The New Patriotic Party’s (NPP) welcome package for the Italian Prime Minister, Mr. Matteo Renzi, who is on a two-day visit, is a passionate appeal to him to re-examine some of the terms of Ghana’s contractual arrangement with state-owned Italian oil giant, ENI, to afford the country the chance to maximize its benefits from the project.
Under the 7 billion dollar agreement, which is about 3 billion dollars more than the development costs of Tweneboa, Enyenra and Ntomme (TEN) and Jubilee oil fields, the Ghana National Petroleum Corporation (GNPC) is bonded to buy up to 90% of ENI-produced gas at a higher negotiated price of $9.8/MMBtu for 20 years and also guaranteed against default by three guarantees – the government of Ghana, the World Bank and the GNPC – amounting to some $750 million.
MMBtu, which is a measure of the energy content in fuel, stands for one million British Thermal Units (BTU). A statement signed and copied to The Chronicle by the party’s Director of Communications, Nana Akomea stated in part that GNPC, after buying the gas from ENI at a guaranteed price, stood the risk of losing its market, including the Volta River Authority and other petrochemical industries, to other cheap gas suppliers.
It also said: “The Government of Ghana’s provision of financial terms to ENI and its partners of 20% return on investment, instead of the normal 12.5%, is an unusually high rate for commercial transactions of this nature, especially as GNPC assumes all the risk in the project.”
The contention of the main opposition party is that apart from the agreement causing a reduction in Ghana’s potential tax revenue by over $160 million, it also “guarantees additional free cash flows to the company by allowing them to write-off 7% interest on all commercial loans from project revenues, when the normal provision is between 2-3%.”
The Government of Ghana, on the 27th day of January, 2015, signed the deal with ENI, known as the ENI-Sankofa field agreement, for the production of about 180 million cubic feet of gas. Sankofa, a recently discovered oil and gas field, is situated in 2,841 feet (866 meters) of water in the Cape Three Points Block offshore of Ghana. Vitol serves as the operator of the discovery and holds a 90% interest; GNPC holds the remaining 10%.
President Jiohn Dramani Mahama, who signed the contract in Accra, said the project would lead to delivery between 150 and 180 million cubic feet, adding that: “going forward, we are looking at about 300 and 350 million standard cubic feet which will be very important in terms of generating power and ensuring energy security for us.”
The agreement was signed to augment Ghana’s attempts to be self-sufficient in the production of energy. This was after a government negotiating team made up of officials of the Ministry of Energy & Petroleum, Ministry of Finance, the Ghana National Petroleum Corporation (GNPC) and ENI Exploration, operators of the offshore Cape Three Points (OCTP) block had concluded talks to allow ENI commence the production of gas.
When Ghana’s engagement with the Italian oil conglomerate became public knowledge, the ruling government received a lot of public backlash from Civil Society Organisations, including Imani Ghana and African Centre for Energy Policy (ACEP).
An analysis by ACEP revealed that the fiscal benefits of the entire project based on the working interests of the parties give ENI Ghana and their contractors, Vitol Ghana, 56% of total cash flows and profits of US$7billion, equivalent to the cost of the project.
It explained that, based on after tax working interest, the contractor group would be entitled to US$14.3 billion (56%) of total cash flow over the project life while the state is entitled to US$11.1 billion (44%). The country’s take is, thus lower than what pertains in previous contracts.
About two weeks ago, Imani Ghana demanded that, the Government of Ghana made full disclosure on the US$7 billion gas deal. The Founding President Franklin Cudjoe said, the Government must learn from the current suspicion-riddled power purchase deal with AMERI Energy and try to avoid a similar fate with the ENI/Sankofa gas project.
Speaking at the 5th IMANI Inspirational Public Sector Leadership Awards, Mr Cudjoe stated that, “it will be in the interest of the government and Ghana to consider critical commentary that have been made on energy projects such as AMERI power and ensure that the biggest one to come, the US$7bn ENI Project, is equally devoid of suspicion.”
And the NPP, which marshalled its intellect into the controversial deal posited that the negotiated gas price of $9.8/MMBtu unit 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 statement revealed.
But the Italian Prime Minister who was addressing Ghana’s Parliament yesterday, said the project, which would be for power generation, “will benefit Ghana…This is a good message for friendship and cooperation between Italy and Ghana.”
He added: “your wealth will be our wealth and your challenges will be shared across our collective efforts in finding solutions that work among the two countries in the spirit of collaboration”.