The Ghana National Petroleum Corporation (GNPC) is pulling out of a joint venture agreement entered into with Lushann International Energy Corporation (LIEC) of Houston which culminated in the incorporation of the Saltpond Offshore Producing Company Limited (SOPCL), Public Agenda can report.
Details of the underlying reasons are scanty but Thomas Manu, Director of Exploration and Production at GNPC, told this paper in an interview on Thursday that the pull out is a usual business decision. Asked whether the pull out is occasioned by non-profitability, Mr. Manu explained that the pull out will allow the GNPC to concentrate on its shares in the petroleum agreement.
Mr. Manu also explained that the pull out also means that the GNPC “will no more be taking the risks it took while it engaged in the joint venture”.
It is not immediately clear who the GNPC will offload its 45 percent share in the joint venture to. The GNPC has two levels of interest in the Saltpond field: a 15% carried interest by virtue of the petroleum agreement and a 45% share as per the joint venture agreement. The Government of Ghana, in addition, has a 3% royalty stake in the offshore field as provided in the petroleum agreement.
Reactions to the decision have been mixed. There are those who think the GNPC must come clear on the specific reasons for the pull out to avoid unnecessary public speculation. On the other hand, some see the pull out as a wise decision, arguing that the Field has not yielded much crude to be enthused about, and would rather that GNPC refocuses its resources and energy in more viable ventures.
The view of Mohammed Amin Adam, a petroleum economist, is that “The argument to de-risk the GNPC’s participation on the Saltpond license is understandable if the operations are not profitable or viable.”
He however observed what he describes as policy inconsistency in the decision, recalling that government’s policy on oil and gas has been to increase the nation’s interest in the petroleum sector.
He indicated, however, that he was pushing this line even though he is not oblivious of what pertains in other jurisdictions. “I know that Nigeria is considering moving out of these joint ventures to safeguard resources for national development financing.
They are thinking of a tax-based system. If Ghana is considering that, it will be good idea but the tax rates have to be reviewed upwards. In some countries, the tax rates are as much as between 70 and 80%, but it is 35% in Ghana.”
That notwithstanding, others have seen the GNPC’s pull out as laudable and perhaps belated because it was long known that the Saltpond field held little potential for Ghana. The low interest of many Ghanaians in the operations of the SOPCL and the lack of demand for accountability on revenues from the Saltpond field on the part of citizenry is an attestable fact to the unprofitability of the venture, some have argued.
Indeed, Mr. Manu says less than 1,000 barrels are being produced per day from the Saltpond field. As such it takes a long time for any crude to be lifted from the field. He could not recall when the last crude was lifted and how much accrued from it without the help of documents.
This is in contrast to how readily GNPC makes information on crude lifting and sales from the jubilee field available. In fact, a time-table detailing when partners would lift their share of the crude is available. The GNPC lifted its second consignment less than a fortnight ago.
Those who argue in favour of the GNPC pull out have also pointed to the low quality of crude that is being produced from the Saltpond field. Saltpond produces heavy crude that is considered difficult to refine.