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PRESS STATEMENT: ACEP’S ALLEGATIONS ARE FALSE

GNPC1In the last few days there has been considerable media discussion of an undated statement issued by the Africa Centre for Energy Policy (“ACEP”) and signed by its Executive Director, Mohammed Amin Adam.   The statement was titled ‘Parliament Must Scrutinize Petroleum Agreement Between Ghana and AGM Petroleum Ghana Limited by Cabinet before Ratifying it-ACEP’.

In  the  statement,  ACEP  offers  the  public  a  critique  of  the  Petroleum  Agreement  between  the Government of Ghana, the Ghana National Petroleum Corporation, GNPC Exploration and Production Company Ltd and AGM Petroleum Ghana Ltd. for exploration of the South Deep Water Tano (“SDWT”) block.  Cabinet approved this Agreement on Thursday, August 16, 2013.  The parties will execute this Agreement in the coming months and then seek Parliamentary ratification as required by the Constitution. ACEP says this Agreement “stinks badly and must not be allowed to pass without serious parliamentary scrutiny.”

We at GNPC are conscious that we manage public petroleum resources and that we are accountable to the public for our performance.  We welcome criticism, however harsh, that highlights our challenges and that helps to improve our performance. We acknowledge that honest and well-informed people may interpret  facts differently and we respect those who disagree with  us.   The ACEP  allegations however are sensational, non-factual and scandalous. We would like to set the record straight.

ACEP’s  first  substantive  allegation  is  that  AGM Petroleum  Ghana  Limited  (“AGM”)  has  neither the technical nor financial capacity to manage a deep-water block like the South Deep Water Tano block.  It describes AGM as “an unknown company in the global oil and gas industry and with no upstream experience …”.    It says that “…[AGM’s] parent company Minexco Petroleum also has no experience in deep-water exploration and won its only oil block in Sierra Leone (SL-07A-10) in 2012.”  ACEP claims “[its] investigations into the operations of AGM Petroleum further shows that it has no known record of raising as much capital as may be required for exploring and developing one of Ghana’s deepest oil block offshore Ghana”.

This allegation is false. As required by Ghana’s Petroleum Exploration and Production Law (PNDC Law
84), only companies registered or incorporated in Ghana can be parties to a petroleum agreement in
Ghana – hence the creation of AGM Petroleum Ghana Ltd by its sole shareholder, AGM Gibraltar.
AGM Gibraltar’s shareholders are:

–     AGR Energy (49.5%), a Norwegian company within the AGR Group, which is listed on the Oslo Stock
Exchange
–     Minexco (OGG) Inc (48.0%)
–     MED Songhai Developers Ltd (2.5%)
The aforementioned shareholders demonstrated that they collectively have the technical competence and financial capability to participate in the SDWT Petroleum Agreement.

AGR Energy is the exploration and production arm of the AGR Group, which is a leading global supplier of services and technology to the oil and gas industry and has been in existence for more than 20 years.

The AGR group, as a contractor, has drilled over 500 wells in 22 countries in the last 10 years and holds the record for the world’s deepest well.  There aren’t many other independent E&P companies that can claim greater offshore operating experience or expertise. AGR will within the framework of the SDWT Petroleum Agreement and the Joint Operating Company provide leadership on all technical matters.

AGR Energy and Minexco OGG demonstrated to the satisfaction of GNPC and the Ministry of Energy and Petroleum that AGM will have no difficulty funding the agreed work programme, and that in the event of a successful exploration campaign the companies would comfortably be able to raise the resources required to undertake field development and production.

Furthermore, their financial capability is supported by the requirement to put in place a Performance Bond to cover their obligations. Med Songhai is a Ghana incorporated and Ghanaian-owned company. It is fully owned by Joseph Agyepong a prominent industrialist, who has demonstrated a willingness and ability to finance the company’s obligations under this venture.

ACEP’s second substantive allegation, which is that the process through which AGM was selected to be GNPC’s JOC partner “cannot pass the deal as genuinely seeking Ghana’s Interest [sic]”, is baseless.  In support of this allegation ACEP does not offer any substantive proof.  The fact that the SDWT block was once held by Aker Petroleum of Norway, which is indeed another accomplished offshore company, is irrelevant to the issue of due process. The claim that Ophir applied for the block unsuccessfully is also simply untrue. Ophir never applied for this block.

At no point does ACEP actually analyse the process through which GNPC selected AGM.  The process of selecting AGM was as follows.  GNPC’s strategy is firmly rooted in the ambition to move rapidly towards full independent operatorship and commercialisation. We sought to meet this ambition by taking on more commercial risk in selected blocks through a GNPC E&P subsidiary and building operatorship capability through Joint Operating Companies (“JOCs”) with world-class operators.   This strategy will increase the returns to GNPC and thus Ghana from any discoveries made, and will also place GNPC more directly in the role of Operator, with a better ability to direct procurement decisions in a manner that achieves national local content aspirations. GNPC decided to use the SDWT block as the first JOC-based petroleum agreement.

