Ghana's Oil And Gas Hijacked

JUST THREE years ago, Ghanaians were getting by with the revenues that gold, cocoa and other minerals provided, which were not much to turn the country into an investment Mecca.

Today, thanks to the entrepreneurial efforts and persistence of a Ghanaian duo, Ghana is a bonafide oil destination.

As expected, Ghanaians have high hopes, and rightfully so. Managed well, the well over one billion barrels of crude discovery can transform the nation into its aspired middle income status.

But if the current goings-on are anything to go by, Ghanaians are in for the shock of their lives as jealousy, corruption, and lack of foresight threaten to derail sound management of the oil discovery.

Ordinarily, between the Ministry of Energy, the Energy Commission, Ghana National Petroleum Corporation (GNPC), and the Parliamentary Committee on Energy, there is enough human resources and adequate oversight to ensure proper management of the emerging oil industry.

The problem is that this structure has been circumvented by none other than a convicted felon who has neither ever been voted for by any constituency nor currently appointed in any official capacity by the government. No decision of significance is ever made without the man's approval.

For there to be a legislature and for one individual with no official portfolio to command such total control over an asset as vital as oil and gas makes a mockery of our democracy.

How can a Memorandum of Understanding (MOU) be reached between GNPC and a yet undisclosed foreign entity with Honorable Moses Asaga, the Parliamentary Committee Chairman on Energy completely in the dark?

To understand this irregularity, the issue of Kosmos Energy deserves mention. The oil exploration company based in Dallas, Texas, has an enviable reputation in the exploration business.

Simply put, if there is oil, Kosmos will find it. But after it has discovered it in commercial quantities, Kosmos sells its interest and moves on to find more oil elsewhere because it does not want to be embroiled in the oil production business – that is not its specialty.

Because that is what Kosmos does, it is well versed in the intricacies of the legal framework surrounding oil exploration agreements as well as the post-discovery sale of its stake.

Thus conforming to the provisions of the agreement it signed with Ghana, Kosmos Energy notified the Ghana government of its intention to sell its stake and move on.

After the deadline for the government to make its own offer to buy Kosmos' stake elapsed, it entered into an agreement with ExxonMobil for the purchase of its stake.

Now the mafia group, headed by an ex-convict, through GNPC, has hijacked the whole process and lied that Kosmos acted illegally, thereby delaying the sale to ExxonMobil so that he can insert his own company, Strategic Oil, into the mix under the guise that GNPC will make a competing offer.

Recall that during the PNDC/NDC era, due to this same penchant for harassing foreign investors, again under the guise of seeking Ghana's interest, many companies stayed away because they deemed Ghana a business unfriendly environment.

We all know the hardship that the resulting lack of capital and the declining cedi unleashed on Ghanaians. Today, the same chatters are developing around the world.

Said a Houston-based operative with close ties to the Mills administration frustrated by his inability to generate investment interest in the oil capital for Ghana: “Most of my contacts are pointing to Kosmos and ExxonMobil and asking me 'do I think they are crazy to get into that mess'?”

They ask: “How many women do you know line up to marry a known wife-abuser?” Asked why would he not advice the Mills administration to desist from harassing foreign investors, he snaps, “They don't listen – it seems they are power-drunk”.

ExxonMobil will not succumb to abusive governments because it does not have to. Not when many countries spend enormous resources to attract proven oil producers such as ExxonMobil. Further, United States' Foreign Corrupt Practice Act constrains the oil giant when it comes to bribing foreign government officials.

Thus, this sale of Kosmos' stake to ExxonMobil would generate no bribery potential for government officials. Could that be the reason why they oppose it so vehemently?

China, on the other hand, comes cheap. In addition, they are very willing to dole out brown envelopes to officials.

But when it comes to proven resources to produce our oil, China's track record is questionable at best. In fact, they bailed out during the exploration phase due to a combination of a lack of technological know-how and their assessment that Ghana was an oil “graveyard”.

Are these the same interests on whom the NDC power broker is willing to stake our oil future? They say in life you get what you pay for. We will all witness what going for cheap will do to us.

