Ten International Oil Companies (IOC’s) that had been part of the initial competitive bidding process have expressed interest in direct negotiations instead, which are to be used to decide who are allocated blocks five and six.
This was revealed by a member of the Bid and Licensing Round Committee, Mr. Callistus Nero, at the launch of the report on the Pre-Qualification Stage, in Accra, on Wednesday.
Mr. Nero said, “10 companies that were in the initial competitive rounds have expressed interest in the direct bidding process, and we have written to them to submit proposals.”
“However not all have submitted the proposals yet,” he added.
As it stands now, the names of these 10 IOC’s that have expressed interest in the direct negotiations have not been made public.
The original pool of companies that put in bids for the three oil blocks on the basis of competitive bidding includes China National Offshore Oil Corporation, Cairn Energy, Qatar Petroleum, Global Petroleum Group, First E&P, Sasol, Equinor and Harmony Oil and Gas Corporation. The rest include ExxonMobil, British Petroleum, Tullow Ghana Limited, Total, ENI Ghana, Vitol, Kosmos Energy and Aker Energy.
Three (3) of the blocks (GH_WB_02, GH_WB_03 and GH_WB_04) will be awarded through an open and competitive bidding process which is the default process in line with Section 10(3) of Act 919.
Two (2) blocks namely GH_WB_05 and GH_WB_06 will be awarded through direct negotiations in line with Section 10(9) of the same law while GH_WB_01 has been allocated to GNPC in accordance with Section 7(9) of the E&P law to explore on a sole risk basis or in partnership with a strategic partner “with a view to developing its technical capacity and becoming an operator.
Earlier this week, the Energy Ministry cited the lack comprehensive data and small size of oil blocks as reasons for the low interest expressed by investors in the maiden licensing bid for the six oil blocks.
Deputy Minister for Energy (Petroleum) Dr. Mohammed Amin Adam explained that the government has done its assessment on the responses it received from the companies and has taken steps to address them.
One of the issues that emerged was that, the current data on those blocks was not comprehensive enough and therefore they didn’t have enough data to enable them to make commercial decisions.
The second issue that came up was the size of the acreage, which they indicated was too small compared to the offers they get from other oil-rich countries.
With these issues, government is expected to take key decisions after discussions with stakeholders and consultants to decide whether to revise the size of the blocks for future bidding rounds to make Ghana’s upstream sector more competitive. It will also strive to improve the data being made available to bidders.
A financial and energy expert is cautioning the Akufo-Addo government on the lack of transparency in all the agreements backing the contract it signed with Helios/China Harbor Engineering and Ghana National Petroleum Corporation (GNPC), as well as the Rosneft LNG regasification project agreement.
Alex Mould, former Chief Executive Officer (CEO) of GNPC expresses concern about the seeming lack of proper world class advisors on technical, commercial and legal areas of all of the LNG regasification project agreements signed a year ago on behalf of government given the short negotiation period which suggests a need for rushed off.
Helios and China Harbor Engineering and GNPC are constructing a terminal for the regasification project to be managed by Tema LNG Terminal Company.
“It should also be remembered that GNPC, last year June, signed a new gas sale and purchase agreement (GSA) deal with Rosneft for the same natural gas supply agreement it had signed with Gazprom in September 2017. This raised a lot of questions by energy experts then as to what necessitated the abrogation of the Gazprom contract and the cost associated with the abrogation of that contract.
“It has been a year now, yet, stakeholders including Parliament and civil society are not getting much information about the LNG regasification project from government through the Ministry of Energy or from GNPC. There are more standing questions begging for answers”, Mr Mould told the media in an interview at LNG Western Africa Conference 2019 held last week in Accra.
He continued, “I’m not conversant with the details with the LNG re-gas contract. I’ve not seen any agreement. I believe that there’s supposed to be a breakwater being built. I don’t know who is bearing the cost of the breakwater, whether it’s the government as GHAPOHA or whether it’s going to be passed on to the project. If it’s going to be passed on to the project, we need to look at the total economics. We need to look at the supply of breakwater the gas.
