Re: Kosmos Broke No Laws

The Ghana National Petroleum Corporation (GNPC) has taken note of the feature published in your paper dated July 7, 2010 which unfortunately sought in vain to justify the sale by Kosmos of its interests deriving from valuable national assets, through a process in which Kosmos displayed wanton disregard for the laws of Ghana and willful indifference to compliance with its obligations under Petroleum Agreements, to which it is party.

GNPC, as the national oil company, has a duty to ensure that all petroleum activities are conducted in accordance with the laws which have been enacted to protect Ghana's interests. 

It is unfortunate that rather than uniting forces with GNPC to ensure that oil companies such as Kosmos respect the people and laws of Ghana, we have NGOs such as the Ghana Energy transparency (GET) joining forces with companies that clearly have no respect for the laws of Ghana (for whatever benefits they may derive).  

In its feature, GET states that “though Kosmos may have erred in the area of information sharing, it is in keeping with a precedence that the Ghana government has set by its non enforcement of the contractual provision of the PA”.

The “precedence” that GET is referring to is a complete mystery to GNPC, because GNPC has always sought to enforce the contractual provisions of its petroleum agreements. 

Even if this phantom “precedence” was a reality, it would be no excuse to use it as a basis to allow the continued violation of our laws.  Yet GET is clearly trivializing Kosmos' data breaches and is telling us that:  

•    GNPC must allow a phantom precedent that hurts the country to continue to be perpetrated.

•    GNPC must not enforce the contractual provisions of the petroleum agreements and must allow companies to violate them at will with no consequences because they only followed a “precedence” that must be maintained.

In the petroleum industry, data is of fundamental importance.  Data is critical for exploration, development and production of oil, and for this reason, the Petroleum Law has clear provisions regarding ownership and confidentiality of petroleum data. 

It is GNPC's role, as the owner of the data, to ensure that the appropriate safeguards are put in place to ensure that the data is used properly and not disseminated in an uncontrolled fashion. 

Kosmos, as part of its sale process, made GNPC data available to over twenty international oil companies, including Exxon Mobil, without complying with those safeguards. 

Each of those international oil companies was notified of this illegality in June 2009 and informed that there needed to be a regularization of the illegal access that had been provided by Kosmos to GNPC data. 

Over the past one year, rather than regularizing the data breaches, Kosmos and Exxon Mobil have engaged in various transactions with each other, and have also ignored the clear indications from the Government of Ghana that compliance with the laws of Ghana is a fundamental pre-condition for investing in Ghana.

Illegal release of data to a large number of international oil companies has materially undermined GNPC's commercial and strategic position in respect of the future development of the relevant blocks.

The loss of potential licensing fees as a result of Kosmos' unlawful conduct is significant.  Reduction in the inherent value of the data, as a result of making it available to such a wide group of recipients, has increased the risk of wider dissemination and unauthorised use. 

This has resulted in a significant change to the balance of negotiating power between GNPC and the international oil industry, and has irreversibly altered the investment landscape in respect of these assets in a way that constitutes a very substantial negative economic impact on Ghana. 

GNPC and all Ghanaians will disagree with GET for supporting Kosmos, a company that has put its commercial interests above compliance with our laws and the long-term interests of Ghana and its people. 

Kosmos has set dangerous precedents that, if allowed to go un-rectified, will cause damage to Ghana.  

GNPC wishes to state unequivocally that while we have made no secret of our intent and preparedness to purchase the Kosmos stake at a fair market value, we refused to submit a formal bid without prior resolution of data breaches by Kosmos because we could not participate in a process that breached the laws of Ghana and Kosmos' obligations under the petroleum agreements.

We have repeatedly communicated as much to Kosmos.  We have secured the necessary financing to purchase the Kosmos stake and will submit a fair market value offer at the appropriate time.

GNPC has never stated that it has pre-emption rights or rights of first refusal. In the context of the Petroleum Exploration and Production Law 1984, PNDCL 84 Section 2(1) which provides that “No person other than the Ghana national Petroleum Corporation established under the Ghana national Petroleum Corporation Law, 1983 (PNDCL 64) in this Law referred to as 'the Corporation', shall engage in the exploration, development or production of petroleum except in accordance with the terms of a petroleum agreement entered into between that person, the Republic and the Corporation…”

This implies that no entity can conduct exploration, development or production of petroleum without partnering GNPC. GNPC does not need to have preemption rights or rights of first refusal.

The right of GNPC, under the GNPC Law and the Petroleum Law, makes such preemption rights unnecessary, as it subordinates the exercise of all such preemption rights to GNPC's consent to the extent that under an existing petroleum agreement, preemption rights seek to introduce new partners through the assignment of interests or increase the interest or control of existing partners in a petroleum agreement.

All of these will impose new associations or partnerships either directly or indirectly on GNPC, through private arrangements in which GNPC would not have participated.

Partnerships that GNPC, by law or commonsense, has the right to accept or reject. These private arrangements which are not rooted or derived from the law or from the petroleum agreements do not therefore supersede GNPC's legal or contractual right to choose its own partner(s).

GNPC takes very seriously the responsibility derived from this provision, and so in exercising its consent rights, GNPC takes careful account of not only the technical and financial capabilities of potential partners, but also the alignment of their strategic interests with ours and the long-term impact on the nation.

We are happy to inform GET that we at GNPC are proud of the skill, expertise and ability of our staff to manage and coordinate the exploration development and production of Ghana's hydrocarbon resources in a manner that will ensure that the people of Ghana derive the greatest possible benefit from these resources. 

In the face of consistent discouragement by naysayers, GNPC worked diligently with a singular objective towards the discovery of oil in commercial quantities in Ghana.

Following the success demonstrated by the Jubilee discovery, GNPC has continued to focus on managing and coordinating the process in a manner that will allow first oil by year-end 2010, while managing efficient exploration of additional blocks. 

GNPC remains committed to ensuring that companies undertaking exploration and production activities or seeking to enter the sector comply with the laws of Ghana and respect the sovereignty of the country.

Ghana has had the opportunity to learn lessons about oil exploration and we remain vigilant to ensure that petroleum activities are undertaken by international oil companies in the best interest of Ghana.

As repeatedly communicated to both Kosmos and Exxon Mobil, Ghana welcomes companies that are willing to operate under the petroleum laws of Ghana and GNPC and the Government of Ghana will work to ensure that all participants in Ghana's oil sector, without exception, operate within our existing legal framework.

We urge all NGOs, especially the likes of GET, to check their facts before coming out with such features to mislead the people of Ghana. We also caution them to refrain from allowing themselves to be used by international oil companies to deceive the people of Ghana for private benefit.

        
Thomas Manu
Director of Exploration and Production
GNPC