The opposition New Patriotic Party (NPP) has raised concerns about aspects of Ghana’s contractual relationship with ENI, a state-owned Italian oil conglomerate and its partners over the exploitation of the Offshore Cape Three Points Block (OCTP).
The NPP, in a statement issued recently and signed by Nana Akomea, Communications Director to coincide with the visit of Italy’s Prime Minister, Matteo Renzi to Ghana, said it appreciated the enormous assistance Italy has given to Ghana over the years.
It noted: “Our worries, which have also been expressed by some civil society organisations in the oil sector, include the fact that the Government of Ghana’s provision of financial terms to ENI and its partners of 20 percent return on investment, instead of the normal 12.5 percent, is an unusually high rate for commercial transactions of this nature, especially as GNPC assumes all the risk in the project.”
It said the negotiated gas price of $9.8/MMBtu (million British thermal units) for gas from the Sankofa fields was too high by world standards of between $5-7/MMBtu.
“It is even higher than the price of gas sold to Ghana from Nigeria, which stands at $8.3/MMBtu, delivered at Takoradi. It is even more expensive than our own Atuabo Gas price of $8.8/MMBtu delivered at Takoradi. At the negotiated gas price of $9.8/MMBtu, it puts to great risk Ghana’s potential of becoming the Petrochemical hub of the region to Nigeria, due to that country’s lower gas prices.”
The opposition said the agreement compelled GNPC to buy up to 90% of ENI produced gas at a higher negotiated price of $9.8/MMBtu for 20 solid years. This gas sales same agreement is further guaranteed against default by three guarantees – the government of Ghana, the World Bank and GNPC – amounting to some $750 million.
Additionally, it said GNPC, after buying the gas from ENI at a guaranteed price, stood the risk of losing its market (VRA, IPPs, petrochemical industries) to other cheap gas suppliers.
“By the agreement, Ghana also guaranteed additional free cash flows to the company by allowing them to write-off 7 percent interest on all commercial loans from project revenues when the normal provision is between 2-3 percent. This also reduces Ghana’s potential tax revenues from this project by over $160 million. No other companies, whether from Jubilee or TEN, have been given this same rate of 7 percent.
“The cost of the development of the Jubilee Fields, with more reserves of oil equivalence and with a water depth of 3,630 ft, came to $4 billion. The cost of development of the TEN oil fields, also with more oil reserves of oil equivalence came to $4.9 billion. The cost of development of ENI’s Sankofa is $7 billion, with fewer reserves of oil equivalence and at relatively lower water depths of 2,706 ft. We wonder the quality of due diligence done, if any.”
It indicated that possible motives could drive the government of Ghana to bend backwards and grant all such unprecedented incentives, which were not even available to the original developers of Cape Three Points
“We are highlighting these issues, as this is potentially the largest single investment in Ghana, which will bind the Ghanaian people for the next 20 years. It is, therefore, important that the benefits of this project are not so one-sided as they seem today.”
By Samuel Boadi