The Minority New Patriotic Party (NPP) in Parliament has stated that the agreement between government and ENI/Vitol for the development of the Sankofa and Gye Nyame Oil and Gas project in the Western region has been bloated by between $2 billion and $3 billion with government officials expected to benefit hugely from the largesse.
The Minority, which raised the concern at the press conference yesterday, said that the whole deal with ENI and VITOL is very appalling and could be another create, loot and share project.
The NPP MP for Afigya Kwabre South, William Owuraku Aidoo, who spoke on behalf of the minority, said that the government has also breached the Petroleum Revenue Management Act by guaranteeing 20 years for the span of the project instead of 15 years that the law allows.
The MP for Afigya Kwabre South, who is also a member of the Mines and Energy Committee of Parliament, indicated that the Minister of Petroleum’s attempt to defend the government in the wake of concerns raised about the project following the visit of the Italian Prime Minister is hackneyed trivia and bizarre.
According to the minority, the whole ENI agreement is a rip-off and cannot be allowed to stand.
The minority explained that contractors for the ENI/VITOL investment will yield a total after-tax working interest of $14.3 billion, representing 56% of total cash flow while Ghana takes $11.1 billion, representing 44%, adding that the percentage due Ghana is significantly lower than the earlier contracts where the fiscal regime was even much more relaxed because government had to encourage pioneer investors to invest in the oil sector.
According to the minority, another overgenerous concessions that the state has offered to ENI/VITOL is in the area of tax incentives which the government is required to provide to the tune of at least $125 million and that the Ghana National Petroleum Corporation (GNPC) is expected to pay an additional upfront cash of $125 million in order to bail out the contractors in the event of a shortfall in revenue.
“In addition Ghana is obligated to issue $100 million sovereign guarantee to pay for the shortfall in case GNPC also defaults. These risks are too high for the nation and over exposes the country,” Hon Owuraku Aidoo said.
The minority explained that mmBtu unit cost of gas from the Sankofa field which does not include the cost of transportation would hover around $12 which is highest in the world.
“What happens if power producers who are supposed to buy the Sankofa gas get cheaper supplies of gas from elsewhere, say Nigeria?” Hon Owuraku Aidoo quizzed.
According to the minority, per the computation, the cost of developing the gas component of the project is $2.7 billion and it would have been more sensible for the government to borrow to finance the project for the nation to benefit greatly instead of providing such free fiscal and other huge incentives to the contractors to pave the way for contractors to reap abnormal profits at the expense of the nation.
“The minority said the government has been borrowing to undertake projects that do not bring significant benefits to the nation but has refused to borrow to undertake a project that would have over the 20 years of the contract period given the nation multiple of benefits.
“We are therefore calling the government and ENI as well as the government of Italy to recline and reconsider some of the provisions in the agreement in order to allow all parties to mutually benefit from the deal.”
By Thomas Fosu Jnr