Ghanaian News

K K Sarpong: There’s lack of understanding over GNPC and Aker/AGM deal

Dr Kofi Koduah Sarpong, chief executive officer of the Ghana National Petroleum Corporation (GNPC) says there is a lack of understanding in the GNPC’s plan to acquire offshore fields to enable Ghana own its petroleum projects.

He said some of the civil society organisations (CSOs) criticising the deal have failed to seek the right information.

Speaking in an exclusive interview with Emmanuel Aboagye-Wiafe on Energy 101, Dr Sarpong said, “I think that we all agree to disagree or in the process of misunderstanding explanations are offered to let everybody calm down. I wouldn’t say they are controversies; I believe that there is a lack of understanding in what we are trying to do and if we are able to put our view across or offer the right explanations then all these misconceptions can be taken on board.

“…Some CSOs have aligned with what we are doing, some haven’t and when I say they are noisemakers (some CSOs), I made that statement because they fail to come to me to seek information.”

He added: “I’ve always said we don’t manage in the media. When they wrote to the Speaker of Parliament, the IMF and the World Bank and copied us [GNPC] we responded. That’s an engagement of some sort. Engagement doesn’t mean that we should be talking face-to-face. They wrote and we also gave a written response to the Rt. Hon. Speaker of Parliament, the IMF Mission in Ghana and the World Bank office.

“We responded to the issues they raised and if you got our response you’ll realise that we debunked virtually everything they said which is quite indicative that they did not have the facts; that is where I get worried.”

Cost of the transaction
Answering a question on the cost of the deal, Dr Sarpong said, “You see we don’t know yet. There are two issues here; there is acquisition cost to be dealt with and then after acquisition, there is cost to first production of oil. The cost to first production we know the estimate as US$350 million if we acquired those percentages; that one is on the Aker block, that one we have been working so we know the estimated development cost… regarding the acquisition cost, it depends on negotiations between the parties; the seller and the buyer, and it’s not going to be done just by guesstimate.”

He added, “There are facts that will be taking into account like valuation results, risk assessments… So when people talk about US$1.65 million, I know the memo which came from the minister to Parliament mentioned US$1.65 billion, if you took the US$350 million which is CAPEX development then it was like US$1.3 million being requested. But if you read the memo, the minister said ‘up to’ meaning give us the mandate so that we operate within this…”

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.

Show More

Related Articles

Back to top button

Adblock Detected

Please consider supporting us by disabling your ad blocker