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Ken Ofori-Atta caught sneaking Agyapa & GNPC-Aker deals into 2022 Budget

The 2022 Budget and Economic Policy Statement, has shaped up as the most dishonest financial document that this country has witnessed in recent time with the discovery that Finance Minister, Ken Ofori-Atta, had sneaked two controversial issues into the document to have them passed.

The two contentious issues; the Agyapa Royalties and the US$1.6 billion Ghana National Petroleum Corporation (GNPC), Norway’s Aker Energy and Ghana’s AGM, had been flagged by both the media, experts, as well as Civil Society Organizations (CSOs).

The Herald has gathered that proponents of the GNPC/ Aker Energy deal, had wanted the deal to be included in the Mid-Year Budget, but the finance minister refused.

The Minority side of Parliament led by the National Democratic Congress (NDC) said, they only gave policy approval for the GNPC to go and engage in negotiations with the prospective lenders, but not to burrow as has been captured in the 2022 budget by the Finance Minister.

The Chief Executive Officer (CEO) of the GNPC, Kofi KoduahSarpong, the Minister of Energy, Dr Mathew OpokuPrempeh and elements in the Akufo-Addo family, are desperately trying to have Parliament pass the deals in which the state stands to lose billions of dollars.

The Minority Leader,HarunaIddrisu in Parliament last Friday during the final debate on the Budget Statement and Economic Policy of the government for the year ending 31st December 2022, insisted that it was wrong for the Finance Minister to include the GNPC-Aker-AGM and the Agyapa deals, giving the impression they had been approved by Parliament.

He wanted both the GNPC-Aker-AGM and Agyarpa deal expunged for the 2022 budget statement, saying that was not the decision reached with the GNPC when it came to Parliament to seek the approval to go and negotiate.

On the Agyapa Royalties deal, the Minority in Parliament, was unwavering in its opposition against the deal, despite the government’s decision to restructure it.

The Minority Leader, said the Minority caucus was against attempts to re-lay the deal before Parliament, and explained that the Minority’s aversion towards the deal is inspired by the government’s attempt to collateralise Ghana’s resources as had happened to GETfund, District Assemblies Common Fund, the Road Fund among others.

“We will not support President Nana AddoDankwaAkufo-Addo to bring back to this August House that baby called Agyapa. Ey3 Agyaboni [to wit; it is a bad deal]. We will not accept it.”

MrIddrisu, said the negative effects of similarly collateralising the GETFund and Road Fund, offer enough reasons for the Minority to oppose the Agyapa deal.

“The reason why we will not support Agyapa is because of collateralising and securitisation [of the nation’s resources]. The NDC started collateralising the Road Fund. What has that led us to? Road contractors are not being paid [by the Akufo-Addo government], certificates are held for three and four years with this unacceptable regime, and you want to collateralise our resources? We say no. We will not accept it.”

The Agyapa Royalties deal, was proposed by the government last year to raise funds through mineral royalties for key infrastructure projects, but could not be passed after stakeholders rejected the deal.

The deal became a subject of hot debate after the opposition National Democratic Congress (NDC) and some stakeholders kicked against it.

The woes of the deal, was subsequently compounded by a 64-paged corruption risk analysis report released by the then Special Prosecutor, Martin Amidu.

The government subsequently suspended the deal.

On the GNPC-Aker deal, a fierce debate had erupted, following the announcement that the state hydrocarbon company was considering paying $965Million to purchase equity in two deepwater blocks from two European firms perceived, by some, to have ‘captured’ the country’s regulatory apparatus.

The deal was neither evaluated nor subjected to any form of forensic investigation to determine whether Ghana was getting value for money.

GNPC is in negotiation with Aker Energy and AGM, both Norwegian led companies, to acquire significant interests in Deepwater Tano Cape Three Points (DWT/CTP) and South Deep Water Tano (SDWT) blocks.

GNPC will acquire directly and indirectly 37percent of the Aker Energy stake in the DWT/CTP block and 70percent of the AGM stake in the SDWT block.

The Norwegians, had gone round the world in search of the investors, but did not get any company interested in the well.

But GNPC, strangely opted for the deal with its subsidiary Explorco, the operating arm of the GNPC, to inherit pre-acquisition development cost amounting to S$965Million as at June30, 2021, as a tax advantage (Capital Allowances), the company said in a presentation to the country’s cabinet.

