Parliament on Wednesday approved an offtaker agreement between the Ghana National Petroleum Corporation (GNPC) and the UNIPEC Asia Company Limited for the lifting of crude oil from the Jubilee Field.
The agreement is under the Master Facility Agreement (MFA) between Ghana and the China Development Bank (CDB).
Under the agreement, UNIPEC Asia Company would purchase and lift from GNPC, 13,000 barrels of Jubilee Crude Oil per day, amounting to five cargoes a year at a cargo size of 950,000 net US barrels.
In pursuance of Government’s agreement with the CDB, for three billion dollars to undertake various infrastructure projects in the country, the MFA requires government to enter into separate subsidiary agreements with the CDB for each project to be implemented under the loan facility.
The first subsidiary agreement for 850 million dollars for the financing of the Western Corridor Gas Infrastructure Project was approved by Parliament last week.
As part of the requirement for the draw down on the facility, the GNPC is to enter into an Offtaker Agreement with UNIPEC Asia Company Limited for the sale and purchase of Jubilee Crude and part of the proceeds paid into a special account at the Bank of Ghana (BOG) for the purposes of servicing the facility.
As a consequence, Government, the CDB, the BOG, the GNPC and UNIPEC Asia entered a Five- Party Agreement for the purpose.
As per the terms and conditions of the agreement, which has a tenure of 15 and a half years, the agreement could be terminated automatically if at any prior time to the expiration of the MFA, all outstanding amounts are irrevocably repaid in full and any outstanding commitment to provide financial accommodation are cancelled, or the seller has discharged in full its obligation in respect of agreed volumes to be delivered under the Offtaker Agreement.
The quality of crude to be delivered is the normal export quality grade of Jubilee Crude oil as available at the time of lifting at the Jubilee Terminal. The agreement provides for the GNPC to deliver the Jubilee Crude Oil to the buyer in bulk FOB (Free on Board) at the Jubilee Terminal on to a vessel provided by the buyer.
The Minority in a spirited debate for the approval of the agreement contended that it iniquitous for government to constitutionally collaterise the Ghana’s oil beyond 10 years because it contravened the dictates of the Constitution as contained in the Petroleum Revenue Management Act.
Dr Anthony Akoto Osei, Minority Spokesperson on Finance cautioned that the agreement could be detrimental to Ghana’s economic growth, saying, “This could be a potential come to harm us”.
He said the country was threading a dangerous path, committing its entire share of the Jubilee Oil to pay for the loan for 15 –and- a- half years.
“Mr Speaker, it is very serious and very shocking if you consider the volume of oil that is being put at stake in this agreement…It is unfortunate that the government is using 15 and a half years share of production out of the 20 years lifespan of the Jubilee Field under the agreement.
“The value of that commitment is not three billion dollars but over six billion dollars for the next 15 year….Mr Speaker We need to thread with caution”, he said.
The Jubilee Oil field is estimated to produce some 80,000 barrels a day, with 15 per cent of the quantity accruing to Ghana, translating into the 13,000 barrels a day, which is being committed to the agreement.
Dr Akoto Osei also questioned why, under the agreement, only one Chinese company would be given “all that amount of oil for such a long period”.
He also counselled the House to approve the five party agreement, as a precursor to the offtaker agreement, saying that he foresaw a situation where the House would be recalled for the approval of the agreement while on recess.
Mr Seth Terkper, a Deputy Minister of Finance and Economic Planning in replying to the debate almost irked the ire of the Minority when he stated that a precedent had already been set by the Legislature when it approved a similar loan agreement for the use of the country’s cocoa to secure a loan for the financing of the Bui Dam, insisting that some of the conditions under the Offtaker Agreement were similar to the one secured for the Bui Dam.
He described as erroneous the impression that Ghana was being short-changed by that agreement, maintaining that the benefits of that arrangement outweighed the period in which the agreement lasted.
“This is a very wise agreement since by the end of period it will generate enough funds for other projects”, he said.
Mr Osei Kyei-Mensah-Bonsu, Minority Leader, urged government to err on the side of caution in order not to jeopardise the country’s economic fortunes by rushing to sign the offtaker agreement, saying, “We ought to be careful, for the better we improve this agreement the better for Ghana”.
Deputy Energy Minister Emmanuel Armah-Kofi Buah, Deputy Minister of Energy, believed the agreement would enable government lay a very good foundation to address the gas infrastructural deficits of the country, adding that projects under the MFA would enhance the industrialisation process of the country.