Ladies and Gentlemen, yesterday, a public advocacy think-tank – IMANI held a press conference at which it sought to challenge what it thinks are various acts of omissions and/or commissions on the part of the Government of Ghana in respect of the plan of development (PoD) submitted by Aker Energy for and on behalf of all the contracting parties in the Petroleum Agreement (PA) covering the Deep Water Tano/Cape Three Points (DWT/CTP) contract area.
The Ministry of Energy has called this press conference to set the record straight, particularly to the extent that IMANI put out total falsehoods.
The PA covering the DWT/CTP contract area operated by Aker Energy was executed on 8thFebruary, 2006between the Government of Ghana -GNPC, AMERADA HESS Corporation. Lukoil and FUELTRADE subsequently farmed in 2015. Fueltrade’s participating interest was set at 2%fr which it paid about 9 million USD with a performance guarantee of 2 million USD.
The contract area has 7 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.
IS GHANA LOSING $30 BILLION?
Imani tried to alarm Ghanaians about a potential loss of $30 billion to the country if the government failed to negotiate a new petroleum agreement with new terms with the DWT/CTP partners. This is absolutely false.
Aker Energy, on behalf of its partners announced after a successful appraisal of the Pecan Field discovery, a significant oil find as captured below:
“Based on existing subsurface data from seismic, wells drilled and an analysis of the Pecan -4A well result, the existing discoveries are estimated to contain gross contingent resources (2C) of 450 – 550 million barrels of oil equivalent (mmboe)”.
How did IMANI arrive at valuation of the field at $30 billion?
It simply multiplied the assumed price of $65 per barrel by 450 million barrels. This exposes the weaknesses in IMANI’s analyses as well as its poor understanding of petroleum economics.
The 450 million barrels of oil equivalent are gross contingent resources, which are the potential resource available all of which cannot be recovered under current technology. IMANI wants us to believe that all the 450million barrels of oil equivalent will be produced but fails to explain how that can be.
In Ghana, our average crude oil recovery rate is 25%. At this rate, the field value will be estimated at $7.3 billion assuming a price of $65 per barrel. We are working with Aker Energy to enhance oil recovery mechanism to achieve a recovery rate of 40%, which will be the highest in Ghana’s oil and gas history and which occurrence will appreciate the value to $11.7 billion. This will be a significant gain for both Ghana and the partners.
IS GHANA LOSING MONEY AS CLAIMED BY IMANI?
It is curious how IMANI reasoned that Ghana stands to lose $30billion if we do not negotiate a new petroleum agreement. There is no basis for a new petroleum agreement. This is because the work that was done by Aker Energy formed part of an appraisal programme based on the existing petroleum agreement.
These works: the drilling of Pecan 4a, Pecan South and Pecan South East wells were part of the appraisal programme submitted by Hess and inherited by Aker Energy and partners but had to be postponed for two and a half years as a result of the provisional ruling of the Special Chamber of the International Tribunal of the Law of the Sea (ITLOS), that amounted to an injunction, freezing new drilling activities within the disputed area part of which was the Pecan field. This provisional ruling, which was delivered on 25th April 2015, affected 69% the current DWT/CTP contract area and parts of other contract areas as well.
Following this development, the then Minister for Petroleum reached an agreement with the parties to the DWT/CTP contract area that the PoD should be submitted 10 months after the final ruling on the ITLOS case. This was also further delayed by 8 months in order to include the results of the entire Pecan appraisals in the PoD.
The continuation of the appraisal programme has led to a significant gain for Ghana because it has established a new find which forms part of the existing Pecan oil pool missed by HESS.
IMANI stated with certainty in its presentation that there was no dynamic communication, without providing a shred of evidence. As we speak now, we can confirm that the wells drilled encountered the same geological reservoir system as the Pecan field. AKER Energy is still evaluating how the wells are connected.
Therefore, we wonder the basis for IMANI’s conclusion that there is no dynamic communication between the wells. IMANI was also not truthful when it stated that AKER drilled HICKORY WEST as an exploration well. HICKORY WEST has not been drilled.
