GoG/GNPC Vrs Kosmos/ExxonMobil

CRUNCH TIME



…As ExxonMobil Ups Lobbying



By J. Ato Kobbie, Managing Editor



With the battle lines drawn, following a decision of Ghana National Petroleum Corporation (GNPC) to refuse giving a nod to a sales and purchase agreement (SPA) between Kosmos Energy and ExxonMobil, after months of shadow-boxing the two U.S. companies, it is now the turn of Government to either follow suit and throw out the deal or succumb to intense manipulations and lobbying that have been ongoing for many months.



Even though the GNPC swiftly refused its consent to the deal, citing its previously stated reason of breaches by the two companies, especially, Kosmos Energy, The Minister of Energy, is yet to decide on the agreement between the two companies, even though he has previously stated in no uncertain terms that he would not consent to the purported deal, in view of a flawed process embarked on by Kosmos Energy.



Both the GNPC and the Ministry of Energy have accused Kosmos Energy, the Jubilee Field Partner, whose first exploratory well in its West Cape Three Points (WCTP) operated block struck oil in commercial quantities in June 2007.



As a result of GNPC’s outright refusal of consent, any position to the contrary on the part of the government would bring it into collision with the Board, which is chaired by. Mr. Ato Ahwoi, a former Minister in charge of the sector in the 1980s to early 1990s.



In that event the Government would either have to convince the Board to reverse its decision or in the event of the board remaining adamant, dissolve and reconstitute it, if it is bent on giving in to the deal.



Apart from intense lobbying in international circles, led by a U.S. international lobbyist noted for spear-heading some notorious U.S. adventures such as the invasion of Iraq and the two-decade long Angola war, where the Americans supported the Jonas Savimbi – led rebels, some Ghanaians, including some of international repute, have also been co-opted into the lobbying and piling pressure on the government.



A high-powered ExxonMobil delegation arrived in Ghana over the weekend, to dialogue with the government over recent developments, which saw the Energy Ministry and GNPC accuse the U.S. Company and its compatriot, Kosmos Energy of having engaged in a flawed process when trading in the latter’s stakes in Ghana’s oil fields. There is no petroleum agreement with ExxonMobil which technically means they have no legal or contractual right to even talk to anybody let alone insist on anything.







GNPC has accused Kosmos Energy of violating its data ownership rights, breached confidentiality terms of the petroleum agreement governing the latter’s operations in Ghana and also engaging in a flawed process in its attempt to dispose of its interests in Ghana to ExxonMobil.



GNPC sources have told The Business Analyst that several attempts to get the two parties to regularize their dealings with the national oil company were treated with contempt, resulting in GNPC declining to give consent to purported sales and purchase agreement between the two parties.



Section 23 (2) of the petroleum exploration and production law, PNDC Law 84, vests data ownership in GNPC as follows:



‘All data and information obtained by a contractor or sub-contractor as a result of petroleum operations and all geological, geophysical, technical, financial and economic reports, studies, interpretations and analysis prepared by or on behalf of a contractor or sub-contractor in connection with such petro1eum operations shall be the property of the Corporation,’



The agreement also provides for handling of such data with confidentiality under Section 23 (5), which states that:



‘A contractor or sub-contractor shall keep all data acquired and any existing data released to him by the State or the Corporation confidential and shall not disclose such data to a third party without permission from the Secretary except as may otherwise be provided in accordance with the terms of a petroleum agreement or petroleum sub-contract, as the case may be.



Meanwhile information gathered by The Business Analyst suggests that Kosmos Energy, has sold its interests to ExxonMobil, as the former’s international private equity investors, Warburg Pincus and Blackstone Capital Partners have long lined up to recoup their investments.



The transaction, however, does not give the oil giant, ExxonMobil, an automatic take-over of Kosmos Energy’s assets in Ghana, as conditions of the Petroleum Exploration and Production Law of Ghana, PNDC Law 84, under which the latter operates in Ghana had to be fulfilled.



Section 8 of the law, subtitled Non-Assignment of Petroleum Agreement, states explicitly that



‘A petroleum agreement entered into under this Law shall not directly or indirectly be assigned, in whole or in part, by the holder of such agreement to another person without the prior consent in writing of the Secretary.’