“But it’s very interesting that a transaction of this size and this magnitude and this difficulty would be signed within 3 months. It’s something that we need to look at. We need to make sure that all the Is are dotted and the Ts are crossed. It involves bringing in the right consultants to ensure that the right feasibility is done before any decision is made”.
According to him, it also important to understand the security structure behind the transaction and what commitment Ghana has made to the project- so time will tell.
Mr. Alex Mould stressed that the ministry off-take is around 250mmscfd through GNPC to all the power plants in Tema power enclave.
“Although, it is believed that GNPC is not directly involved in terminal issues, it is believed that GNPC has signed an agreement with the Terminal Company to guide eventual takeover of the Terminal (being a BOOT) arrangement; however, the details are blurry and it is unclear who the EPC contractors are, aside from the fact that the GSA is between Rosneft and GNPC.
“Project completion is expected in second half of 2020 but however based on a study of projections of the gas demand and supply, it is estimated that there is a surplus of gas progress until about 2028. GNPC is still the national gas aggregator as appointed by Government, but it is suggested that the new Gas Bill which is going for approval in Parliament is proposing Ghana Gas (GNGC) as the aggregator,” he emphasised.
The Chief Executive Officer of the National Petroleum Authority (NPA), Hassan Tampuli, has revealed that the country loses about US$200 million in tax revenue due to the incidence of smuggling of petroleum products.
Speaking at the at this year’s Ghana International Petroleum Conference in Accra, Mr. Tampuli stated that these activities is also responsible for the country losing about US$12 million from the unified petroleum price fund annually.
He mentioned Takoradi and Tema ports, Prampram, Aflao and the eastern coastline as the unapproved offshore routes for the smuggling.
“These nefarious activities of the petroleum service providers and some that are not even service providers, led to the country losing colossal US$200 million per annum of tax revenue,” he said.
Mr. Tampuli stated that some elements in the petroleum industry have made it their business to engage in nefarious activities which eventually leaves the country poorer.
He expressed concerns about the smuggling of subsidised products such as premix, marine gas and gasoline, as well as what he termed fraudulent freight claims from some transporters and siphoning of LPG from bulk vehicles into surface tanks.
The Chief Executive revealed poor quality products from some neighbouring countries are smuggled by road through unapproved entry points between Ghana and Togo and eventually end up at private tank yards, mining companies and other retail outlets.
He further revealed that some companies have been sending gas oil declared for sale to foreign vessels at local filling stations while some of them have been engaging in under-declaration and non-declaration of products lifted at various depots.
“Over 300,000 metric tonnes of actual annual consumption was unreported [last year]” he said.
On the back of these, he said the GNPC has in collaboration with the Ghana Revenue Authority, the Ghana Navy and the security agencies rolled out measures to tackle the problem head-on to save the nation from the loses.
“I believe it is time for petroleum players in the sub-region to engage in a dialogue and the issues that confront us and find common unique solutions for the advancement of our respective countries.
ExxonMobil has opened a new office in Accra, Ghana to progress offshore exploration programs.
ExxonMobil Exploration & Production Ghana (Deepwater) Limited acquired rights in 2018 to explore the ultra-deepwater block Deepwater Cape Three Points.
The petroleum agreement was ratified in April 2019. ExxonMobil plans to begin 3-D seismic acquisition later this year.
Once the seismic program has been completed, together with partners Ghana National Petroleum Commission (GNPC) and GOIL Offshore Limited, the company will evaluate the potential for drilling its first exploration well in the country.
“This office will help us progress our exploration program in Ghana,” said Pam Darwin, vice president of sub-Saharan Africa exploration and new ventures at ExxonMobil. “We look forward to working closely with our partners and the government to bring value to the Ghanaian people through our business and community involvement.”
