The African Center for Energy Policy (ACEP) has suggested that the state-owned the Ghana National Petroleum Corporation (GNPC) under the management of Kofi Koduah Sarpong and the National Chairman of the New Patriotic Party (NPP), Freddie Blay has become a secret organization with key decisions hardly made public.
ACEP cited how GNPC is acquiring 7% of Jubilee and TEN oil fields ceded to it by Kosmos Energy from a $750m acquisition of Oxy’s interest in October 2021 but there is no insight into how it intends to finance the $199 million acquisition, leading to speculations of illegality in breach of Petroleum Revenue Management Act (PRMA), Act 815 as amended.
ACEP, at a press conference – downloadhttp://herald.233prime.com/wp-content/uploads/2022/01/GNPC-7-percent-acquisition_final.pdf – do yesterday, January 13, 2022, disclosed that GNPC “has set up an offshore company in the Cayman Islands to hold the 7% interest rather than owning it directly or through a subsidiary in Ghana. This raises the bar on opacity and worsening accountability associated with the Corporation”.
According to ACEP’s Kodzo Yaotse, GNPC CEO, Dr K.K Sarpong and board chairman Freddie Blay are beneficial owners of this company, registered in the Cayman Islands.
The policy think tank is therefore calling on GNPC to fulfill all ‘legal righteousness’ as expected of them.
The Herald’s information is that discussions on this acquisition have been ongoing since October, last year with some interesting activities at the Ministry of Finance to get some money to pump into the deal, however, discussions on the transaction have been in total secrecy.
Interestingly, some members of the opposition National Democratic Congress (NDC) , especially Parliamentarians are mentioned to be aware of the transaction but have remained dead silent about it. This has left room for speculation that they have either been compromised as usual. Others have hinted that the Akufo-Addo government has some dirt on many of the NDC MPs, and using it blackmail them hence unable to speak against GNPC in particular.
The Akufo-Addo government has had a penchant for setting offshore companies with phony characters. Many of these firms including the Agyapa Royalties deal have untraceable addresses, directors among other things which make it difficult to find in the event of a dispute.
Notable members of President Akufo-Addo’s family are seen hovering around these deals and time they are hatched.
The fact of the matter is that Houston based Anadarko was part of the contractor group on the Jubilee and TEN fields from inception through a locally registered subsidiary, Anadarko WCTP Limited.
In 2019, Anadarko sold its global assets to Occidental (Oxy). Shortly after, Oxy began the disposal of non-core assets worldwide to reduce its debt. In Africa, a portfolio of assets in Ghana, Algeria, Mozambique, and South Africa was affected. In 2020, Oxy negotiated the sale of the Africa assets to Total Energies (Total).
However, the Ghana Revenue Authority (GRA), as part of the exit negotiations and approval process, demanded a capital gains tax of about $500 million. In Algeria, authorities demanded that the national oil company exercise its pre-emption rights over the assets, which blocked Total’s acquisition of the Algeria asset.
Eventually, Total purchased the assets in Mozambique and South Africa, with Ghana and Algeria bogged down by tax claims and pre-emption rights challenges, respectively.
Subsequently, Oxy decided to hold on to the Algeria assets and reengage the market for the Ghana assets. Kosmos Energy opted for the assets and concluded negotiations on a purchase price of $750 million for Oxy’s interest in Jubilee and TEN fields in April 2021. This time, GRA settled on investment gains tax after it became contractually untenable to exact capital gains tax. The ministerial approval for the transaction was delayed until early October 2021.
As part of negotiations and Kosmos’ quest for regulatory clearance, the company made three important concessions post its negotiation with Oxy;
1. Ceded 7% of the participating interest of Oxy to GNPC on both fields at the price of about $200 million.
2. Committed to training GNPC’s staff in furtherance of the Corporation’s effort to become an operator.
3. Debt settlement of $16 million, about half of GNPC’s debt to Anadarko on behalf of the Corporation. ACEP believes that this is a compelling acquisition based on the data and process of valuation adopted by Kosmos to protect shareholders’ interest.
The negotiated price of $750 million represents a reserve valuation of about $5.2/barrel, achieved through a 2P reserve audit conducted by Ryder Scott, an independent reserve auditor.
This was similar to what CSOs demanded of GNPC and Parliament of Ghana on the proposed Aker transaction, rather than the unaudited estimates of the seller, used for the many valuations at about $8.3/barrel before development investment.
In addition, Kosmos estimates a short payback period of three years at $65/barrel and maintains resiliency at $45/barrel. Additionally, the two fields are already in production and provide immediate cash flow and eliminate much of the uncertainties associated with undeveloped assets.