Who wears the anti-Ghana crown – GNPC or CSOs?

This week, Ghana’s National Oil Company (NOC), the Ghana National Petroleum Corporation (GNPC), stepped up a campaign of mudslinging against the country’s Civil Society Organisations (CSOs) by sponsoring attacks in certain newspapers aimed at painting the CSOs as “Anti-Ghana”.

GNPC also caused to be circulated an unsigned document purporting to be responses to serious, sometimes alarming, concerns the CSOs have raised about the GNPC’s aggressive efforts to get Ghana to bear the cost of a nearly $1 billion windfall to their friends in Aker in exchange for a bigger spot at the trough of oil contracts under the guise of a “co-operatorship” deal executed through a “joint operating company” structure.

GNPC’s plan is to bribe Aker with this mammoth payoff so that it can be awarded the dubious title of “co-operator” in a special purpose vehicle (SPV) structure, thus positioning it well to blow the $350 million allocated for capital spending from the $1.45 billion Government of Ghana intends to raise for it on subcontracts linked to risky misadventures in the Ghanaian oil basin. Only God knows what other concessions Aker has offered to the GNPC top brass in exchange for the $1.1 billion bonanza.

To project such dastardly unpatriotic conduct onto CSOs as a strategy of deflecting attention from this rape of the national kitty, this monstrous decision to spend $1.1 billion – almost three times what is fair – on a majority stake in one almost-useless oil field (Nyankrom at South Deep Water Tano/SWDT) and on a minority stake in a second unremarkable one (Pecan at Deep Water Tano – Cape Three Points/ DWT-CTP) and still have the temerity to call your critics “anti-Ghana” would be cute, were it not for the effect of such plunder on the suffering Ghanaian masses.

The CSO movement in Ghana is by no means uniformly opposed to the idea of increasing public/state natural resource ownership. In fact, some of the leading voices of that movement are even in support of complete nationalisation.

Nor is the idea of the national oil company being in the driving seat of producing the country’s petroleum reserves anathema to anyone in any of the CSOs. Many CSO leaders are on record to have advocated just that, and to have campaigned against foreign domination of the resource sector long before the current bosses of the GNPC ever got to their current positions.

What CSOs oppose is the cynical attempt to hide behind empty rhetoric of scaling the “energy transition” and resource nationalism to fritter away the national patrimony.

That the GNPC is seriously anti-Ghana in its conduct in this matter is glaring “on the face of the record” as Ghanaian lawyers like to say.

On 23rd December 2019, on the GNPC’s advice, the Ghanaian Minister of Energy went to Parliament to demand radical surgery to the original agreement governing the bigger of the two fields GNPC intends to buy into and increase their stake from 10% to 37%. The said agreement for this field (DWT-CTP, but henceforth, let’s call it “Pecan” after its biggest oil find) was executed in February 2006 among the GNPC, Government of Ghana, and Amerada Hess.

Serving the interests of Aker, which in 2018 had bought out Hess, the effect of this surgery without anaesthesia was to cause unprecedented damage to Ghana’s rights as a resource sovereign. GNPC, a company founded in 1983 that has been talking about “operatorship” for four decades had a ring in its nose and was dancing for its Norwegian bosses.

For example, Article 20 of the 2006 agreement was rewritten by GNPC to say that no longer would the joint committee, constituted by the Government and Aker to oversee the development of Pecan, have any direct say in the actual hiring of contractors, overturning decades of practice of how Ghana exercises some of the rights of “operatorship” even when not an actual operator.

After giving away such critical influence just a year and half ago, GNPC has suddenly discovered that an overnight energy transition requires it to have an equal say in which contractors get hired to operate wells and service production platforms as a “co-operator”, except of course that it is willing to pay $1.1 billion for this influence now.

Article 23 of the original Pecan agreement signed between Hess, long before its purchase by Aker, and Ghana in 2006 was also rewritten to say that anytime Aker decides that there is more oil than was originally thought to be in the field, Ghana will, like a “Koliko”, extend the life of the Agreement.

