GNPC seeks for $1.65 billion for oil and gas exploration

The Ghana National Petroleum Corporation (GNPC) is requesting parliamentary approval for a loan of $1.65 billion to accelerate its oil and gas exploration by acquiring two stakes in Ghana’s offshore fields.

GNPC is seeking the funds to purchase a 70% stake in the South Deep Water Tano (SDWT) fields operated by AGM Petroleum Ghana Limited.

Additionally, GNPC is seeking to acquire a 37% stake in the Deep Water Tano/Cape Three Points (DWT/CTP) operated by Aker Energy Ghana Limited.

Upon parliamentary approval, GNPC would acquire assets from the two companies to participate in the upstream petroleum sector through its subsidiary, GNPC Explorco.

This was announced on Monday, August 2, by the Minister for Energy, Dr Matthew Opoku Prempeh, who laid a memorandum before parliament for consideration and approval.

In the paper, GNPC is requesting for the “provision of a loan not exceeding US$1.65 billion to finance the acquisition at a price to be negotiated, which might not exceed US$1.3 billion and GNPC Explorco share of capital expenditure (CAPEX) to Pecan Phase One First Oil of US$350 million.”

Per the paper tabled before parliament, GNPC is also seeking to establish a joint operating company between GNPC Explorco, Aker Energy and AGM Petroleum.

Also, the Minister for Energy and the Minister for Finance, Ken Ofori-Atta, are requesting to be mandated to agree on a purchase price by Aker Energy and AGM Petroleum.

According to GNPC, entering into such an agreement with the two entities was critical due to the decision of ExxonMobil to pull out of an offshore prospect in the country.

This means that the country needs to improve upon its capacity and take up a large part of the exploration activities before Ghana’s oil reserve hits a level of terminal decline.

There are also rising concerns that the push for lower-carbon energy may reduce the value of Ghana’s hydrocarbon resources over time.

“With the shift away from investments in oil and gas into renewable, Ghana faces the risk of stranded assets and dwindling proven reserves if GNPC is unable to undertake exploration, development and production alone.

A declining industry undermines growth, diminishes revenue expectations for Ghana and makes redundant the stock of skilled labour in the industry which Ghana has rapidly built up over the decade,” GNPC said.

Therefore, GNPC has asked parliament to fast track processes for ratifying the agreement, noting that it is needed urgently.

It argues that the partnership, which has already received cabinet approval in about five years, would help the country produce an extra 200,000 barrels of crude oil.

The Speaker of Parliament has since referred the paper to the joint committee on Mines and Energy and Finance for consideration.

The joint committee is expected to report back to the house for final determination.

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Meanwhile, the Minister of State at the Ministry of Finance, Charles Adu Boahen, has told Bloomberg that the time has come for Ghanaians to “become masters of our own destiny when it comes to our oil and gas resources.”

“There will certainly be the demand for fossil fuels in countries outside the West that will continue to use diesel- and petrol-fired cars and consume power generated from fossil fuels for the foreseeable future,” he added.

Finance Minister speaks on GNPC’s move

During the mid-year budget review presentation, the Finance Minister indicated that the COVID-19 pandemic had amplified the campaign for a transition away from fossil fuels.

He noted that with the prevailing sentiments around energy transition, there is a strong possibility that Ghana may be left with stranded assets, unless it accelerates its exploration activities and develops a home-grown strategy to extract fossil fuels.

“As such, GNPC is looking at opportunities for its subsidiary, GNPC Explorco, to acquire such assets and become an operator in its own right to ensure the expeditious development of our hydrocarbon resources,” he signified.

The finance minister stated that the new strategy might require an amendment or revision of the PRMA to allow GNPC to enter some Reserve-Based Lending (RBL) transactions.

This will enable it to raise the required financing to consummate the acquisitions and finance the exploration and development of the fields without overreliance on government funding, Mr Ofori-Atta explained.