Ghana to lose over US$10 billion in transfer of Ghana’s Equity Interests to Aker Energy/AGM – Minority


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The Government of Ghana instead of protecting the national purse is rather engaged in offering for a pittance the country’s petroleum resources and assets to foreigners.

Recall that in 2009, the Government negotiated and secured an additional 5% carried interest when Eni bought into the Vitol Upstream (Heleconia) operated block thus bringing Ghana’s total stake up to 20%. This has accounted for the significant share of oil and gas production that Ghana has in the current Eni oil and gas producing fields which has had a major impact on Ghana’s GDP in 2017 and 2018.

Currently, however the Government has been busy trying to reduce the official State share in the AGM/Aker block which could hold billions of barrels of oil, in a manner akin to the infamous Ameri scandal.

The Deal (viz: Reduction of Additional Interest from 15% to 3%? Conversion of Explorco interest from 24% to 5% to increase Carried Interest from 10% to 15%)

The existing Petroleum Agreement gives Ghana a total 43% stake (made up of carried and participating equity (interest) of 25% and a commercial interest of 24% of the remaining 75% equivalent to an additional 18%). However the Government is rolling this back by negotiating with AGM/Aker to transfer a whopping 25% of this equity interest to Aker/AGM, a foreign entity thereby reducing Ghana’s interest to only 18%.

Estimated Impact

The impact of the “selloff” of almost 25% of Ghana’s equity interest (represented by a reduction from 43% to 18%) without any consideration (nothing in return) from Aker/AGM, in an area that can hold as much as 1 to 2 billion barrels of recoverable reserves (after applying a recovery factor) of oil is any body’s guess. The effect of this significant reduction of more than 25% in equity interest for GNPC and the State is the potential loss of over 250 million barrels of recoverable oil production equivalent (net to Ghana) which is almost 50% the size of the entire Jubilee field. This is equivalent to about US$10 billion (assuming a conservative US$40 net per barrel) in direct revenues into the consolidated fund and transfers to GNPC.

Mind you GNPC had already invested over US$30 million in acquiring data and reducing exploration risks over the block with bank loans to make the block attractive prior to the entry of Aker/AGM into the block.

Additionally there is a commitment by AGM/Aker to pay for (or carry), GNPC on the costs of the first two exploration wells which the Government is forfeiting. This amounts to forfeiture of free funding of about $62 million (i.e. 24% of $259 million well commitment). To be clear, the Government’s hands are not tied. It can flatly refuse this request as the previous Minister did without losing anything. If AGM refuses to meet its two well obligation it is under bond to pay US$259 million (less any work done) to GNPC to conduct the drilling work obligation and can actually enforce this as Aker has assets within the country.

If we want to sell Ghana’s stakes at all, why not wait for Aker/AGM to drill the free carried obligatory wells for which Ghana is not required to contribute any costs whatsoever, as stipulated in the existing Petroleum Agreement , and then, perhaps consider selling after the announcement of any oil finds. After any discovery, the maximum value of the stakes can be realized in a competitive transparent sale for the country, if at all necessary.

The obvious lingering questions are:

1. Why a renegotiation when the fundamentals of the environment have not changed but rather improved in favour of investors with higher oil prices and significant technical work already done by the State and GNPC with recoverable reserves potential estimated at about 1 to 2 billion barrels.

2. What is Ghana getting in return from this foreign entity (AGM/Aker) for this mind boggling transfer of benefits (viz: Reduction of Additional Interest from 15% to 3%? Conversion of Explorco interest from 24% to 5% to increase Carried Interest from 10% to 15%)

a. The conversion of a 24% commercial stake into an additional carried interest of 5% is highly inadequate when the 24% is already carried for 2 wells at the value of about US$62 million. A 24% commercial interest with such well costs being carried should be worth an additional 15% carried interest and not an additional 5%.

b. The conversion of the additional interest from 15% to 3% is even worse as this is even fully carried beyond the 2 exploration wells into appraisal.

c. The argument that GNPC cannot raise money to fund its interest for development and production cannot hold.

d. Worse case GNPC would be in in a much better position than now to sell some of this interest and obtain financing for development e.g. EO Group’s interest of only about 2.5% was worth more than US$300 million after oil was discovered.

3. What is the motivation for Government in all this? Why did Minister Agyarko reject this transaction?

4. Why the indecent haste to short-change Ghana in this manner.

5. Can it be for private gain? Who is benefiting from the new 5% local content? Are there any transfers of some of these interests to unknown private Ghanaian interests?

6. Are the statutory institutions including the Petroleum Commission, GNPC and indeed the Energy Minister, who are mandated to secure Ghana’s interests in the oil and gas sector aware of this?

On the last question, it is actually rumored that Aker/AGM has grown so much wings  that they even refused to have a negotiation on this matter with GNPC citing a directive from the President himself which has set tongues wagging about who the true beneficiaries of this thievery are.

It is also not clear whether this has anything to do with the turf war between the Chairman of GNPC and the Chief Executive and whether the Energy Minister is aware.

For GNPC this is certainly not consistent with its vision of becoming a commercial and financially independent entity. This would affect its efforts at financial independence when Government budget support of GNPC ceases to flow by 2025/2026 based on the 15 year limit set by the Petroleum Revenue Management Act.

We cannot allow this to happen. We call on the Parliament of Ghana to call the Government to order and to halt this blatant forfeiture of State assets to undeserving foreign interests. We also call on civil society and all well-meaning Ghanaians to resist these attempts to short-change the country in this blatant mismanagement of the nation’s critical petroleum resources.