CSO’s to Gov’t: Your handling of GNPC Aker deal is eroding investor confidence and must not be tolerated

GNPC and Aker deal -CSO

The Alliance of Civil Society Organizations (CSOs) working on Extractives, Anti-Corruption and Good Governance is worried government’s handling of the Ghana National Petroleum Corporation (GNPC) deal with Aker Energy could erode confidence of Investors in the petroleum sector.

The CSO’s maintain they are not against the GNPC Aker deal but believes it is not in the interest of Ghana due to the huge amount involved in the transaction.

According to the CSO’s the mere mention of the transaction has become a major source of worry for players in the extractives sector.

In a letter signed and addressed to the speaker of Parliament, The Country Director of the World Bank, The country Director of the International Monetary Fund and the Norwegian Ambassador , the CSO’s assured that they are open for further engagement on the controversial deal.

“Ultimately, for government to spend more than US$1 billion, the value generated must be comparable to any other investment the State could put those resources to. Our disappointment, therefore, stems from the fact that there is too much focus on the emotional argument about operatorship than value for money and ancillary risks.” .” The letter said,

“The more we hear about the transaction the more worrying it gets. When we called on Parliament to investigate the transaction, we had hoped that Parliament would at least seek to verify the investment figures provided by GNPC. If Parliament had paid attention to our modest appeal, they would have saved the sector minister the embarrassing letter from Lukoil to the effect that they were not even aware that such a major change to the shareholding and operatorship of the block was happening on their blind side.”

“These are the kinds of practices that kill confidence in the sector and must not be tolerated. We remain available and able to engage openly to ensure that the interest of Ghana is preserved. In that spirit, your good office could invite Alliance CSOs and GNPC to discuss the details of our position. GNPC assured you that they would engage. But, unfortunately, that is not happening, at least transparently, to discuss the concerns of Civil society.” The letter added”

Below is the full letter

Rational behind acquisition

The government, acting through GNPC, has initiated the process to acquire a 37% stake in Deep Water Tano Cape Three Points and a 70% stake in the South Deepwater Tano

The purchase agreement once finalised will ultimately result in the establishment of a joint operating company between Aker Energy, AGM Petroleum Ghana Limited and GNPC Explorco.

The planned acquisition which has received cabinet approval was laid before Parliament on Monday 2 August 2021 for the input and approval of the house and to mandate the Ministers responsible for Energy and Finance to commence negotiations and agree on a purchase price with Aker Energy and AGM.

Ghana has in place 18 petroleum agreements, many of which have not seen substantial work done as of December 2020. Out of the 18 fields, three are producing fields and four are discoveries.

The Petroleum Exploration and Production Act, 2016 (Act 919) which governs the upstream petroleum industry gives GNPC exclusive rights to undertake its mandate in all open blocks in the country. It requires all persons wanting to undertake upstream petroleum operations in Ghana to partner with the Corporation.

But, the declining number of majors in Ghana and the ongoing energy transition means that if no one else is willing to explore or develop, GNPC may have to develop Ghana’s deepwater resources alone. To do so GNPC must have operator capabilities and the technology.

GNPC acknowledges that it will need some capacity building in order to become an operator on its own. The process requires a major oil company willing to travel on this learning route with GNPC. Partnership with AKER Energy and AGM, with proven deepwater capabilities, provides such an opportunity for the national oil company to develop operator capabilities.

GNPC proposes to partner with Aker Energy/AGM to jointly develop the DWT/CTP and SDWT blocks. The two companies, with a wealth of deepwater experience and the requisite technology, are keen to enter into this arrangement with GNPC.

The existing discoveries by Aker Energy and AGM (the Pecan and Nyankom fields) are by far the largest discoveries in Ghana, and the only ones that can be developed as stand-alone developments. This partnership has the potential to add more than 200,000 barrels of crude oil to Ghana’s current production within the next four to five years.

Benefits

The transaction according to the Energy Ministry offers significant benefits to Ghana in its quest to develop its petroleum sector. Among others, GNPC gets to build operator capacity at a critical time in history to ensure that the hydrocarbon resources in the country can be fully developed.

Other expected benefits are Ghana’s crude oil production will increase by 140,000 to 200,000 bpd within three to nine years, oil produced may be exported or refined in Ghana for domestic use thereby reducing imports of refined products and conserve foreign exchange, local content agenda can be effectively set by GNPC and a GNPC with operator capabilities will provide enhanced value creation for Ghana.

GNPC Explorco will eventually recoup the capital expenditure as part of petroleum costs and loan offered to GNPC Explorco for the transaction can be repaid at First Oil through securitization of crude oil entitlements.

Additionally, tax expenditures (through exemptions) and initial concessions extended to Aker Energy/AGM will be substantially reclaimed by GoG and assets to be acquired by GNPC Explorco will be done at a discount to current valuation.

Royalties, tax revenues and profits to GNPC Explorco will amount to about US$6.5 billion in nominal value over 15 years and substantial foreign exchange inflows will accrue to Ghana which will contribute to GDP growth and expanded job opportunities.

Fred Dzakpata

Gh Extractives

Ghextractives.com is an independent multimedia portal that seeks to provide credible information and news content to readers especially players in the extractive sector in Ghana, Africa and beyond. It also provides a unique platform for players in the energy sector to market their products and reach a wider audience

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