Creating value for Ghana’s oil & gas resources: GNPC/AGM Petroleum Strategic Alliance
Across the globe, a debate continues to revolve around resource nationalism and the capacities required by countries to leverage these resources for their benefits. In Ghana, the same discussion is taking place under the watchful eye of a vibrant civil society and media that understandably show a vested interest in the country’s future. Similarly, Ghana’s government has, in very clear terms, indicated its resolve to ensure that the country is not shortchanged of the capital inflows to the economy.
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The passing of the Local Content and Participation Regulation, 2013 (LI 2204) is an indication of the strength of this national resolve. The regulation aims to empower Ghanaians and ensure the citizenry benefits from the country’s newly discovered resource. With the passing of this regulation, the Ghana government is determined to ensure the country gets value for its resource at all levels of the value chain.
Around the same time of the passing of the local content regulation, Parliament ratified a unique petroleum agreement between the national upstream regulator turned operator, the Ghana National Petroleum Corporation (GNPC), and AGM Petroleum regarding the South Deepwater Tano Basin. Formed in Ghana, AGM Petroleum is a consortium made up of Minexco (OGG) Inc, AGR Energy and an indigenous Ghanaian company, MED Shongai.
The uniqueness of the agreement can be seen in the focus placed on training and technology transfer through the establishment of programmes to prepare Ghanaians to work in the oil and gas sector. These include programmes that teach the management skills and technical expertise required for petroleum operations. EXPLORCO -- the joint operating company set up under the agreement to undertake the exploration and production activities -- will also serve as the vehicle for this training and technology transfer.
Ghana’s Parliament must be commended for its vigilant oversight: The constitution of the AGM consortium indicates that it is the first time two Ghanaian corporate actors are playing key roles in the oil and gas sector. Rather than allow foreign interests to supersede, Parliament placed the interest of the citizenry first, ensuring at the same time that a significant amount of technical expertise and financial capital could be leveraged for the development of the basin.
Several other aspects of the petroleum agreement are of immense national benefit. Aside from the fact that there are Ghanaian companies playing key roles as a result of the local content provisions being adhered to, the agreement also requires that goods and services be procured from indigenous Ghanaian companies, without any compromise of quality.
According to the Minister of Energy and Petroleum, Mr Emmanuel Armah Kofi Buah, the local content and participation regulation will “guarantee employment for Ghanaians in junior and middle-level positions, while requiring a succession plan for Ghanaians to take over positions currently occupied by non-Ghanaians.” This focus is clearly expressed in the structuring of the AGM/GNPC Petroleum Agreement.
An amount of $15 million will be paid to EXPLORCO for the specific purposes of undertaking capacity building for relevant tertiary institutions in Ghana, including KNUST and the University of Natural Resources and Energy. These funds are targeted at modifying the educational programmes of these institutions to bring them in line with the manpower needs of Ghana’s growing petroleum industry. Courses and skill sets critical to the petroleum industry such as subsea engineering and the construction of floating production storage and offloading (FPSOs) will be actively supported under the EXPLORCO initiative.
In order to facilitate the necessary training and technology transfer, AGM Petroleum is committed to paying GNPC an amount of one million dollars at the beginning of each contract year. Provisions such as this ensure that the AGM Petroleum agreement comes with financial and local content participation commitments which exceed those of any petroleum agreement Ghana has signed thus far. The result is an arrangement that serves the interests of the corporate investors as well as the nation.
In a press release, following the ratification of the Petroleum Agreement, Chief Executive Officer of the GNPC, Mr Alex Mould, stated that, “The agreement aligns with GNPC’s overarching goal of becoming a ‘stand-alone’ operator in seven years and a world-class operator in 15 years.” This presents an opportunity for GNPC to realise its objective of becoming a world-class national oil company by leveraging this joint operating agreement with AGM Petroleum.
The Campaigns Coordinator of the Integrated Social Development Centre (ISODEC), Dr Steve Manteaw, echoed the sentiments about the unique nature of the AGM agreement.
“The AGM contract is an improvement on previous contracts,” he stated. "What is reassuring is that (the contract) has an arrangement built into it that mentors GNPC into becoming an operator on its own. This you can't get for free anywhere." Dr Manteaw noted, and added that having AGR of Norway, a sizeable industry player, in the AGM consortium guaranteed that a significant number of industry expertise would be available.
When oil was first discovered in commercial quantities in Ghana, euphoria swept the nation. However, this was soon followed with caution and concern about whether the resultant extraction would favour the nation or simply profit foreign conglomerates. With positive developments such as the AGM Petroleum agreement, it is almost certain that the discovery of oil will be a blessing and not a curse for Ghana.