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Pricing Of Jubilee Oil


…And KOSMOS Worst

By J. Ato Kobbie, Managing Editor

Even before the actual selling price of Ghana’s first cargo of crude oil from
the Jubilee Field is known to the last dollar at the close of business on
Wednesday, March 16th, The Business Analyst can state that the Ghana National
Petroleum Corporation (GNPC) got the best deal from all the cargoes lifted from
the field, with Kosmos Energy being the worst performer.
The national oil company is expected to rake home for itself and the country
around $0.20 as premium on each of the 995,259 barrels of crude oil that Vitol
SA and Cirrus Energy lifted on its behalf on March 9, 2011.
The worst deal so far, has come from Kosmos Energy, who sold the second Jubilee
Oil cargo of 989,360 barrels lifted by Trafigura on January 20, 2011 to an Exxon
refinery at a discount of $2.00 to dated Brent.

Although the first cargo of 649,064 barrels of crude from the Jubilee Field,
jointly owned by Tullow Ghana Limited and the EO Group, was lifted by Vitol SA
on January 5, 2011 and sold at a discount of $0.50 to dated Brent, against the
backdrop of that being the maiden supply that was not surprising.
This paper gathered that the pricing formula agreed among the Jubilee partners
provided for a $2.50 per barrel discount as the worst case pricing scenario for
the maiden cargo, which went to Tullow Oil.

This was because of the uncertainties and risks associated with first cargoes,
even though the gravity of the Jubilee Oil at 37 API puts it in the top range
and should ordinarily attract a premium over Brent crude price.

Anadarko, which lifted its own cargo, together with that of Sabre Oil and Gas on
February 9, 2011 got the second best deal, selling at a premium of around $0.10
p/b to dated Brent on the 996,708 barrels it sold.
With world crude oil price hovering above the 100-dollar mark, the corporation
has already announced at a press conference that it expected not less than
$110-million from its high grade cargo, if the pricing trend that prevailed at
the time of lifting continued.

The corporation has promised to disclose the actual price, which would be
computed on a five-day Brent average after the March 9lifting date, plus the
negotiated premium.

The end of the first round of lifting of crude oil from the Jubilee Field, and
expected revenue, has already brought to the fore questions of transparency and
the need for vigilance as the partners have been reluctant to disclose
information regarding how much they are selling the product.
Until the national oil company disclosed at a press conference it held last
week, disclosing who had lifted what cargo and for whom, information related to
the earlier transactions, such as quantities and pricing, had not been

Even though GNPC drew the veil off the quantities and trading companies that
lifted on behalf of the partners, the national oil company fell short of
disclosing how much exactly each cargo was sold for.

Article 11.7 of the Petroleum Agreement, spells out pricing of crude oil from
Ghana’s oilfields based on Market Price and Article 11.8 requires that
contractors who lifted crude oil (in this case the Jubilee Partners), ‘shall
notify GNPC of the market Price determined by it for its respective lifting
during each Quarter not later than thirty (30) days after the end of that
Where there is discrepancy in the Market Price, the parties would reconcile to
arrive at the standard price.

Ghana’s expected tax revenue from its oil resource is to be computed on the
excess of revenue over a threshold that allowed for the partners to recoup their
investments over a stipulated period (about five years).

The higher the price realized from the crude oil sold, the higher the investment
recovery rate and the more taxes that would accrue to the state and vice versa.


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