GNPC together with officials of Aker Energy, moved about influencing journalists and Civil Society Organizations (CSO) including Mensa Thompson of Alliance for Social Equity and Public Accountability (ASEPA) and the Executive Director of the Chamber of Petroleum Consumers Ghana (COPEC Ghana), Duncan Amoah to support the controversial deal.

Evans Mensah of Joy FM, was mentioned as the one who led the payments of the monies to some of the CSOs.

Of this calculated pre-acquisition development cost, $811Million is the GNPC’s share of the costs incurred by Hess Corporation (previous operator of DWT/CTP) and Aker Energy, current operator of the block; $154Million is the GNPC’s share of the cost incurred by AGM so far in developing the SDWT block.

GNPC said it had analyzed the Transaction and has concluded that it “offers an opportunity for GNPC to acquire operatorship capacity to enable it play a major role as an Exploration and Production company.

“It will enable GNPC and Ghana to not only face the emerging Energy Transition in a well-prepared manner, but also create significant value for Ghana”, the state firm declares. The proposition is that GNPC will be partnering with Aker Energy and AGM to jointly develop the DWT/CTP and SDWT blocks, after forming a joint operator company with 40% GNPC Explorco and 60% Aker/AGM through a fund. The Joint operator company will hold 10% stake in each of the blocks. But a concert of civil society groups, numbering 15, and including such highly influential ones as Africa Centre for Energy Policy (ACEP), IMANI Centre for Policy and Education and Natural Resource Governance Institute (NRGI), collectively disagree with the terms of the transition and the very basis of the initiative.

Their concerns highlight a kind of dejavu. In 2019, Parliament, at the request of the executive, which itself was pressured by Aker/AGM, made extensive amendments to Ghana’s (Exploration and production) Act, 2016 (Act 919) and its regulations “to allow companies to hold on to contract areas at the Energy Minister’s discretion rather than automatically relinquishing part of exploration blocks as practiced before the entrance of Aker”, the group notes. The CSOs remind the public that in the 2019 event, “two Petroleum agreements were amended for Aker to limit the regulatory powers of the Petroleum Commission (PC) on the activities of the company and the participation of GNPC Explorco on the SDWT block was significantly reduced, with all such amendments captured in the law and regulations in the agreements”.

Tackling the numbers in the transaction specifically, the CSOs declare: “Aker claims it has invested about $800Million so far on the blocks in a document submitted to Parliament. While GNPC claims it has verified the expenditures, it still appears inflated if juxtaposed against the amount of work done by Aker and the value of its acquisition three years ago. Aker acquired Hess’s interest in the DWT/CTP for $100Million in 2018. Before selling its interest to Aker, Hess had appraised the field with estimated recoverable oil of 450Million barrels.

In total, Hess drilled 12 wells (seven exploratory wells and five appraisal well). With that amount of work done, the highest valuation Hess got was about $400Million in 2016 when it farmed out 40 percent to Lukoil and FuelTrade for the entire field. Akers claims it has spent about $420Million on five wells drilled on the two blocks. In another document presented to the country’s Economic Management Team (EMT), the $420Million relates only to the three wells on DWT/CTP.

Given that the DWT/CTP cost is shared among the partners of the block the total expenditure claims for the wells could be in the region of $600 or $750Million compared with $400Million by Hess for 12 wells, depending on which of the documents used. This is very high regardless of which of the information is used”.

The group then asks: Is it worthwhile, realistic—or even advisable—for GNPC to pay so much public money for the chance to become an “operator”? It answers its own question. “GNPC is attempting to convince Parliament that it will learn to become a world-class upstream operator through this acquisition. However, the structure of the transaction only makes GNPC Explorco a relatively passive “joint operator”, with limited opportunity to learn by doing.

“The proposals we have seen don’t accurately detail how Aker would transfer the needed skills, knowledge or technology into Ghanaian hands. Instead, it proposes setting up a Special Purpose Vehicle (SPV), which Aker will control with 60 percent interest, and GNPC Explorco will have 40 per cent. This structure cannot make GNPC the operator it wants to become as the SPV is not the same as Explorcoin the Petroleum Agreement (PA)”

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