Article 23 (16) of PNDC Law 84, also provides that ‘A contractor or sub-contractor shall not transfer any share or shares in its incorporated company in Ghana to a third party either directly or indirectly without the written approval of the Secretary if the effect of such transfer would be either to give such third party control of such company or to enable such third party take over the interests of a shareholder who owns five per centum or more of the shares in such company.’



The Petroleum Agreement under which Kosmos Energy operates was signed with its incorporated company in Ghana, as required under Section 23 (15) of the petroleum exploration and production law, which requires that:



‘Except for such sub-contractors as may be exempted from the requirements of this subsection by the Regulations, a contractor or sub-contractor which is not an incorporated company in Ghana under the Companies Code, I 963 (Act 179) shall-



‘(a)register an incorporated company in Ghana under the provisions of the Companies Code, 1963 (Act 179) to be authorised to carry out so1ely petroleum operations in respect of which a petroleum agreement or petroleum sub-contract has been entered into under this Law and such company shal1 be a signatory to any petro1eum agreement;’



What this means is that the Minister for Energy, would have to consent to ExxonMobil’s takeover of Kosmos Energy (Ghana) before it can be effective even if it had acquired Kosmos Energy in the U. S.



Apart from being incorporated in the country, subsection 15 (b) of Section 23, requires that such companies ‘maintain an office or establishment in Ghana to carry out petroleum operations and shall have in charge of such office or establishment a representative with full authority to act and to enter into binding commitments on behalf of the contractor or sub-contractor, as the case may be; and

‘(c) in respect of such petroleum operations, open and maintain an account with a bank in Ghana.’



PROPAGANDA WAR

In the wake of the controversy, it has emerged that some recent anti-Ghanaian media war in the international media, including, Forbes, The Wall Street Journal and Washington Post, could be the handiwork of an international lobbyist K. Riva Levinson and her firm, KRL International.



Levinson, who has been contracted by Kosmos Energy as a lobbyist in connection with its operations in Ghana, in a promotional clip sighted by The Business Analyst, lies about the government of Ghana changing the terms of the original petroleum agreement with her client, for which reason she was going to be a ‘trouble maker.’



Analysts are finding a close link between a recent Forbes Magazine ranking Ghana as ‘the 9th worst managed economy,’ based on falsified data and a May 2003 report in the same magazine, following a dispute between the government of Ghana and Kaiser Aluminum of the U.S. over pricing and availability of power for the Volta Aluminum Company (VALCO).



Levinson, who has been hired by Kosmos Energy, at the time was appointed the Kaiser Aluminum Representative in Washington.



The Forbes report in question, dated May 23, 2003 reads as follows:

=====================================

Ghana: US Firm Opens Talks to End Dispute with Ghana's Government

Reed Kramer

27 May 2003

________________________________________

Washington, DC — Negotiations are taking place this week in Ghana to resolve an ongoing dispute between the government and an American mining company that is complicating an otherwise cooperative relationship between two countries with long historical ties.

The disagreement, involving Houston-based Kaiser Aluminum and its Ghanaian subsidiary, Valco, has led to a suspension of all lending to Ghana by the Overseas Private Investment Corporation (Opic), a U.S. government agency that provides political risk insurance and loans to American businesses investing abroad.

"Ghana is being seen as not acting in a commercially reasonable manner that would ensure investor confidence," OpicPresident Peter Watson stated in a letter to Ghana's ambassador in Washington early this year. As a result of Ghana's actions, he said, "All applications for investment support in Ghana will remain under review." Watson, who refused several requests for an interview, said through a spokesperson this week that the agency "is accepting applications but not acting on them at the current time."

This week's negotiations in Ghana involve the Kaiser corporate vice president and general counsel, Edward F. Houff, and a ministerial team led by Ghana's energy minister, Dr. Paa Kwesi Nduom. Riva Levinson, who represents Kaiser Aluminum in Washington, said the company is "hopeful that a commercially negotiated deal can be reached."

The talks are being closely monitored in Washington, where the dispute has received high-level attention at a number of agencies, including the Treasury, State and Commerce Departments and the office of U.S. Trade Representative Robert Zoellick. At issue is the price and availability of electric power for the aluminum smelter at Tema operated by Valco, the Volta Aluminum Company, which is owned by Kaiser (90%) and Alcoa (10%).

Kaiser Aluminum first invested in Ghana shortly after the country gained independence from Britain in 1957. Since aluminum processing requires a large volume of affordable electricity, the investment was made feasible by construction of the huge Akosombo Dam on the Volta River, built with U.S. government assistance in what was regarded in Washington as a Cold War counterpoint to the massive Soviet-built Aswan Dam in Egypt.

