Companies currently party to agreements in Ghana include Tullow Plc, Kosmos Energy, ENI, Lukoil and Hess.
The latest to join the wagon is super major, ExxonMobil Corporation, which is the world’s largest publicly traded international energy company.
Last week, the oil giant signed an agreement with Ghana to explore for oil in the Deepwater Cape Three Point offshore (DWCTP) oilfield.
ExxonMobil will, per the terms of the agreement (subject to parliamentary ratification), hold 80 per cent interest as operator while Ghana’s National Oil Company, the Ghana National Petroleum Corporation (GNPC) holds 15 per cent interest.
ExxonMobil has committed to working with government to identify a local partner to potentially hold up to 5 per cent interest.
This was the first time the public was invited to witness the signing of an agreement.
Exploration activities, including the acquisition of seismic data and analysis, are expected to commence later this year.
Refusal to grant waivers stalled earlier negotiations
The then government of the National Democratic Congress (NDC) refused to grant some waivers sought by ExxonMobil, hence the breakdown in negotiations.
This was after ExxonMobil had signed a Memorandum of Understanding with government in April 2015 to assess the Deepwater Cape Three Point (DCTP) region.
Negotiations were thus suspended. The oil giant was demanding waivers over tax and some foreign exchange rules.
New government invites ExxonMobil, ready to grant waivers
Upon assumption of office, the ruling New Patriotic Party (NPP) went back to the negotiation table and made some overtures to the oil giant.
Minister of Energy, Mr Boakye Kyerematen Agyarko at the signing ceremony communicated government’s readiness to gave in to demands from ExxonMobil.
“The Bank of Ghana has agreed to grant them a waiver but then it’s important to note that the other players in the industry are all operating without those restrictions,” Mr Agyarko stated.
GNPC signs MOU with ExxonMobil
On September, 14, 2017, the GNPC signed a Memorandum of Understanding (MOU) with ExxonMobil for Exploration and Production rights over the Deep Water Cape Three Points Block.
That MOU formed the basis for negotiations for the Petroleum Agreement which was signed recently.
The agreement between Ghana and ExxonMobil was reached through direct negotiation. Government in October, 2017 found comfort under section (10) subsection (9) of the Petroleum (Exploration and Production) Act, 2016 (Act 919) and published a notice of direct negotiation with ExxonMobil.
The notice gave reasons for the direct negations as ExxonMobil having the relevant technical expertise and sound financial capability with access to both capital and project finance for exploration and production of oil in that location- DCTP.
“Ultra–Deep Water exploitation is beyond the reach of current technology, therefore IOCs with strong Research and Development capability such as ExxonMobil are needed to develop future technology to unlock UDW exploitation potential,” the notice stated.
One other reason for going into direct negotiation is that Ghana is one of the few African oil producer countries without the presence of a super major and ExxonMobil’s entrance into Ghana would validate the country’s hydrocarbon potential.
Experts describe reasons as untenable
Some oil experts and analysts have indicated that even though government’s reasons for opting to negotiate directly with ExxonMobil could be necessary, they are far from sufficient to justify a non-competitive tendering process.
Policy analysts, Dr Steve Manteaw observes that the notice of negotiation touts the expertise, track record, technological acumen, financial capacity of Exxon Mobil, but “these do not necessarily suggest that Ghana will get the best offer from the company – it is only when they are pitch against similar size companies such as BP, Shell, Aker, Chinese giants etc. all of which have capacity to work in ultra-deep waters, that they will offer greater value.”
According to Dr Manteaw, “a major risk associated with direct negotiation is that, it gives room for elite capture.”