In April 2012, GNPC placed all available data and analysis about the SDWT block in an online data room where interested companies could review it for a period of 6 weeks.    The data room process enabled interested companies to make technical and commercial proposals for a company to partner GNPC to apply to the Government of Ghana to negotiate a Petroleum Agreement.  Information about the data room was sent to over 900 companies and individuals around the world.

Ten (10) companies actually reviewed the data online.  Three (3) companies submitted serious offers. GNPC met with all 3 companies to clarify the terms of their offers. GNPC evaluated all the clarified offers and concluded that on the whole the bid from AGM was superior to the other two offers in terms of the level of technical competence, the aggressiveness of the work programme, the highest returns to Ghana from a successful outcome and the most rapid holistic development of GNPC’s operational capacities.

We reported formally on this process and the qualitative and quantitative analysis of the outcome to the Ministry of Energy.   The Minister then convened the Government Negotiations Team, a body which included   representatives   from   the  Ministry  of  Energy   and  Petroleum,  the   Attorney   General’s Department,  the  Ghana  Revenue  Authority,  the  Petroleum  Commission  and  GNPC.       This  body negotiated the terms of the Petroleum Agreement with AGM and submitted a report to the Minister for Energy.   The Minister then submitted the draft Agreement to Cabinet in December 2012.   Cabinet considered and approved the Agreement on 16th August, 2013.  The process was at all stages within the framework of Ghana’s laws, competitive and transparent and we challenge ACEP to demonstrate any irregularity or betrayal of the national interest.

ACEP goes further to insinuate fraud on the part of GNPC and its partners in the SWDT block.   ACEP claims that “AGR Norway has no known interest specified in AGM Petroleum Ghana Limited”.   ACEP suggests that if AGR did have such an interest in AGM then AGR would have been the signatory to the petroleum Agreement.  ACEP demands to know “the role of AGR Norway in this apparent commercial confusion”.   ACEP suggests that there has been an attempt to misrepresent the nationalities of AGM shareholders and officers as Ghanaian and expresses concern “… over the potential abuse of the “Ghanaian Company” principle to justify a patronage system in our oil and gas industry”.

Again,  ACEP’s  allegations  are  baseless.     They  do  not  demonstrate  painstaking  research  on  and assessment of international oil and gas and indeed foreign investment practice. Rather they complicate what should be a straightforward and typical commercial transaction.

First, we have already described the shareholding of AGM (Gibraltar) Ltd.  There has been no effort to disguise the fact that AGM Petroleum Ghana Ltd is owned by its shareholders, through a Gibraltar incorporated company.  Such a misrepresentation would serve no purpose as it is common practice in international corporate structuring for local operating companies to be owned via intermediary holding companies in other jurisdictions.

Importantly, and as previously stated, Ghana’s Petroleum Exploration and Production Law (PNDC Law
84)  is  clear  in  stipulating  that  only  companies  registered in Ghana  can  be  parties  to  a  petroleum agreement.  Accordingly, “AGM Petroleum Ghana Ltd” was incorporated for this purpose.

Second, the AGR Group is publicly listed on the Oslo Stock Exchange. The Group’s interest in AGM Gibraltar is a matter of public record in Norway. It would be unlawful for foreign companies, including AGR Group, AGR Energy, Minexco or AGM Gibraltar to sign a petroleum agreement. The proper thing is for AGM Petroleum Ghana Ltd, the Ghana incorporated and registered company to do so on behalf of its parents to conduct petroleum operations in Ghana.

Third, it is simply not true that Mr. Gilad Mintzer is described in the company incorporation documents or otherwise represented to Government as a Ghanaian.  Again, there would be no purpose in such a misrepresentation.  Ghana’s Companies Act does not require that locally incorporated companies have Ghanaian directors.  It merely requires that one of the minimum two directors be present in the country at all times.  Nor does Ghana’s law require that a director or other officer of a company have an interest in that company. There is in fact no “Ghanaian Company” principle to be abused.
From the foregoing, ACEP’s assertion that the agreement “stinks badly” has no basis in law or fact. AGM is a serious, well-established Ghanaian entity set up to focus on petroleum operations in Ghana as required by law. Its leading member, AGR, is a world-class operator capable of transferring the requisite operatorship skills to GNPC in the shortest possible time. The terms of the agreement are difficult to match, as was seen in the outcome of the competitive bid.

We want Ghanaians to rest assured that GNPC, in partnership with the Government of Ghana, will always seek to ensure that Ghana attains the maximum benefit from its hydrocarbon resources. We therefore welcome Parliamentary scrutiny of the SDWT agreement as has been done for all petroleum agreements preceding it.

Signed:
Eric Pwadura: Ag. Head, Corporate Affairs

Source: Daily Graphic

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Reporting Oil and Gas project was launched on 4th June 2009atTakoradi, Western Region, Ghana by Penplusbytes (PPB – www.penplusbytes.org) with the vision of providing a one stop online information and knowledge about Ghana’s oil and gas sector
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