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14.02.2020 Business & Finance

Stop Taking Credit For Energy Sector Growth – Gov’t Fires NDC

 John Peter Amewu
LISTEN FEB 14, 2020
John Peter Amewu

The President Akufo-Addo's Government has stated that the NDC cannot claim credit for the growth in government take in energy contracts.

It would be recalled that on Wednesday, February 12, 2020, NDC held a press conference on the state of the energy sector in Ghana, making a number of claims.

The NDC claimed among other things that they adopted policies and programmes to ensure the nation consistently increased its share in most petroleum agreements that were negotiated.

NDC also claimed that Ghana’s share in the three oil-producing fields kept increasing – from 13.6% to 20%.

According to the NDC, this incremental sequence in the growth of Ghana's shares under its government clearly demonstrates a conscious and consistent effort to increase Ghana’s stake in petroleum agreements.

But the Energy Ministry in response, described the claims as unsubstantiated.

Energy Minister, John Peter Amewu, addressing the media on Friday in Accra, said the NDC cannot claim credit for the growth in government take in these contracts.

“These Petroleum Agreements were all negotiated and signed by the NPP government under President Kufour,” he said.

He added that all the Petroleum Agreements that are producing crude oil in Ghana were signed by the Kufour’s administration .

That all the thirteen petroleum agreements that came to force under the NDC had enhanced fiscal terms and increased national stake, the Minister said

“If those Petroleum Agreements did not have enhanced fiscal terms that would have been problematic because they were signed after several discoveries of crude oil, an indication of relatively de-risked basins.”

He added that in spite of this, the NDC failed to understand conditions of the market at the time they signed these agreements, hence the increased fiscal terms achieved in the Petroleum Agreements have taken us nowhere for most of them.

The 13 Agreements signed by the NDC, according to him, were signed between 2013 and 2016.

Out of these, the only companies that have met their minimum obligations are ENI and Springfield, he noted.

“AGM had to change ownership under the NPP Government before it could meet its obligations. The remaining 10 companies were to drill 11 wells. They have not drilled a single well. They were to spend $700 million, but they spent only $30 million. These are the contracts with the so called enhanced fiscal terms,” according to him.

“We have always said that zero percent of 100 is zero. So if you have the highest fiscal terms in contracts that do not lead to production, it amounts to nothing,” he added.

The Minister noted that the NDC on various platforms has attributed their failure to the ITLOS provisional judgement that froze activities during the period.

“However, it is important to note that only three of the Agreements the NDC signed were affected by ITLOS – AGM, AMNI International and ERIN Agreements. Even one of the companies affected by ITLOS, AGM has recently announced crude oil discovery. “

What happened to the rest?

We must understand that fiscal terms alone do not define the success of Government negotiations of oil contracts. The experience and financial capacity of a company are equally important,” he explained.

Afterall, the objective of every government is to negotiate a contract that can result in oil production, he noted.

“A fiscal strategy should therefore inspire increased reserves and production. However, the NDC's negotiated fiscal terms have not achieved these,” he added.

In response to claims that NDC took a bold step in establishing the Public Interest and Accountability Committee(PIAC) as an independent statutory body mandated to promote transparency and accountability in the management of petroleum resources in Ghana, he revealed that NDC created a weak PIAC as the Committee was not given teeth to bite, but to merely produce semi-annual and annual reports, whose adverse findings cannot be enforced.

“PIAC cannot prosecute or summon officials. The NPP government is currently holding consultations with stakeholders on a draft natural resources governance bill, which is going to empower PIAC to enforce its findings,” he said.

According to him, the NPP government is committed to transparency and accountability in the oil and gas industry.

“The NPP government passed the General Petroleum Regulations which provided significant transparency reforms including a requirement to disclose beneficial ownership information in Petroleum Agreements, and disclose marketing contracts signed by GNPC, as well as Corporate Social Responsibility projects.”

“The Petroleum (Exploration and Production) Act provided for the establishment of a Register of Petroleum Agreements and the application of Open and Competitive bidding of oil blocks. However, it took the commitment of the NPP Government to establish the register and to conduct Ghana's first open bidding round for oil block”.

Responding to claim that NDC repositioned BOST and TOR to become strong companies only for the NPP government to weaken them. And that they secured two (2) million barrels of Ghana’s crude oil from the TEN fields to be processed by TOR, he noted that NDC almost collapsed TOR and BOST.

“The claim that BOST and TOR were strengthened cannot be true. Contrary to the NDCs claim that BOST was making profits during their time, the facts do not support this.”

“BOST in January 2017 when the NDC handed over power owed $624 million to suppliers, BDCs and related parties in respect of crude oil imports for processing at TOR and refined products which got lost from BOST tanks. But as at February 2020, the outstanding amount to settle to clear the books now stand at $57 million,” he added.

“An audit on BOST accounts shows that between the periods 2013 to 2016, there was a significant rise in the net losses by the company with the highest net loss of GHC 569 million recorded in the year 2016.

The 2018 management account showed a 70% reduction in losses from the previous year, 2017. Similarly, the 2019 management account indicated a further 41% reduction in the loss level from the year 2018.”

According to him, “This steady decline in the loss level of the company, from 2017 to 2019, shows that during the year 2020, the company will likely make a profit. BOST under the NPP Government is in a better position.”

“BOST continues to pursue its objectives including holding strategic reserves of petroleum products. Other private depots also hold sufficient stocks, which together with BOST provide enough buffer for product supply.

We want to assure the people of Ghana that unlike the NDC's time when we had long queues at petroleum stations for three days in June 2014 due to fuel shortage, the Akufo-Addo Government will never expose Ghanaians to such a crisis.”

“In the renegotiated agreement, GNPC's additional participating interest was reduced from 15% to 3%. As if that was not enough Explorco's commercial interest of 24% was dropped to Zero”.

“The NPP government has proven to be better managers of the oil and gas sector. This is because: We have renegotiated the domestic gas price from $8.8 per mmBtu to $6.08 per mmBtu. The gas price would have been lower if Sankofa gas price was less expensive,”he said.

—Daily Guide

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