Ghana: Government’s Refusal To Refund US$4 Million VAT Pushed EXXONMOBIL Away

Energynewsafrica.com can authoritatively report that the Government of Ghana’s refusal to implement VAT exemption granted in the Deepwater Cape Three Points (DWCTP) oil block Petroleum Agreement is the topmost issue which has triggered the America’s oil and gas super major, ExxonMobil decision to abandon their exploration activities in the West African nation.

Reliable sources within the country’s energy sector indicated that the US super major has paid about US$4.2 million in VAT despite the company being exempted from paying VAT as per the Petroleum Agreement.

Article 12.8 of the DWCTP Petroleum Agreement (PA) specifically provides that “Contractor, its affiliates and sub-contractors shall not be liable to pay VAT in respect of plant, equipment and materials and related services supplied in Ghana, to be used solely and exclusively in the conduct of Petroleum Operations under this Agreement”.

Article 12.16 further provides that “Contractor shall be exempted from any upfront payment and /or refund requirement on any exempt taxes, duties, fees and other imports of any kind”.

Letters written by Deloitte & Touche, external consultant of ExxonMobil and sighted by energynewsafrica.com expressed the frustrations of ExxonMobil.

For almost two years, ExxonMobil has been pursuing the Government of Ghana to address their concern but all to no avail.

“We wish to follow up on this request as our client has not received any feedback from your office to date. Our client is currently compelled to make payment for VAT on supplier invoices which is an adverse cash flow impact on its operations considering that the company is clearly exempted from upfront payment of VAT in accordance with Article 12.16 of its Petroleum Agreement ratified by Parliament.

“We look forward to your prompt response and issuance of VAT Relief Purchase booklet to our client,” a portion of the letter written by Deloitte Touche read.

More to come…