The Minority in Parliament has urged the government to renegotiate the agreement on the Sankofa Oil and Gas Project signed between the Ghana National Petroleum Corporation (GNPC) and ENI/VITOL of Italy, claiming the country has been shortchanged in the deal.
It said the government negotiators poorly negotiated the agreement since the terms were skewed against Ghana and the contractors benefited.
The Minority again requested the Italian government, as the sole shareholder of ENI/VITOL, to meet with the Ghana government to renegotiate the agreement to enhance mutual cooperation and benefit.
Addressing the Parliamentary Press Corps in Accra yesterday, the Member of Parliament for Afigya Kwabre South, Mr William Owuraku Aidoo, said the incentives offered to ENI and VITOL neither obtained in other previous local agreements nor in similar international transactions.
“It is difficult to fathom the considerations that went into this agreement which by every standard is skewed, shoddy and appalling. The negotiators for the state perhaps did not have the requisite competence to deal with the contractors.
“It is safe to conclude, given the enormity of the matter, that some corruption might have influenced the negotiators to enter into such a bad agreement. Any of these does not exonerate the government and GNPC from blame. The government/GNPC-ENI/VITOL agreement simply stinks and it is difficult to comprehend why negotiators will subject Ghana to such a raw deal,” he said.
Mr Aidoo, who is also a member of the Mines and Energy Committee of Parliament, said the contracted provision of 20 per cent return on investment offered to ENI/VITOL instead of the normal 12.5 per cant was an unusually high rate for commercial transactions of that nature, especially as the government and GNPC assumed all the risk in the project.
He said another “overgenerous concession” that the state had offered to ENI/VITOL in the agreement was the at least $125 million tax incentive which Ghana was required to provide.
Besides, he said, GNPC was obliged to make additional upfront cash payment of $125 million in order to bail out the contractors in the event of a shortfall in revenue.
Mr Aidoo said the government was also obligated by specific provisions in the agreement to issue $100 million sovereign guarantee to pay for the shortfall in case GNPC also defaulted, indicating that “these risks are too high for the state and overexposes the country”.
Furthermore, he said, the World Bank and the International Development Association (IDA), at the invitation of the Ghana government, provided further partial risk guarantee cover of up to $700 million.
Mr Aidoo also said the Petroleum Revenue Management Act provided for the state to support the GNPC over a period not exceeding 15 years.
Gas priced too high
Mr Aidoo said under the agreement, GNPC was required to off-take 90 per cent of the total quantity of gas produced by the contractors at a guaranteed price of $9.8 million per British thermal unit (mmBtu).
He said if the cost of transportation was added, the price for mmBtu was estimated at about $12 million, which would make the gas produced in Ghana the most expensive in the world.
According to Mr Aidoo, the cost of developing the Sankofa Field by ENI/VITOL which had lesser proven reserve oil equivalence and which existed in shallower levels of about 2,706 feet came up to $7 billion.
That, he said, was higher than the $4 billion cost of developing the Jubilee Fields, the first oil discovery with more proven reserve oil equivalence and with a depth of 3,640 feet.
He said it appeared that the contract was bloated by between $2 billion and $3 billion “to the disadvantage of the state. In its present state the agreement, without any equivocation, stinks. It is a rip-off and cannot be allowed to stand”.
The Minority Leader, Mr Osei Kyei-Mensah-Bonsu, said he had drawn the attention of the Italian Prime Minister, Mr Matteo Renzi, during his recent visit to Ghana, to some sore points in the agreement.
He said he had called for the parties to reflect and reconsider some of the provisions in order to allow for the two parties to mutually benefit from the deal.