“We appreciate the support we have received from all of our stakeholders in Ghana, particularly from Energy Minister John Peter Amewu and his team,” Darwin added.
The Deepwater Cape Three Points block, located 57 miles (92 kilometers) off the coast of Ghana. It measures approximately 366,000 acres (1,482 square kilometers) in water depths ranging from 5,085 feet to 9,350 feet (1,550 meters to 2,850 meters).
ExxonMobil holds 80 percent interest in the Deepwater Cape Three Point block. Ghana National Petroleum Corporation holds 15 percent and GOIL Offshore Limited holds 5 percent.
The Chief Executive officer of ENI Ghana, Roberto Daniele, has encouraged more Ghanaian entities to venture into the energy sector to ensure success for the industry, stressing that local content is key to the sector’s success.
“Local content is key to success of the industry. It is something that ENI is always pursuing around the world, and we are doing the same here in Ghana. I really hope that Ghanaian businesses will increase; but even now, there is a very good presence of Ghanaian businesses in the industry,” he told the B&FT on the sidelines of the Ghana Energy Summit 2019 organised by the B&FT and Energy Ministry in Accra.
He said this is something that everyone must support and encourage, to get more local businesses in the industry to take advantage of the oil and gas industry.
“For sure, this is something we must never stop championing. More local companies should get into the market and take advantage of the oil and gas business,” he said.
Following the 2007 oil find, pressure was mounted on government to draft a local content policy for the oil and gas sector.
The policy document is comprehensive and addresses all aspects of local content in the quest to realise maximum benefits from the oil and gas sector.
It is envisaged that these actions will lead to the creation of a self-sustaining and buoyant economy
However, given almost 10 years of producing oil in commercial quantitites, not much has been done to lure more Ghanaians into the oil sector, especially the upstream which is believed to require technical expertise and is capital intensive.
Speaking at the summit, the Chief Executive of Ghana Gas, Mr. Ben Asante, said operation of the gas company is 100 percent indigenous.
“All the pipes and are being handled by Ghanaians. I am not saying that we pay them cheaply, but they are cheaper; and most importantly, they will be able to pass on the experience to those who come after them – and that’s how you sustain an industry,” he said.
In a related development, there is a debate for the government to expand the definition of local content to include the types of energy resources available in the country.
During the local content session of this year’s Ghana Energy Summit in Accra, panelists of the session argued that limiting the local content definition to only local participation will not develop the energy sector.
“We need to expand the definition of local content to include the type of renewable energy we have,” said Sherrie Thompson, founder of Sun Shade Energy.
“We should harness our part of the wind and sun energy industry – we need to invest; we are the investors that will make and grow our own industry.”
According to her, to ensure local content participation, all the oil companies should be listed on Ghana Stock Exchange.
She said if that happens, the country will not be talking about government owning 10 or 15 percent – the people will rather have ownership by getting a dividend from their ownership from stock.
“Do we have energy stocks and energy bonds, and if not, why don’t we?” she asked.
“How can we participate? When the oil and gas companies are part of the Ghana Stock Exchange and are paying dividends to the people, that becomes local content participation,” she added.
Oil’s contribution to Ghana domestic revenue is increasingly gaining ground as a tenth of domestic revenue in 2018 emanated from oil and gas.
Analysis of data from the Ministry of Finance’s Fiscal Data and the Public Interest Accountability Committee (PIAC) report, shows that the contribution of oil to domestic revenue continues to record significant growth, from when in 2016 it recorded just three percent of domestic revenue.
It is projected that the percentage contribution of petroleum revenue to domestic revenues will rise further in 2019 barring any external shocks.
Between 2011 and 2018, domestic revenues increased averagely by 22 percent a year.
A year by year analysis of change in domestic revenue between 2012 and 2018 reveals that the year 2014 had the highest percentage of 28 percent increase in domestic revenue. This is largely due to high oil prices during the period.
