ExxonMobil to start oil exploration at Cape Three Points

The stage is almost set for the world’s biggest deepwater oil company, ExxonMobil, to begin full-scale exploration for the black gold in Ghana’s West Cape Three Points in the Western Region.

This follows a no-objection notice from the government after the global oil giant had selected the Ghana Oil Company Limited (GOIL) to be its local partner, as per the Local Content laws of the country.

Although not officially confirmed, some experts have confirmed to the Daily Graphic that the entry of ExxonMobil, which is said to have the world’s best and sophisticated equipment to undertake deepwater exploration, will help the country drastically boost its oil production from the present 180,000 barrels per day to about 1.5 million in about three years, hitting a peak of about 3.5 million barrels per day afterward.

No-objection notice

A letter signed by the Minister of Energy, Mr John-Peter Amewu, on October 19, 2018 to that effect and sighted by the Daily Graphic in Accra said: “I refer to your letter dated October 8, 2018, on your preferred indigenous Ghanaian companies for the purpose of fulfilling the condition for the full execution of the agreement over the Deepwater Cape Three Points Block.”

“The selection of an indigenous Ghanaian company as a partner in a petroleum licence is a requirement by law specifically provided for in Regulation 4(2) of LI 2240 and states as follows – There shall be at least five percent equity participation of an indigenous Ghanaian company other than the corporation to be qualified to enter into a petroleum agreement or a petroleum licence,” it added.

The letter further stated: “I have taken note that the Ghana Oil Company Limited is one of your preferred companies, having met the requirements of your very rigorous due diligence. The LI 2240 further provides in Regulation 4(4) that ‘For the purposes of Sub-regulation (2), the minister shall determine the persons qualified’.

“In exercise of my mandate, therefore, I wish to inform you that I have no objection to the selection of GOIL as your indigenous Ghana partner in the Deepwater Cape Three Points Block. I am hopeful that you finalise negotiations with your preferred indigenous partner expeditiously to allow for the remaining processes to be concluded for the ratification of the petroleum agreement by the Parliament of Ghana.”

First agreement

Exxon Mobil Corp signed a deal with Ghana towards the end of January this year to explore for oil in the Deepwater Cape Three Points (DWCTP) oilfield.

The signing followed direct negotiations between Ghana and ExxonMobil without an open competitive tender due to the nature of the field, where the depth ranges from 2,000 to 4,000 metres.

Post ITLOS

The ExxonMobil deal is the first to be signed after the International Tribunal for the Laws of the Sea (ITLOS), in September last year, drew an ocean boundary favouring Ghana in a dispute with Cote d’Ivoire.

Shareholding structure

ExxonMobil, the lead operator in the field, holds an 80 percent interest in the DWCTP, while the state-owned Ghana National Petroleum Corporation (GNPC) holds 15 percent.

Meanwhile, the entire agreement is subject to approval by Parliament. which resumed sitting last Tuesday, and it is expected that the agreement will be considered to enable Exxon to start exploration this year or early next year, as earlier projected.

Major benefits to Ghana

At the signing, it was announced that 15 percent initial interest in all petroleum operations under the Petroleum Agreement shall be given to the GNPC.

The state-owned company does not pay for its initial 15 percent under the agreement.
ExxonMobil will pay for the shares of the GNPC and, therefore, ExxonMobil will not make any cash calls on the GNPC in respect of its stake.

That, many experts believe, is much better than most of the agreements in which production is expected to last for 30 years.

Payment of royalty

The government is given 10 percent of the gross production of crude as royalty. However, it can choose to collect this in cash.

Payment of income tax

The state shall levy income tax at the rate of 35 percent under this petroleum agreement, pursuant to the Petroleum Income Tax Law. Simply put, Ghana will tax ExxonMobil 35 percent on profits made after drilling oil.

Concerns

Meanwhile, there are some few concerns raised about the deal, with particular reference to GOIL as the local partner, since it is not a player in the offshore petroleum business.

Some experts who spoke to the Daily Graphic on grounds of anonymity said with the experience of the GNPC, it would have been a better local indigenous company, as per the law.

They maintained that GOIL, a listed company, would have to hold an emergency annual general meeting for shareholders to approve of the deal.

Again, being a listed company, ExxonMobil could buy out the shares of GOIL by offering a juicy share price to existing shareholders to enable the company to assume full ownership without a local partner in practice.

 

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