Government at the weekend has responded to IMANI’s allegations over the petroleum agreement with Aker Energy, denying claims that the deal could be detrimental to the state’s finances.
However, many industry watchers, as well as public policy commentators and analysts remain dissatisfied with the explanations given.
A claim by policy think tank IMANI in its latest press engagement, held in Accra last week, suggests that Ghana could lose up to US$4.8 billion in potential revenues in the exploitation of the estimated US$30 billion oil find to Norwegian company, Aker Energy, which is a 51 percent equity holder and operator of what will be Ghana’s fourth – and by far its largest – oilfield, scheduled to enter development imminently and commence first phase production by early 2021 at the latest.
In January this year, the company announced the discovery of oil in the Pecan South-1A well in the Deepwater Tano Cape Three Points (DWT/CTP) block offshore Ghana. The discovery is touted as the biggest oil find in Africa.
IMANI’s Vice-President Kofi Bentil however argues that the find is being claimed by Aker Energy without legal basis.
Aker Energy acquired the 51 percent stake in an earlier well in the area found by another Norwegian company Hess Oil which Aker subsequently acquired in early 2018.
Hess Oil operated under a Petroleum Agreement with the government of Ghana signed in 2006 which granted the company seven years within which to undertake oil exploration in a given area, the Contract Area.
This Exploration Period ended in 2013.
Kofi Bentil argues that by the laws governing oil exploration and production in Ghana, any oil find made outside of the exploration period cannot be claimed by the company that found it – it belongs to the state.
Aker Energy, he asserted, having inherited the well from Hess oil at a time the exploration period had ended, was not permitted by law to continue any exploratory activities.
They were only required to do appraisal work on the Pecan find made by its predecessor company – Hess Oil.
But the Energy Ministry has subsequently countered the claims by IMANI, citing it as a major goof concerning the contractual agreement with Aker Energy.
“The contract area has seven discoveries namely pecan north, almond, cob, beech, pecan, paradise and hickory north. The first five are oil discoveries while paradise and hickory north are gas discoveries.
“Aker Energy acquired the interest of AMERADA HESS Ghana Limited in February 2018 and proceeded to continue the unfinished works under the programme of an appraisal to HESS” Energy Minister John Peter Amewu told the media last Friday.
Aker Energy, on its own part has maintained a steadfast silence on the issue. Efforts by Goldstreet Business to obtain a statement from the company last week were unsuccessful; however a senior source at the company speaking unofficially and on condition of anonymity insisted that the ongoing controversy is between Imani and government and as such does not involve Aker itself.
However public policy analysts insist that the Energy Ministry’s explanation does not address the issue of the expiration of the exploration license given Hess, years before Aker drilled the exploratory wells that have uncovered the impending Pecan oilfield. While they do not go as far as Bentil does in arguing that the new find should actually belong to the state, they point out that the new find should be subject to the terms of Petroleum Agreements (PAs) as structured under the Petroleum (Exploration and Production) Act 919, which was passed in 2016, rather than the terms contained in the earlier PAs in force when Hess was given its exploration license.
Under the new PAs, which have come into force before Aker’s new discovery, royalties are pegged at 10 percent and the state’s freely carried interest at 15 percent with an option to pay for further participating interest. The earlier PAs restrict the state’s royalties to four percent with carried interest of 10 percent and no compulsory option of a further paid participating interest.
Instructively, the fiscal regime was tightened through the terms of the newer PAs because Ghana is now considered a strongly competitive destination for oil exploration and production unlike hitherto, when it did not have a track record of oil discoveries and subsequent production; and analysts point out that indeed it is this same track record which encouraged Aker to acquire Hess to get into Ghana’s upstream oil and gas industry in the first place.
The potential revenue that could be forgone by Ghana has been computed based on a valuation of the Pecan field at US$30 billion – which Energy Minister hotly disputes, putting it at between US$9 billion and US$11.5 billion – and the difference in revenues due Ghana between the earlier PAs and the fiscally tightened ones now in force.
By Wisdom Jonny-Nuekpe & Toma Imirhe