Government Signed A Bad Deal With ExxonMobil

Energy experts, after analyzing the petroleum agreement recently signed by government of Ghana and ExxonMobil, have expressed deep disappointment over the concessions – many of them apparently outrightly illegal – given the American oil industry leader.

They express shocked, some saying it is the worse deal ever to have been signed ever among all the oil blocks awarded for exploration, development and production.

The entire fiscal regime of the agreement is less beneficial to Ghana than any of the previous agreements and there are dire clauses in the legal and regulatory regime of the agreement which should not have been allowed in the agreement.

Dr. Steve Manteaw, a member of Public Interest and Accountability Committee (PIAC), GHEITI and a Poilcy Analyst at ISODEC, after analyzing the agreement concluded that, the country did not get the best of deals as claimed by the Energy Minister during the signing ceremony in Accra some weeks ago.

He said, this is because there was no effort to conduct a bidding round and for that matter government simply accepted whatever ExxonMobil offered it. “Competitive tendering yields the best results in block allocation in the upstream petroleum sector.”

Effectively this makes the agreement the biggest sole sourcing agreement entered into by the Government of Ghana to date.

“The ENI agreement which was signed ahead of ExxonMobil has Carried and Participating Interest totaling 20% while ExxonMobil which is said to be the best, has 18% Carried and Participating Interest,” he noted.

Springfield Ghana, which is a sole Ghanaian company offered Ghana a better deal than that of ExxonMobil with regards to the fiscal regime. In terms of royalty, Springfield offered Ghana 12.5 percent as against 10 percent by ExxonMobil.

ExxonMobil is allowed capital allowance of 10 years as against 5 years allowed for all the previous agreements signed.

“We can excuse the Jubilee partners and TEN partners for the terms they insisted Ghana had to accept from since they were the first groups to take the high risk of uncertainty of whether there is oil in commercial quantities or not” says Dr Manteaw. “Their deal were negotiated with not much confidence and for that matter, Ghana needed to be flexible in order to attract them to help Ghana prove that we have oil in commercial quantities offshore and onshore Ghana, although seismic data was available showing likelihood of Ghana having oil in commercial in quantities, but there were still doubt.”

In the case of ExxonMobil, it was rejected by the previous NDC government for the reason that their deal was not good for the country, but to the surprise of many energy experts the current deal signed by the government is worse than the deal NDC rejected.

“The block awarded to ExxonMobil is a low risk one due to the fact that, several companies had done preliminary tests on it and had proof of the existence of oil in commercial quantities. Most of those companies were ready to put in offer for the block, but it is amazing the government could disregard the Petroleum Exploration & Production law on competitive bidding process for award of oil blocks and rather allow the Minister of Energy to use his ‘discretionary’ powers to hand pick the company he likes” laments Dr Manteaw

Prof. John Gatsi of the University of Cape Coast had earlier called on PIAC members to give the details of the ExxonMobil agreement signed with Ghana, emphasizing that, there cannot be effective petroleum management if citizens are not active in demanding accountability.

To him, the deal was not the best as purported by the Energy Minister.

At a training workshop in Akosombo organized by GIZ and the Institute of Financial and Economic Journalists (IFEJ) for it members to critically assess the strength and weaknesses of the ExxonMobil Petroleum agreement, Dr Manteaw, admitted “No doubt ExxonMobil is a big company with the financial muscle and technical superiority but we did not get the best deal in the transaction.

“Competitive tendering yields the best result, that’s why the framers of the law ACT 919 made competitive tendering the default position for block allocation in the upstream petroleum sector” he said

Dr Manteaw is of the view that, Ghana can get the best out of companies like ExxonMobil by pitching them against their rivals like British Petroleum and Chevron.

Also, in his personal view, the energy expert believes that, the discretionary powers given to the Minister for Energy not to enter into a Petroleum Agreement after a bidding round, exposes the minister to corruption.

He observed such allocated powers to the minister place him as a target for investors seeking undue advantage in the upstream petroleum sector.

“So much power has been allocated to the Minister and this makes it easy for him to be influenced by investors seeking opportunity in the upstream petroleum. They will head straight to the minister’s house and try to compromise him to exercise that power”.

Section 10 (3) of the Petroleum Exploration and Production Law states that Petroleum Agreement shall only be entered into, after an open, transparent, and competitive public tender process.

However, the Minister has discretion, on grounds of stated reasons, not to enter into a Petroleum Agreement after a bidding round.

Again, section 10 (9) grants discretion to the Minister, in consultation with Petroleum Commission, to enter into Direct Negotiations without public tender where such approach represents the most efficient manner to achieve optimum returns or outcome.

Dr Manteaw, therefore, stressed on the need to limit the grant of discretionary powers to the minister and ensure most of the petroleum agreement decisions that have to be made are fixed in the law.

“If we can take a bit of the power away from the minister and put that power into the law it even helps in the negotiation process.

“Let’s fix more of the fiscal regime in the law rather than assigning it to the discretion of the minister” he advised.