It must be stated that as a country we operate within the laws governing petroleum agreements, therefore any petroleum find when produced will be shared according to the terms of the applicable petroleum agreement.
The DWT/CTP PA provides a crude oil sharing mechanism in addition to other benefits such as taxes, of which under the existing agreement, Ghana’s share is estimated at about 55-60% of the net oil produced. It is important to state that these benefits are spread over the field life. Therefore, for anybody to contend that these were exploration wells drilled outside the exploration period hence any petroleum find from these works require a new petroleum agreement with new terms is grossly misinformed.
The finds from these appraisal wells drilled just confirmed the areal extent of the original pecan discovery. That is why their names are Pecan 4A, Pecan South 1A and Pecan South East 1A; showing their relation.
IMANI’s CURIOUS TRENDS
IMANI’s CLAIM OF FAILURE BY GOVERNMENT TO OBTAIN ADDITIONAL SHARES
GNPC Explorco was given the opportunity to exercise its right to acquire a 10% commercial interest in the block. GNPC Explorco failed to exercise the right when it was due in 2015. We are equally curious why GNPC did not exercise this right at the time. Records show that provision was made in the GNPC budget for 2015 and repeated in 2016 for the acquisition of this interest. However, for whatever reason, the then GNPC administration did not apply the funds to pay for the interest.
Aker Energy submitted a Plan of Development & Operations (PoD) to the Ministry of Energy on the 28th day of March, 2019. On receipt of the PoD, the Ministry of Energy wrote to the Petroleum Commission requesting it to review the PoD and make a recommendation to the Honourable Minister of Energy.
The reference of the PoD to the Commission was done pursuant to Section 28(1) of the Petroleum (Exploration and Production) Act, 2016; Act 919 which provides “The Minister shall not approve a plan of development and operation unless…the Minister has received recommendation from the Commission and relevant agencies…”
The Petroleum Commission, proceeded to do a thorough review of the PoD and submitted an Advisory Paper to the Hon. Minister of Energy by a letter dated the 17th day of April, 2019.
In reviewing the PoD, the Petroleum Commission relied on the provisions of Sections 27 and 28 of Act 919 and also Article 8.11(a)-(l) of the Deepwater Tano/Cape Three Points (DWT/CTP) Petroleum Agreement. The provisions of the law and the PA cited constitute 29 conditions-precedent/checklist that had to be satisfied by Aker Energy’s PoD for same to be passed as approved on the recommendation of the Petroleum Commission.
Based on a thorough study and review of the Aker Energy’s PoD, the Commission came to the conclusion that Aker Energy’s PoD cannot be approved in its present form. As indicated earlier, the Commission by a letter dated the 17th day of April, 2019 transmitted an Advisory Paper made up of the reasons why the PoD cannot be approved; to the Honourable Minister stating among others that Aker Energy must be made to review the PoD to comply with the necessary provisions of the law and the DWT/CTP PA.
The Honourable Minister, considered the Petroleum Commission’s Advisory Paper and agreed with all the reasons it gave. Subsequently, by a letter dated the 24th day of April, 2019 communicated to Aker Energy that its PoD cannot be approved in its present form further to which it was directed to review the PoD based on the reasons which were attached to the letter and submit a revised PoD within 45 days of its receipt of the letter.
These are matters of record, yet Imani, without checking whether any such steps had been taken since the PoD was submitted claimed at its press conference yesterday that even though it is aware that a recommendation had been made to the Honourable Minister, it did not know whether Aker Energy had been written to. Imani’s fear as it claimed yesterday was that if the Honourable Minister does not write to Aker Energy, the 30-day time limitation by which any failure to direct a revised PoD to be submitted, will mean that the PoD shall be deemed approved.
