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September 17, 2019
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GNPC fights back after Finance Minister queries $34m crude oil loss

The Ghana National Petroleum Corporation (GNPC) is denying any wrongdoing after it was accused by the Finance Minister of underpricing Ghana’s crude oil causing the nation to lose about $34 million.

The loss according to Ken Ofori-Atta occurred under the current boss, K.K. Sarpong.

In a July letter to Mr Sarpong, the Finance Minister raised alarm about the alleged underpricing and demanded an explanation to how it occurred.

Mr Ofori-Atta in his query letter said the GNPC gives the off-taker the option to choose whichever five-day moving average of prices to use for determining the value of the cargo.

This is not supposed to happen and has “given the off-takers the latitude to choose lower prices to value the TEN crude oil.”

The letter continued that “our analysis reveals that, in five out six cases, TEN crude oil was priced lower than the lowest possible Brent crude oil price based on different five-day moving averages within the 30-day window before the B/L date.

“All liftings, except the fifth, were affected by this low pricing phenomenon. The potential loss. Based on the low scenario is approximately $9.83 million,” the letter added.

The Finance Minister said had the GNPC insisted on the highest possible price within the pricing window, the State would have gained $34.12 million.

He asked the petroleum regulator to amend the defective contracts based on which the crude oil was sold.

But in an interview with Joy News’ Evans Mensah, the GNPC says it has done nothing wrong and there is no basis to amend the crude oil sale contract as demanded.

General Manager in charge of Commercial Joseph Dadzie said their position on the issue has been communicated to the Finance Ministry and they appear satisfied with them.

On how the crude oil got to be underpriced, he explained that “there was some misunderstanding as to the nature of those transactions and even how that pricing was done.”

He is however convinced that the responses and evidence they have submitted to the Ministry should suffice, adding “as far as we are concerned, we don’t think there is any merit in the fact that we undersell the crude”.

In his response to why the off-takers are allowed whichever five-day moving average prices to use for determining the value of the cargo, Dadzie said there was a lot more to the transaction that has been made public.

He explained that pricing options are a standard market practice and so what is provided does not give any advantage or disadvantage to whoever buys from the GNPC.

 

The deal in question he clarified is “not a straightforward crude oil sales and purchase agreement. It involves other transactions and so you need to look at it within the context of the other transactions that were put together.”

Singling out the crude oil transaction therefore to say it has created a loss to the state will be inaccurate, Dadzie said.

He added “there is no loss to the state, in fact if we are to look at the totality of the transaction there would probably be more money for the state than whatever loss anybody is talking about.”

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