A former Managing Director of Ghana Oil Company Limited (GOIL), Mr Yaw Agyemang-Duah, has described the selection of the local downstream petroleum company to partner ExxonMobil to undertake full-scale exploration of oil in Ghana’s West Cape Three Points in the Western Region, as one of the best decisions to be taken by the government.
According to him, the move fell in line with the vision of the shareholders and the government in general to make GOIL one of the foremost local indigenous players in the petroleum sector of the country.
In an interview with the Daily Graphic following the publication of the story about the no-objection letter from the sector minister regarding the choice of GOIL, Mr Agyemang-Duah said: “the selection has unveiled an opportunity for GOIL to become more formidable and stronger in its business area and to venture into new areas where it can return more to its shareholders, key among them being the government which holds the shares in trust for the good people of Ghana”.
“The concerns raised about the selection with regards to the fact that ExxonMobil may buy GOIL out, is neither here nor there, because knowing the value of the stake it holds now, I do not foresee any such thing happening”, he said.
He said as a dominant player in the downstream sector, GOIL was capable of doing business upstream.
“This decision brings in its wake the opportunity for retraining and job creation avenues among other things and that is why we should embrace it”, he said.
Mr Agyemang-Duah also noted that the move would also bring to rest, the various attempts by some lobbyists who wanted that opportunity.
He commended the past and present management and staff for steadfastly holding onto the vision of the company and ensuring consistent growth over the years.
“I also commend the government for being bold and open with its decision and I know that the company will succeed”.
The government, through the Minister of Energy, issued a no-objection notice after the global oil giant had selected GOIL to be its local partner as per the Local Content Laws of the country.
Some experts have confirmed to the Daily Graphic that the entry of ExxonMobil, which is said to have the world’s best and sophisticated equipment to undertake deep-water exploration, will help the country to boost its oil production from the present 180,000 barrels per day to about 1.5 million in about three years, ramping up to a peak of about 3.5 million barrels per day afterwards.
In what is expected to completely change the financial fortunes of the country, the selection of ExxonMobil by the government has been hailed as a positive step in view of the clout of the company.
ExxonMobil Corp signed a deal with Ghana towards the end of January this year to explore for oil in the Deepwater Cape Three Points (DWCTP) oil field.
The signing followed direct negotiations between Ghana and ExxonMobil without an open competitive tender due to the nature of the field where the depth ranges from 2,000 to 4,000 metres.
Ghana began commercial production of oil from the Jubilee reserves in late 2010.
Presently, companies drilling in the same area include Tullow Oil from the United Kingdom and Kosmos Energy from the United States of America (USA).
ExxonMobil, the lead operator in the field, holds an 80 per cent interest in the DWCTP, while the state-owned Ghana National Petroleum Corporation (GNPC) holds 15 per cent.
The agreement is subject to approval by Parliament, which resumed sitting last Tuesday, and it is expected that the agreement will be considered to enable Exxon to start exploration this year or early next year.
How Ghana will benefit
At the signing, it was announced that 15 per cent initial interest in all petroleum operations under the Petroleum Agreement shall be given to the GNPC.
The state-owned company does not pay for its initial 15 per cent under the agreement.
ExxonMobil will pay for the shares of the GNPC and, therefore, ExxonMobil will not make any cash calls on the GNPC in respect of its stake. This simply means that this is an agreement in which the people of Ghana own 15 per cent, but will not be expected to contribute at least 15 per cent of the cost of exploring and producing oil because Ghanaians are sovereign owners of the resource.
The life span of the production in this agreement is 25 years, after which it reverts to the GNPC.
In addition to the initial interest of 15 per cent, GNPC shall have the option to acquire additional paying interest of up to three per cent in each development and production area of petroleum operations.
Royalty / tax payment
The government is given 10 per cent of the gross production of crude as royalty. However, it can choose to collect this in cash. The state is entitled to 35 per cent of profits under this petroleum agreement, pursuant to the Petroleum Income Tax Law. Simply put, Ghana will tax ExxonMobil 35 per cent on profits made after drilling oil.