Ghana’s opposition NPP calls for review of Italian oil deal
In a statement issued by the party to welcome the Italian
leader, who was on an official two-day-visit, the NPP said the deal is lopsided
in favor of the Italian firm and only gave marginal benefits to Ghana. Last year, President Mahama announced a deal in the pipeline
between the government and Italy’s largest oil and Gas Company, which he said
was to boost Ghana’s gas supplies to secure the energy sector.
The $7 billion agreement, he said was for the development of
the Offshore Cape Three Points (OCTP) integrated oil and gas project.
The NPP has however raised serious concerns and are asking
for proper due diligence to be conducted before the project takes off. The
statement signed by Communications Director Nana Akomea also challenged the
figures put forward as the cost of the project, comparing it to other more
productive drilling sites, which have cost less to develop.
Below is the full statement:
NPP WELCOMES ITALIAN PRIME MINISTER, RAISES QUESTIONS ABOUT
ENI-SANKOFA DEAL
The New Patriotic Party joins the Government and people of
Ghana to welcome His Excellency Mr. Matteo Renzi, Prime Minister of Italy, to
Ghana today. The NPP appreciates the enormous assistance of Italy to Ghana over
the years and the excellent state of our relationship.
On this auspicious occasion of the Prime Minister’s visit,
however, the NPP is constrained to highlight for the consideration of His
Excellency and, indeed, all Ghanaians aspects of Ghana’s contractual
relationship with ENI, a state-owned Italian oil conglomerate, and its partners
over the exploitation of the Offshore Cape Three Points Block (OCTP).
Our worries, which have also been expressed by some Civil
Society Organisations in the oil sector, include:
i. The Government of Ghana’s provision of financial terms to
ENI and its partners of 20% return on investment, instead of the normal 12.5%,
is an unusually high rate for commercial transactions of this nature,
especially as GNPC assumes all the risk in the project.
ii. The negotiated gas price of $9.8/MMBtu for gas from the
Sankofa fields is too high by world standards, of between $5-7/MMBtu. It is
even higher than the price of gas sold to Ghana from Nigeria, which stands at
$8.3/MMBtu, delivered at Takoradi. It is even more expensive than our own
Atuabo Gas price of $8.8/MMBtu delivered at Takoradi. At the negotiated gas
price of $9.8/MMBtu, it puts to great risk Ghana’s potential of becoming the
Petrochemical hub of the region to Nigeria, due to that country’s lower gas
prices.
iii. This agreement compels GNPC to buy up to 90% of ENI
produced gas at a higher negotiated price of $9.8/MMBtu for 20 solid years.
This gas sales same agreement is further guaranteed against default by three
guarantees – the government of Ghana, the World Bank and GNPC – amounting to
some $750 million.
Furthermore, GNPC, after buying the gas from ENI at a
guaranteed price stands the risk of losing its market (VRA, IPPs, petrochemical
industries) to other cheap gas suppliers.
iv. Ghana
also guarantees additional free cash flows to the company by allowing them to
write-off 7% interest on all commercial loans from project revenues, when the
normal provision is between 2-3%. This also reduces Ghana’s potential tax
revenues from this project by over $160 million. No other companies, whether
from Jubilee or TEN, have been given this same rate of 7%.
v. The cost of the development of the Jubilee Fields, with
more reserves of oil equivalence and with a water depth of 3,630 ft, came to $4
billion. The cost of development of the TEN oil fields, also with more oil
reserves of oil equivalence, came to $4.9 billion. The cost of development of
ENI’s Sankofa is $7 billion, with less reserves of oil equivalence and at
relatively lower water depths of 2,706 ft. We wonder the quality of due
diligence done, if any.
We ask, what possible motives could drive the government of
Ghana to bend backwards and grant all these unprecedented incentives, which are
not even available to the original developers of Cape Three Points?
We are highlighting these issues, as this is potentially the
largest single investment in Ghana, which will bind the Ghanaian people for the
next 20 years. It is, therefore, important that the benefits of this project
are not so one-sided as they seem today.
We hope the Italian Prime Minister will use his good offices
to prevail on ENI and the Government of Ghana to review some of these terms, in
order to maximise our mutual benefits from this project. We believe this will
further strengthen the Ghanaian-Italian relationship and North-South
co-operation.
……signed……
Nana Akomea
Director of Communications
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