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Sankofa, Gye Nyame oil and gas project approved

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The Majority and Minority yesterday clashed over the approval of the resolution to provide fiscal support agreement and guarantee among the government, the Ghana National Petroleum Corporation (GNPC), ENI and Vitol in respect of the development of the Sankofa and Gye Nyame oil and gas project.

While the Majority called for the approval by the House, the Minority argued that time was not ripe for the immediate endorsement of the resolution.

Dr Anthony Akoto Osei raised an objection that he was part of a pending suit at an Accra court over an issue with the GNPC which was fixed for ruling in the morning and that the ruling might affect the approval. However, the Speaker, Mr Edward Doe Adjaho, ruled that any ruling on the case would not affect the House’s approval and therefore asked the Minister of Finance to move the motion for the adoption of the resolution.

Background

The government of Ghana, the GNPC and Heliconia Ghana Limited entered into an agreement in respect of the Offshore Cape Three Points Petroleum Agreement (OCTP) governing the OCTP oil and gas project in March 2006.

The current operator, ENI Ghana, was brought into the OCTP Petroleum Agreement (PA) in September 2009.

As part of the conditions for accepting the ENI farm-in, the GNPC successfully negotiated an additional five per cent participating interest in the licence on behalf  of the state, which increased the state’s working interest in the OCTP block to 20 per cent.

Between 2009 and 2012, non-associated gas discoveries were made by the GNPC and its OCTP partners in the Sankofa main Sankofa Gye Nyame fields with total estimated reserves of 1.15 trillion cubic feet. Oil was also discovered in Sankofa east with a reserve  of about 131 million barrels.

In May 2013, ENI declared, in accordance with a clause of the OCTP PA, that gas discoveries could be produced commercially and that given the proximity of the gas discoveries, the contractor proposed that the gas discoveries be jointly developed by the OCTP contractor.

Pursuant to the agreement, ENI and Vitol commenced discussions with the GNPC on an appropriate gas price and other contractual arrangements for the disposition of the gas.

Importance of project

Due to the strategic importance of the project to the economy, and given the limited reserve, the government requested the OCTP partners to sell the gas on the domestic market to meet the country’s increasing energy demand in line with the agreement.

As part of the negotiations, the GNPC is expected to provide security to give comfort to the investors about GNPC’s readiness to buy and pay for the gas. A gas sales term sheet, heads of agreement and security arrangements, including a World Bank partial guarantee and a sovereign guarantee were proposed by ENI/Vitol and negotiated with the government, to support GNPC’s performance and payment obligations under the proposed project.

Benefits of the project

Highlighting the possible benefits of the project, the Minister of Energy and Petroleum, Mr Emmanuel Armah-Kofi Buah, explained that the development of natural gas reserves from the Sankofa-Gye-Nyame field would generate an estimated revenue of US$11.115 billion to the state over the 18-year OCTP project life.

According to the minister, the state is also expected to make significant savings of an estimated sum of US$ 5.1 billion from gas price reduction from GNPC proposed investments in the pipeline and receiving facilities.

He said the project would help create employment opportunities from the new gas business, position the country as a regional hub for energy supply through the development of a robust power sector and also assist in the development of the requisite institutional capacity needed to manage a gas system.

More revenue

This will bring the gas price to US$8.075 per one million British thermal unit (mmBtu), leading to estimated savings of about US$2.0 billion to the state.

The Btu is a standard unit of measurement used to denote both the amount of heat energy in fuels and the ability of appliances.

The joint committee said upon additional investment of the US$193 million in 2016, a further expected reduction in the gas price to US$7.0135/mmBtu would be obtained, representing an estimated amount of US$3.1 billion in savings which would be channelled into other critical areas of the economy for speedy socio-economic transformation.

The Minister of Finance, Mr Seth Emmanuel Terkper, who moved for the adoption of the resolution, described the project as about the largest in Ghana and one of the biggest in Africa.

Divergent opinions

The Ranking Member for Mines and Energy, Mr Kobina Tahir Hammond, who is the member for Adansi Asokwa, who seconded the motion for the adoption of the report, said the project was started in 2006.

Dr Anthony Akoto Osei, the Ranking Member for Finance, cautioned the House that since it took Cabinet about two years to present the deal to Parliament, the House should not to rush into approving it but should take its time to carefully scrutinise it.

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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