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Is ExxonMobil contract really the best deal?

  • SOURCE: the finder.com | Isaac Aidoo
  • AN excited Boakye Agyarko, Ghana’s Energy Minister had on the day of the signing ceremony described the deal with ExxonMobil as “amongst the best compared to other petroleum agreements signed in the past.”

    In spite of some major commitments sought from the supermajor in favour Ghana painstaking scrutiny of the agreement, and comparison with earlier agreements with existing players in the country’s oil and gas sector hardly reveal the best deal.

    In terms of Carried Interest (CI), Paid Interest, Royalty and Surface Rental among others, all of which are revenue sources to Ghana, Policy analysts maintain that the ExxonMobil agreement could have promised more.

    Carried Interest (CI)

    Before ExxonMobil’s 15 per cent carried interest, ENI had already made the 15 per cent so they are, at best at par.

     

    Paid Interest

    For the Jubilee Partners prior to Ghana’s discovery of oil their paid interest was 3.64 per cent while Tweneboa-Enyenra-Ntomme (TEN) and ENI were 5% each. For Springfield, its new discovery has a paid interest of 17 per cent while the existing well is paying 5 per cent. ExxonMobil has the lowest of 3 per cent.

     

    Carried and Participating Interest (CAPI)

    A combination of the Carried and Paid interest will give the total government stake in the operations of the companies known as the CAPI.

     

    Oil Company

     

    CAPI (%)

     

    Jubilee Partners

     

    13.64

     

    TEN

     

    15

     

    ENI

     

    20

     

    Springfield

     

     

    New: 28

    Existing: 13

     

    ExxonMobil

     

    18

     

    So in terms of stake of government in the different agreements, Springfield was the highest, then ENI before ExxonMobil.

     

    Royalties

    In terms of royalty, ExxonMobil is not the highest (10 per cent), rather, Springfield comes up with 12.5 per cent, Jubilee Partners and TEN give 5 per cent each while ENI gives 10 per cent at 1,312 feet and 7.5 per cent at depths beyond 1,312 feet.

     

    Corporate Income Tax (CIT)

    The Tax is the same (35 per cent) across all the players, including ExxonMobil.

    Surface Rental

    The determination of surface rental fees is subject to the parties involved in the negotiations.  When compared with previous agreements, especially that of Springfield, the ExxonMobil deal is not better but at par.

    Capital Allowances: ExxonMobil deal contravenes E&P law

    Capital allowances are opportunities companies get to recover their costs before they come into tax paying positions.

    Article 12.5 of the agreement allows ExxonMobil to recover its cost over 10 years.

    This appears to over-ride the provisions of Section 67(6) of the Petroleum Income Tax Law and its rationale. Per the provisions of the law, capital expenditure shall be recovered over a period of five years and recovered at 20 per cent a year.

    According to Dr Manteaw, per what is contained in the agreement between Ghana and ExxonMobil, “we have used the agreement to vary the provisions of the law by extending to over 10 years.”

    ExxonMobil is a renowned global leader in the oil and gas industry and the world’s largest publicly held oil and gas Company.

    The agreement with ExxonMobil is yet to receive Parliamentary ratification.

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