Over the past two years, oil contributions have led to a 20 percent annual increase in domestic revenues.
With oil prices averaging high as US$ 99.03, the contribution of petroleum soared to 12 percent in 2014 but thereafter dipped to three percent in 2016 due to bearish oil prices averaging US$ 43.74. The year 2014 recorded the highest average annual crude oil price over the last five years.
“Investing petroleum revenues in high impact projects and diversifying resource sector is key to broadening the domestic revenue base and sources,” says Mr. Gideon Ofosu-Peasah, a Natural Resource Economist and Consultant at the Africa Centre for Energy and Environmental Sustainability.
Crude Oil and Gas Production in 2018
A total of 62,135,435.07 barrels of crude oil were produced from Ghana’s three
production fields in 2018, where Jubilee Field produced 28,461,775 barrels representing 45 percent of total production; TEN produced 23,557,361 barrels or 38 percent; and SGN produced 10,751,671 barrels or 17 percent.
In 2017 total crude production was 58,658,063.54 barrels. This translates to a 5.93 percentage points increase in 2018.
A total of 91,459.30 Million Metric Standard Cubic Feet of raw gas was produced from the Jubilee, TEN, and SGN Fields in 2018, compared to 77,294.44 MMSCF in 2017.
More Oil Marketing Companies (OMCs) which had retail outlets which were cited as shortchanging consumers are to replenish the quantities to their respective customers within the coming days.
That is the assurance from the Chamber of Petroleum Consumers, COPEC.
The move follows series of negotiations and the need to give value for money despite complying with regulatory fines imposed by the Ghana Standards Authority.
A market survey by the Ghana Standards Authority in May 2019 identified ten out of sixty-five fuel stations for shortchanging consumers.
The fuel stations were found to have either tempered with their fuel dispensing machines or under delivered fuel sold to consumers.
Most of the OMCs have since rectified the anomalies with Goil giving as much as twenty-five percent free fuel to compensate affected consumers.
Executive Secretary of COPEC, Duncan Amoah tells Citi Business News there have been efforts to get other OMCs to duly compensate their customers at least by the end of this week.
“This week, we are looking forward to Allied, Glory Oil, Total, Shell and the others to also roll out some of these programs or promos in order to be able to give back something at least to these customers who are stuck with them. As a result of some of the pumps earlier malfunctioning through the Standards audit, we think that Goil has demonstrated good faith, Goodness Energy has demonstrated good faith; we are waiting on the others to also carry on in the coming days.”
The Ghana Standards Authority slapped a five thousand cedis fine on each of the affected fuel stations cited for the infractions.
Though the companies have paid the fine, COPEC wants the GSA to be tough with its sanctions to prevent the situation from recurring.
Duncan Amoah further explained that efforts to introduce a new law to review the sanctions regime plus the regular monitoring by various stakeholders, should help in giving value for money.
Meanwhile, the Association of Oil Marketing Companies has assured of the group’s relentless and unwavering determination to attain 100% compliance.
The Ministry of Energy has disclosed that the Renewable Energy Act is being amended to bring more clarity on the policies and regulations of the act.
According to the Ministry, the move is to ensure active participation of the private sector in achieving government’s goal of scaling up the penetration of renewable energy in the energy mix.
The government in 2011 passed the renewable energy act and targeted 2030 to have at least ten percent renewable energy in the electricity generation mix of the country.
In an interview with Citi Business News, Director for Renewable Energy at the Ministry of Energy, Wisdom Ahiataku-Togobo said the amendment of the renewable energy Act will be key in promoting the use of renewable energy.
“The renewable energy Act was passed in 2011 and today change in circumstances requires that we have to amend the act. At the time the act was passed, electricity from solar was very expensive and most bulk consumers would not buy power from solar. So, the act put in place something we call the feed-in tariff which is a tariff that will encourage developers who produce solar to pay the premium rate so that it can be fed into the system”.