Imani put out falsehood
The full press statement by Energy Ministry
From yesterday’s issue
Well, the Ministry of Energy received the PoD on the 28th day of March, 2019 and wrote to Aker Energy on the 24th day of April, 2019 directing it to submit a revised PoD in 45 days because its PoD cannot be approved in its present form. A simple calculation of the passage of time between 28th March, 2019 and 24th April, 2019 shows that it was 28-days within the 30-day limitation. In any event, a PoD is a very important document and it is only fair, just and equitable that in asking for it to be reviewed, the reasons must be cogent and well-reasoned.
Aker Energy has as of the 24th day of April, 2019 received the decision of the Ministry of Energy for it to submit a revised PoD and thus, the fear of Imani as expressed is most unfounded. A simple phone call to the Ministry of Energy will have allayed this fear but alas! Imani failed to do this and sought to lead the people of this country astray in a move bereft of true facts and proof.
For the avoidance of doubt it is provided at Article 8.13 of the DWTCP/PA thus:
“After thirty (30) days following its submission, the Development Plan shall be deemed approved as submitted, unless the Minister has before the end of the said thirty (30) day period given Contractor a notice in writing stating:
The Petroleum Commission rightly advised the Honourable Minister of this time limitation in its Advisory Paper and the Honourable Minister fully agreed with that advice and accordingly wrote with the full reasons why the Aker PoD ought to be revised and submitted. Once again, Imani did not check with the Ministry of Energy whether it is aware of this provision and if so, what it was doing about it?
It is disappointing that Imani has acted in the manner it has in this matter, especially when there had been an engagement with them a few weeks ago on these matters and the knowledge they have that the Ministry of Energy is open for all manner of enquiries and engagements.
IMANI stated that a contractor cannot give pre-conditions in a Plan of Development. A simple check by IMANI would have indicated that the Petroleum commission had already made this observation to the Hon Minister in a letter dated 17th April 2019 and this has already been communicated to the contractor, Aker Energy. It is in fact only the Minister who give conditions precedent when approving a PoD under Section 27 (7) of Act 919.
REQUEST TO RENEGOTIATE ALREADY FAVOURABLE TERMS
IMANI sought to create the impression that the old law under which the DWT/CTP PA was signed in 2006 had favourable terms, hence the passing of the new Petroleum Law Act 919. A historical review of oil producing countries will show that countries that are frontier usually provide favourable terms to attract investors. As they mature, and their basins are geologically de-risked, and they resort to fiscal graduation to capture more benefits. Ghana is no exception.
Notwithstanding this, we wish to state categorically that AKER ENERGY and the Government of Ghana are not in negotiation over the DWT/CTP PA, and the impression created that the PA is being renegotiated to give AKER Energy favourable terms is false.
The reference to the letter signed by the former Energy Minister is in respect of a different South Deep Water Tano (SDWT) Petroleum Agreement commonly known as the AGM block. The attempt to relate the current AKER Energy project to a different agreement is therefore misleading if not mischievous.
AKER ENERGY CONDUCTING EXPLORATION AND APPRAISAL IN THE CONTRACT AREA AND HAS SUBMITTED A PLAN OF DEVELOPMENT
AKER Energy drilled Pecan South and Pecan South East in March and April 2019 before submitting a Plan of Development. This is allowed under the Petroleum Agreement. However, these were not drilled as exploration wells. They were drilled as appraisal wells.
Article 8.19 of the PA provides that any area which forms part of a discovery area in respect of which a contractor has given the Minister a separate notice indicating that such discovery merits appraisal or confirmation that same merits appraisals, need not be relinquished, contrary to what IMANI is claiming; and shall be drilled as appraisal wells. This is where the issue of dynamic communication comes in.
FUEL TRADE LIMITED – CONFLICT OF INTEREST
IMANI alleges that Fuel Trade is owned by Dr. K.K. Sarpong/ his family. Dr. K.K. Sarpong has already denied this allegation in a press release yesterday.
However, we wish to inform you that Fuel Trade came into the Petroleum Agreement during the NDC regime at the time that Dr. K.K. Sarpong did not know if ever he would be the CEO of GNPC. We wish to state that we have not renegotiated the AKER Petroleum Agreement and we are at a loss how Dr. K. K. Sarpong could be the chief negotiator over what does not exist.