Part of the current disagreement centers around the 50-year Master Agreement that was signed in 1962, when Kaiser began operations in the country. Although the agreement remains in effect, the government argues that the Power Contract contained in the Agreement has expired and that renewal is subject to Parliamentary approval. The government has sought to garner international support for its stance by publishing its position paper in various media, including allAfrica.com (see The Position of Ghana on the Arrangements with Valco.

Ghana says Valco is paying 1.1 U.S. cents per kilowatt-hour, while the cost of producing electricity in the country has risen to 6.5 cents. Kaiser disputes the government's cost calculation and says the price of 3.0 cents that Ghana is demanding would push the cost of producing aluminum above the world market price.

A mediation effort in January broke down with no agreement. A new set of talks in Washington earlier this month proved more productive and resulted in concurrence by both sides to abide by arbitration, if negotiations don't produce a resolution, according to government and private sector sources. Kaiser has submitted the case to the arbitration panel of the International Chamber of Commerce.

"Should there be the need to continue on the arbitration path, we will be responsive, we will participate and we will respect whatever conclusions come in the end," Ghanaian Energy Minister Nduom told AllAfrica during a visit to Washington last month. He sharply dismissed suggestions by U.S. officials that Ghana acted without regard to the rule of law in this case, calling adherence to the law the "centerpiece" of President John Kufuor's program since he took office in early 2001.

"This is the government that has said 'zero tolerance' for corruption and that no one is above the law," Nduom said. "For anybody, anywhere to suggest that this particular government would not respect contracts or any part of the rule of law is something that we will contest very, very vigorously."

Ghana no longer has sufficient hydroelectric power to meet rising industrial and consumer demand and must generate electricity from thermal plants that burn petroleum, a more expensive process. In addition, Ghana has to import power from Cote d'Ivoire, Nduom said. The water level in Volta Lake has dropped to an unsustainably low level, and the lake needs healing, he said.

One concern on the Ghanaian side is the fact that Kaiser Aluminum has been in bankruptcy for more than a year. According to Jones Day, the company's law firm, the action was caused by an "unusually weak aluminum market," as well as the cost of asbestos litigation and rising retiree pension and medical obligations. Kaiser has said the bankruptcy plays no role in the dispute with Ghana and will not affect its future in the country. The company's largest shareholder is Maxxam, a Houston holding company controlled by financier Charles Hurwitz.

The discussions this week in Accra are aimed at resolving the disagreements and devising a solution that does not require arbitration. That prospect appears to have been enhanced by Ghana's willingness to accept an arbitrated outcome, if needed. Already, the atmosphere for discussion has improved, leading to an easing of the tensions that had been hampering bilateral ties, according to both U.S. and Ghanaian officials.

Even without a final accord, Ghana's acceptance of binding arbitration is expected to open the way for resumed lending by Opic to the country. Earlier this month, Opic took part in a trip to Ghana in connection with financing for a $100-million upgrade by CMS Energy for its thermal power plant at Takoradi. The expansion by the Michigan-based firm would significantly contribute to lowering the cost of electricity in Ghana, a core issue in the dispute between Kaiser Aluminum and the government. Last month, CMS Energy joined with other firms to establish the U.S. Ghana Economic Council to encourage improved bilateral ties.

According to Nduom, the government of Ghana wants to find an "amicable settlement" with Kaiser that will bring the matter to a close.



Meanwhile, a web search on Riva Levinson names her as one of the top-ten leading beneficiaries of the Iraqi invasion, having led the campaign for the invasion under concocted stories against Iraq.

She is also reputed to have worked for the Jonas Savimbi rebels in their guerilla war with the Angolan government which lasted for about two decades.

Again, searches reveal that with about 20 years experience as a Washington DC lobbyist, Ms Levinson is Permanent Consultant, for U.S. Government Relations and was for more than a decade the Managing Director at BKSH & Associates, where “she managed the company’s international portfolio.

In 2006, she left the company to open her own consultancy and currently serves as the Managing Director of KRL International, LLC.

Ms. Levinson holds a Master’s degree in National Security Studies from Georgetown University. She holds also a Bachelor’s degree in Economics and International Affairs from Tufts University and has also studied at the School of Economics of the University of Barcelona, in Barcelona, Spain, and is fluent in Spanish.