RECENT MEDIA DISCUSSIONS ON GNPC AND JUBILEE OIL
19TH JULY, 2012. ACCRA
In the past weeks , the media has published allegations about the Ghana National Petroleum Corporation attributed to senior public officials speaking on platforms organized by the Extractive Industries ‘Transparency Initiative and Star Ghana or to IMANI Ghana. The published allegations are that:
We wish to respond formally to these allegations and set minds at rest.
GNPC ACCOUNTABILITY TO PUBLIC AUTHORITIES.
It is completely inaccurate to state that GNPC does not render accounts to the state for oil revenues . GNPC is in compliance with our statutory reporting and accountability obligations.
In 2011, Parliament allocated US$207.96 million from Petroleum Revenues to GNPC. During the 2012 budget hearing. GNPC accounted to Parliament through the Honorable Minister for Energy and the Honorable Minister for Energy and the Honourable Minister for Finance and Economic Planning on the use of these funds as follows-
“US$132,484,815(or 63.7%) went to repay part of the money. GNPC borrowed from the Jubilee partners to pay for our US$165.8 million share of field development costs incurred since 2008.
“US$30,315.185(or 14.6%) went towards the acquisition, processing and interpretation of 2,612km of 3D Seismic. Data for the Southwest Deep Tano Block.
“US$28,119,624 (or 13.5%) was used in fabrication and installation of 14km of deepwater pipeline as part of the Natural Gas infrastructure.
“US$7,661,475(or 3.7%) went to staff costs.
“US $9,383,204(or 4.5%) went towards General Operational and Administrative Expenditure.
These receipts and expenditures are captured in detail in our 2011 financial statements currently undergoing external audit. Our 2011 external audit is behind schedule because it took us some time to work through some of the accounting policy impacts of the 2011 Petroleum Revenue Management Act- and not because we are reluctant to account for these monies .
Once the audit is concluded we will circulate our accounts as required by law.
GNPC DIVIDEND AND PAYMENTS
It is completely incorrect to allege that GNPC withholds revenue from the Government. This reflects a misunderstanding of the working of the PRMA. The practice has been that GNPC does not directly retain any revenues from the participating interest in Jubilee production. Rather GNPC hands over 100% of the gross revenues to the State. The State then cedes such funds as Parliament considers necessary to cover GNPC ‘s share of development and production costs , annual administrative costs and its long-term capital needs. GNPC therefore has no discretion over dividend payments because this would mean that GNPC would not have the resources required to execute the projects Parliament and the Executive have approved.
JUBILEE PRODUCTION PROSPECTS
Contrary to IMANI‘s pessimistic assessment, the Jubilee field operations have been competent .Jubilee has delivered industry-leading operational and safety performance .The field was brought on-stream in record time and within budget. It has a record of 98% uptime and has suffered no lost time incidents. Production has been lower than originally projected. Both GNPC and Tullow the operator have offered truthful public explanations for the decline in production and explained the remedial works underway to reverse this decline.
Also contrary to IMANI’s claims, the jubilee team’s production projections for end -2012 and beyond are scientific and consistent with the results of the remedial works conducted so far and the pace of phase 1A development. The jubilee team has completed remedial work on three on three of phase 1 production wells and brought them back on-stream at increased rates and at reasonable costs. The jubilee team plans to conduct similar remedial work on three more wells this year .The jubilee team has also drilled two new phase 1A production wells and one injection well. We will produce from these new wells in the last quarter of 2012.
In the first half of 2012 ,jubilee produced an average of about 63,000bopd.Jubilee is currently producing at the same average rate even though at any particular point in time one well is off-line undergoing remedial work .As these wells and the new Phase1A wells are brought on-stream we expect jubilee production to peak at 90,000bopd by the end of the year and to achieve an annual average of between 70,000 and 80,000 bopd for 2012 .We expect to ramp up to plateau production of 120,000 bopd in 2013.
JUBILEE DEVELOPMENTS COSTS
IMANI alleges that the original jubilee development costs are abnormally high .IMANI seeks to demonstrate this by comparing jubilee costs to the costs of what they claim are comparable developments in Brazil and Angola .IMANI is misinformed .The comparisons they make are superficial and simply unscientific.
Development cost are not the same across time or place .For example when oil prices are high ,development activity increases and there is greater competition for equipment and services thus driving costs upward .When prices are low ,activity falls and there is a lot idle capacity available creating a buyers’ market .The Jubilee field was developed between 2009 and 2011 when oil prices were at an all time high consistently exceeding US$70per barrel and often above $100 per barrel for prolonged periods. Rig rates during this period ranged fromUS$440,00-US$650,000/day with aggregate daily drilling costs(‘’spread rates’’)around US $1Million per day .By contrast ,Angola’s Girasol Field development commenced in July 1998 and Brazil’s Roncador was discovered in October 1996 with production commencing in 1999 .In this period ,oil prices averaged about US$20 per barrel and rig day rates were about US$200,000 per day.
Further development costs depend on the physical availability of oilfield equipment and services in the area of operations .Obviously ,the further one has to transport equipment ,materials and experts the higher the cost of the operation are likely to be. Again, Brazil and to a large extent Angola had mature oil and gas industries at the Roncador and Girasol were developed.
To a large extent equipment, material s and labor for these developments were available locally .By contrast, nearly everything and everyone had to be imported over long distances for jubilee development. Again comparison is unreasonable .To use Girasol or Roncador as benchmarks for jubilee is simply unprofessional.
IMANI’s analysis of Jubilee Phase1A project cost is informed by wrong information and wrong extrapolation from inadequate information .They could have spread themselves and the public some anxiety by simply asking GNPC for the correct information and challenging us to explain before going public .Our doors are always open for constructive discussion about the oil and gas industry in Ghana.
We wish to assure the public that we take our responsibility to inform and engage with stakeholders very seriously .We understand that with the commencement of production, public demand for information and analysis about the sector has grown exponentially. We regularly respond to information and presentation requests from journalists and civil Society Organizations (CSOs).We make presentations to industry, Labour, Communities and civil society. We supported this year’s New Year School platform for engaging a very wide spectrum of national opinion leaders .We participate actively in the Extractive Industries Transparency initiative committee through which information is available to civil society stakeholders and the Ghanaian Public’s a national oil company ,we see these engagements as central to our core mandate.
Corporate Affairs Department
Ghana National Petroleum Corporation