…as partners struggle to secure local partner
The quest to secure a local partner to join the multi billion dollar government of Ghana, Exxon Mobil agreement as required by the Petroleum Exploration and Production Act in a bid to start operation is facing some challenges three months into signing the agreement.
As per the provisions in the petroleum exploration and production Act , all multinational companies seeking to engage in oil production in Ghana must allocate at least five percent shares to a local company. Without a local partner, multinational firms cannot go ahead with their operations.
Isaac Amoako Mensah, Chief Executive Officer of Classic Amodel Ghana Limited (CAGL), who is an industry expert in an interview said “ as far as I am aware, no local partner has been announced, we don’t know who would be selected. No name has been announced yet. Definitely we are expecting a name to be mentioned and we are waiting.
When they select their preferred local partner company, they would inform the Petroleum Commission who is the regulator for approval and then proceed with commencement of operation. Without a local partner Exxon Mobil cannot go ahead with their operations”, he stated.
Interestingly , Mr Amoako Mensah clarified that “Parliament of Ghana has no business with the deal.” The only thing required of Parliament is to approve the contract for work to begin. However, the most important thing is to have a local partner to manage the five percent stake as required by Law.
Beneficiaries in the agreement
Article 2.4 of the E&P Act says that “ GNPC shall have a fifteen percent (15 percent) initial interest in all Petroleum Operations and development operations. Initial Interest shall be a carried interest. With Respect to all production operations GNPC’s initial interest shall be a paying interest.
Article 2.13 states that “For the avoidance of doubt, the participating interest shall be divided as: “ Exxon Mobil 80 percent of the total interest under this agreement and Internally Generated Company 5 percent of the total interest under the agreement.
Particulars / Parties to The Contract
GoG, GNPC (Ghana Group) – 15 percent carried interest. Upon discovery has option of taking up to 3 percent paid interest (additional) Art. 2.5 of Agreement (the Law does not provide threshold but defers the determination of the level of paid interest to the negotiating parties);
ExxonMobil – 80 percent interest holding; Yet to be identified indigenous Ghanaian company – 5 percent;
The assignment in respect of the local company is in keeping with Local Content Regulations 2204, 2013, which provides under: Interest of a citizen in petroleum operations, that:4. (1) An indigenous Ghanaian company shall be given first preference in the grant of a petroleum agreement or a license with respect to petroleum activities subject to the fulfillment of the conditions specified in these Regulations;
(2) There shall be at least a five percent equity participation of an indigenous Ghanaian company other than the Corporation to be qualified to enter into a petroleum agreement or a petroleum license;
(3) Despite sub-regulation (2), the Minister may vary the requirement specified in that sub-regulation, in circumstances where an indigenous Ghanaian company is unable to satisfy the requirement of the five percent equity participation.
(4) For the purposes of sub-regulation (2), the Minister shall determine the persons qualified.
By Adu Koranteng