The Ministry of Energy has chastised Alex Mould, a former chief executive officer of the Ghana National Petroleum Corporation (GNPC), for making “dishonest” comments relating to government incentives in the nation’s petroleum agreements with Aker Energy and AGM Petroleum.
In a statement signed by its head of communications and public affairs, Nana Damoah, the ministry questioned Mr Mould’s position on the effect of the Aker Energy and AGM Petroleum agreements, particularly as GNPC under his watch granted incentives to ENI’s Sankofa gas project.
The statement says the amendments to the agreements with Aker Energy and AGM Petroleum were to provide “regulator certainty” to support the realisation of Aker’s Pecan project and “incentives” to increase investment in the AGM block.
The ministry said both investments have already yielded positive results for the country, as AGM recently announced crude oil discoveries following an accelerated drilling campaign.
It explained that the incentives will also increase oil production, create job opportunities and add value to the Ghanaian economy.
Mr Mould issued a statement claiming that the Energy Ministry has caused vast damage to the country’s oil and gas sector stretching into the long term, arguing that the amendments to the agreements with Aker Energy and AGM have far-reaching consequences for Ghana’s oil and gas industry.
Some of these consequences, he said, include strangling state policymaking, state regulation and state commercial participation in the upstream oil and gas sector; collapsing local content development; and imposing certain critical obligations on the Minister of Energy which are regulatory in nature and compel him to accept use of FPSO technology as the only option for producing the resources held in the AGM block.
Other constraints, Mr Mould said, include compelling the Minister to accept the contractor’s delineation of the area to be included within a “development and production area” in the Aker block; allowing Aker within a year of its “final investment decision” to vary the approved development plan unilaterally, without reference to the Minister; and giving contractors unfettered discretion over oilfield procurement without recourse to the Petroleum Commission or any other governmental authority.
However, the Energy Ministry says, Mr Mould published factual errors to mislead the public.
The ministry’s statement says his claim that the amendments compel the government to accept FPSO (floating production storage and offloading) as the development technology is factually wrong. It explains that the amendments only stabilise the framework for evaluating the FPSO, assuring the contractor that any FPSOs being evaluated will be subject to the current evaluation criteria.
The ministry further urges Mr Mould to acknowledge that FPSO is the most realistic development option at such water depths. The Pecan field lies in ultra-deep waters of between 2,400 and 2,700 metres in the Tano Cape Three Points bloc, about 115 kilometres out from the Ghanaian coastline.
The ministry further says Mr Mould shows a lack of appreciation of the fiscal stabilisation provisions specified in the original agreement, which sets out the type and number of taxes the contractor shall be required to pay.
The statement notes that in “Article 12.1, the Petroleum Act provides: ‘No tax, duty, fee or other impost shall be imposed by the state or any political subdivision of the state on contractor, its subcontractors or its affiliates in respect of activities related to petroleum operations and to the sale and export of petroleum other than those provided in this article.’ ”
It stresses that the “withholding tax of rate of AGM, which Mr Mould described as zero, is factually inaccurate . . . it is 5 per cent as stated in the PA amendment”.
The ministry’s statement adds that Mr Mould’s idea about “unfettered discretion” is curious, given that Regulation 40A (2) mandates the contractor to submit the approved annual work programme and budget to the Petroleum Commission for final approval.
“It is important to state that in the amendments of the AGM petroleum agreement, we negotiated a higher net gain for Ghana. We reduced our commercial paid interest and subsequent exposure of GNPC but raised the free carried interest of the state,” it says.