted that non-compliance with these requirements undermines predictability in petroleum revenue flows and weakens fiscal planning.

The law provides for sanctions in cases of default. Section 3 of the Petroleum Revenue Management Act, 2011 (Act 815) stipulates that entities that fail to meet payment deadlines must pay a penalty of five percent of the original amount for each day of default, or any higher rate prescribed under other applicable laws.

However, the report observed that these penalties have largely gone unenforced – reducing the deterrent effect intended by the law.

It is based on these findings that the Auditor-General charged the upstream regulator and country’s tax authority to move beyond administrative oversight and actively enforce penalties against defaulting companies to safeguard state revenues.

According to the report, total estimated proceeds from surface rentals at the reporting period’s end amounted to US$3.46million, made up of US$721,585 for the 2024 financial year and    US$2.million in arrears from prior periods. Yet only US$512,711.08 was paid into the Petroleum Holding Fund, highlighting a widening gap between expected and realised revenues.

As of December 31, 2024, the total amount due from surface rentals stood at                       US$2.94 million – equivalent to 107.6 percent of estimated surface rental receipts for the 2023 financial year. Of this amount, US$1.8million related to four contractors whose petroleum agreements had been terminated by the Minister of Energy, raising concerns about recovery prospects once contracts are cancelled.

In its report, the Auditor-General urged the Petroleum Commission and GRA to intensify recovery efforts and ensure that all companies liable for surface rental payments comply with statutory timelines. It cautioned that continued non-enforcement risks normalising late payment behaviour and weakening fiscal discipline in the upstream sector.

Beyond recovery, the report recommended tighter entry and monitoring controls. It called for enhanced due diligence and robust Know Your Client (KYC) procedures before petroleum agreements are finalised, alongside periodic financial health checks to assess whether operators retain the capacity to meet their fiscal obligations over the life of their contracts.

The Auditor-General further suggested that GRA should consider requiring bank guarantees from prospective oil companies as a risk-mitigation measure, particularly given what it described as a growing pattern of default, debt accumulation and abscondment among operators.

The report noted that GRA has acknowledged these recommendations and is taking steps to implement them, including seeking collaboration with relevant stakeholders to introduce bank guarantees for exploration companies.

However, the Auditor-General pointed out that contrary to the provisions of Act 815, defaulting companies were not charged penalties for late payments. It warned that failure to enforce the law not only deprives the state of revenue but also emboldens non-compliant operators, ultimately weakening the credibility of Ghana’s petroleum fiscal framework.

Meanwhile, the Public Interest and Accountability Committee (PIAC), the country’s petroleum revenue watchdog, has consistently flagged the issue of surface rental payments in its reports, urging authorities including the Bank of Ghana (BoG) and the Ministry of Energy and Green Transition to collaborate with regulators to recover arrears owed the state.

In its 2025 half-year report, PIAC noted that despite efforts by the GRA, surface rental arrears stood at US$2.82 million at the end of the first half of 2025, up from US$439,011.08 in H1 2024.

“The Ghana Revenue Authority, the Petroleum Commission, the Bank of Ghana, the Ministry of Energy and other related institutions should increase collaborative efforts to recover the Surface Rental arrears,” PIAC recommended.

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