Even more gobsmacking was the decision by GNPC, after Parliament had sanctioned an amount of $47 million for it to buy 10% more of Pecan, to renege on its 2015 acquisition agreement with Hess. GNPC took the money and then run! It refused to pick up the 10%. It is now prepared to pay for the same Pecan field an amount that would value the same 10% stake at $250 million minimum! This is the patriotic entity that is goading its crony media allies to call CSOs fighting for the interests of the country, “anti-Ghana”!

That was all about Pecan. The crazy sequence of events through which Ghana’s initial 79% interest in the second field of interest – Nyankom – was, from 2013, whittled down to an embarrassing 15% through the machinations of the same GNPC that today wants to reacquire a 70% interest for hundreds of millions of dollars has been extensively chronicled in my earlier article here.

In the litany of falsehoods circulating as a response to the CSO critique of the Aker deal, the extraordinary folks at GNPC claim, with extraordinary chutzpah, that GNPC shall through this deal be “inheriting” $1.2 billion in capital costs from Aker that it will deduct from taxes it would otherwise have paid to the Government of Ghana to invest in social spending.

For an organisation so notorious for squandering public money on funny investments (like chronically distressed goldmines and loss-making motels in the jungle) to say that one of the benefits of a bad deal is that it will be spared from paying tax to the Government so it can keep the money for its own use is the height of irony. Except irony doesn’t quite capture it.

First and foremost, for a $1.2 billion tax-deductible to materialise, the investor has to actually spend that money developing actual oil assets in Ghana.

Yet, the annual reports of both Hess and its successor, Aker, are amply clear that actual capital assets developed in the Pecan-Nyankrom contract areas cannot amount to $1.2 billion. The Norwegian billionaire, Kjell Inge Rokke, who controls both oil fields is required to file returns for the entities through which he controls those assets. Those returns show clearly that spending to date hovers around the $300 million mark since he acquired the two oil fields of interest from Aker.

That leaves us with capitalised assets that Hess could have passed on to Aker when it departed these shores in 2018. On page 32 of Hess’ 2018 report, they tell us clearly that they “expensed” $268 million on capital costs before abandoning the Pecan discoveries they had made in Ghana because they did not feel that they would make a sound investment. (They spent a further $239 million on overheads and depreciation expenses, but these are by no means capital expenses nor petroleum-related costs).

In 2018, Aker picked up a 50.8% stake in Pecan for $100 million from Hess. The same field they are now trying to flip to Ghana for nearly $800 million. Add this to the unappraised and risky Nyankom field (where out of two wells drilled, one – Kyenkyen – proved a disappointment) situated in some of the most challenging locations in all of the Gulf of Guinea that Aker wants to add on for another cool $300 million thereabouts.

Let this sink in properly: in addition to having been ready to pay $1.3 billion for these two trinkets and having now weaselled out permission from Ghana’s pliant Parliament to pay up to $1.1 billion to acquire them, GNPC is also now inflating the actual capital expenditures made by foreign investors on these assets by nearly $700 million so that it can rip off Ghana on the taxes it would pay in the future if the fields ever come onstream and actually make money. Talk of anti-Ghana!

A fundamental argument of the CSO movement is that in the three years since Inge Rokke and his Aker-related entities have been in charge of the Pecan and Nyankom fields, not all that much of consequence has changed in terms of the fields’ commercial potential as a result of the appraisal campaign Rokke paid for. All the significant discoveries in Pecan, the only truly serious field, were made by Hess before leaving in 2018.

Only one discovery well, on the other hand, was sunk by Rokke’s AGM into Nyankom in 2019. In fact, there are considerable richer discoveries made in Ghana that have not been commercialised, like Kosmos’ Wawa and Akasa, and Expanded Shallow Water Tano, whose operator, Erin Energy, is reportedly bankrupt. In short, far more affordable prospects are available if “operatorship” was actually the goal. It is clear, however, that it is not.

We know that Rokke farmed into those assets at less than $200 million. We remember him saying he and his partners would spend $4.4 billion to produce oil, then changed his mind and settled on $2.5 billion. After postponing the investment indefinitely because of lack of enthusiasm in the market, his allies at the GNPC have decided to give him a nice golden parachute. At the cost of Ghana, of course.

All the while chanting: “Anti-Ghana!” Anti-Ghana! Anti-Ghana! Anti-Ghana indeed!