He further disclosed that modalities for the smooth implementation of the net metering code will soon be made public.
Under the net metering code mechanism, renewable energy generation facility owners are credited for electricity supplied to the grid. The credit is subsequently set off against electricity purchased from the distribution utility.
The system has however been met with some challenges like the inability of the distribution utility companies to credit back power received into their network.
Addressing the issue, Mr. Ahiataku-Togobo said challenges surrounding the net metering system will soon be addressed.
He made these comments at the sidelines of the opening of the largest off-grid hospital project in Africa.
About Commissioning of Project
SunPower Innovations in collaboration with FOCOS Orthopaedic Hospital has installed the largest off-grid solar hospital project in Africa. The project is a 700KWp 1MWH ESS off-grid solar system constructed at the FOCOS Orthopedic Hospital, Pantang.
Speaking on the benefits this installation will give FOCOS, Mr. Eric Adjah, Technical Lead for SunPower Innovation, said, “this is one of the first in the hospital sector which will help FOCOS Hospital cut down on its huge power bills and enjoy stable a 24 hour supply power, to the hospital, with the generator only serving as backup”
According to the Chief Executive Officer of SunPower Innovations, Ernest Amissah and the CEO of FOCOS Orthopaedic Hospital, Professor Oheneba Boachie Adjei, the project takes the hospital completely off the national grid.
In line with the passage of the Renewable Energy Act in 2011, SunPower Innovations has expressed its commitment to supporting the gradual shift of public and private institutions from the national grid to more renewable sources of energy; specifically, solar power.
According to the company, it believes that this would serve as the ideal platform to emphasize to the public the benefits of adapting to solar power to their businesses and Ghana’s economy as a whole.
The Energy Ministry has cited the lack of comprehensive data on Ghana’s oil blocks as well as the small size of the blocks as some of the reasons for the low interest in the first oil blocks bidding round.
Out of the three blocks put up for the first bidding round, four companies expressed interest in one block, only one company expressed interest in block 2 while no company showed interest in the last block.
Deputy Minister, Mohammed Amin Adam told Citi Business News that the government has done its assessment on the responses it received from the companies and has taken steps to address them.
“Basically, two major issues emerged, the first one is that the data that we already have on those blocks was not comprehensive enough and therefore they didn’t have enough data to enable them to make commercial decisions so we have to improve on the quality of the data,” he stated.
According to him the second issue that came up was the size of the acreage, which he said was too small for most of the companies compared to the offers they get from other oil-rich countries.
“For some of them, their exploratory strategies require them to operate in larger acreages and there are a number of countries that will give larger acreages to companies. If they compare what they get as per their strategies with what they were offered, our acreages or blocks were smaller in size and therefore it was inconsistent with their strategies”
The Deputy Minister stated further that his outfit will take a decision after discussions with stakeholders and consultants to decide whether to revise the size of the blocks for future bidding rounds to make Ghana’s upstream sector more competitive.
1Energy analyst and Chief Executive Officer of African Energy Consortium Limited, Kwame Jantuah, has called on the government to desist from appointing persons who lack the right expertise to head public institutions in the oil and gas industry.
According to him, the appointment of such individuals could lead to massive losses in the petroleum industry.
He said the government must subject heads of institutions such as the Ghana National Petroleum Corporation (GNPC) to thorough interviews and vigorous selection processes to determine their knowledge of the petroleum industry before they are hired.
“We need to change the way we put our CEOs and those in charge of the oil sector in place. Why should it be the responsibility of the President to choose GNPC’s CEO? Why should it be the President to choose the head of the Petroleum Commission?
“In some countries, if you have not worked in the oil industry for a long time and you are not seasoned, you can’t take over those positions. Brazil is one of them. You have to work in the oil industry and you have to be proven that you understand what it means to work in the oil industry,” Mr. Jantuah stated.