Poor negotiations of gas price with ENI and Vitol to cost Ghana a fortune


It has emerged that Ghana will be paying a higher price for its own gas produced from the country’s Sankofa Gye Nyame Field operated by ENI Ghana Exploration.

The unfortunate development is as a result of poor agreement contract the Government of Ghana entered into with partners operating in the Sankofa Gye Nyame Field that does not inure to the benefit of the country.

The Sankofa Gye Nyame Field, known as the offshore Cape Three Points Project (OCTP), consists of a number of discoveries with combined estimated oil and gas reserves of 398.8 mmboe, which is made up of 204million barrels of oil (mmbls) and 1,071 billion cubic feet (bcf) of gas.

First oil from the Sankofa Gye Nyame Field is expected in the third quarter of this year and peak at 45,000 barrels of oil a day by 2018, whereas gas production is expected to start six months later in the first quarter of 2018, with a daily production capacity of 170 million cubic feet.

The Field is operated by ENI Ghana Exploration Production Limited with share holding of 44.44% during operations phase. Vitol Ghana Upstream and Ghana National Petroleum Corporation are the other partners and hold 35.56% and 20% respectively during production operations phase.

A member of the Public Interest and Accountability Commission (PIAC), Dr. Steve Manteaw, explained the reason behind such a situation that, although the country has a 20% stake returns by virtue of its equity participation in the project, it also has the right to acquire the returns of the other partners in the project after a thorough negotiation of the price of which Ghana did.

According to him, the concern which has now become an albatross on the neck of the country is the price at which the country negotiated for to purchase that gas from ENI and Vitol.

He said the prices are not competitive and advantageous to the Republic of Ghana

The PIAC member further revealed that the prices are higher than the current gas prices on the market and what is ever more worrying is a clause that commits to Ghana to by the ENI price even when cheaper gas become available.

Dr. Steve Manteaw noted that nothing can be done about the agreement now since efforts to repudiate will further result in judgement which is not a good things for the country, so moving forward, the government of Ghana should take a cue from this development and make sure that subsequent contract agreements that are signed are done with serious scrutiny.

The PIAC member advised that in future when such contracts are going to be designed, the government should tie the rules and procedure and the fiscal regime for contract negotiation into the country’s law, and not give discretionary room for public office holders for the reason that “Ghana is not known to be a great negotiator of deals.”

Giving examples, Dr. Manteaw pointed to the HESS Petroleum contract where  an initial royalty was negotiated at 2% only for it to be renegotiated again to 4% by the next successive government.

“They’re having been examples that need a lot to be desired, one has to do with the negotiation of HESS Petroleum contract where the initial royalty was negotiated at 2%, it took a change of government to renegotiate upward to 4%. And so given that we are not too great a nation known for goo negotiations, we should tie the rules and terms of extraction mostly to our laws to allow the laws to operate,” he added.


Source: therepublicnewsonline.com/Nana Appiah Acquaye

The Republic News Online

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