But questions still remain around the man's involvement and approach. Where is Ghana going to find the money to finance Kosmos' stake worth $4 billion and counting due to its continuing exploration and discovery?

What national assets are being put up as collateral? If GNPC is miraculously able to buy Kosmos' stake, what company would produce the oil?

Already, worthy companies have begun shunning Ghana because of her return to a business-unfriendly status.

Why are oil executives in Houston convinced that the man is the “go-to” guy on oil and gas in Ghana when he is not appointed by the government?

Has his hijacking of the oil industry created a stalemate that threatens the oil production timeline of late 2010? Do Ghanaians have to wait for needed developments that the oil revenue would make possible just because a convicted felon wants to have his way?

Ever since our oil discovery was announced in June of 2007, Ghanaians have been warned to learn from the mistakes made by other oil producing developing countries.

If we heed that advice, we will all benefit from this God-given asset. Unfortunately, it appears we have begun more disastrously than even Nigeria and Angola.

It is imperative that the mafia group leader desists from the path that he is pursuing. Ghanaians will no longer be fooled into believing that he is doing so for their interest. He has done so one too many times.

In all this, what is even more depressing is the apparent silence of the opposition parties who are supposed to be the representatives of the minority, and indeed the rest of the nation.

We as Ghanaians need to challenge our elected leaders to represent our interest, else our democracy stands the risk of being hijacked by a few self-serving lunatics.

Despite the fact that the mafia leader has an accomplished record as a terrible business decision-maker, the Mills administration seems to have ceded all the critical decisions regarding our oil and gas industry to him, and so far he has succeeded in enhancing his long standing reputation in the oil and gas industry as ignorant, arrogant and reckless, particularly due to how he has bungled in his handling of the Kosmos and ExxonMobil transaction.

It is time for all of us, especially our elected representatives in the minority parties, to ask the following critical questions of Mills and his so-called energy advisor:

•    What kind of national asset or treasury are they using to secure the $4 billion loan they are seeking to buy the reserves from Kosmos.

•    Where are they going to find the money to pay for the development and production of the field, if they are already defaulting on the payment of our 3.5% current paying interest?

•    Has the man gone through any approval process with all the relevant government agencies, including the minority parties, to make a compelling business case for why Ghana should risk $4 billion dollars to acquire an asset that GNPC has no experience whatsoever to manage?

•    More importantly, why is he, the one person, making these decisions on behalf of all of us as Ghanaians although he holds no official capacity?

Could it be that he is deliberately doing so to avoid being responsible for all the potential damage he is causing the nation, both financially and image-wise.

It is important for Ghanaians to know that under the existing petroleum agreement with the Ghana government and all the partners on the Jubilee field, the Ghana government is entitled to the following financial gains:

•    10% royalties from the revenues of the oil production. This cash is paid to Ghanaians before any cost elements are taken out of the revenue.

•    10% of the profit is paid to Ghanaians as part of carried interest i.e. money made without bearing any cost in the exploration, development and production of the oil.

•    Additional 3.5% of the profit is also paid to Ghanaians as part of participating interest i.e. money made as a result of direct investment in the venture.

•    35% tax receipts. Money paid to Ghanaians in a form of tax from the total profit.

•    In all, Ghana walks away with approximately 50% of the cash benefit without any significant cash investment, leaving the remaining five of the partners to split the rest accordingly.

Of course, Ghanaians would like to have 100% of all the proceeds, but the reality is that we do not have the billions of dollars that is required to be put at risk in a relatively short time and wait for over twenty years to get our money and profit back. Indeed, we could use $4 billion loan today to rebuild our decaying schools, hospitals, highways and finance small business to develop the economy and use the expected oil proceeds to pay for the loan.

This is the kind of investment option we need to consider, as opposed to buying risky deepwater oil and gas assets we have neither the knowledge of managing nor operating. We need to give it to those companies that know how to manage and operate it efficiently and sit back and enjoy the proceeds. And this is what the man does not understand, because of his ego.       

By Ghana Oil Watchdog