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Renegotiate Gas Price In ENI Deal

The Member of Parliament for Pru East, Kwabena Donkor, wants the Akufo-Addo administration to renegotiate the gas price component of Ghana’s 20-year deal with Italian oil company, ENI, for the development of the Offshore Cape Three Points (OCTP) integrated oil and gas project.

The negotiated gas price was $9.8/MMBtu (one million British Thermal Units) for gas from the Sankofa fields, which was critics said was higher than the price of gas sold to Nigeria, which stood at $8.3/MMBtu.

Dr. Donkor, who was the Minister for Power under the Mahama administration which signed the deal, said the cost was “extremely high,” though he noted that at the time, the cost of about $7.9 billion for the overall agreement, was projected when the price of crude was between $80 to $100.

“This projection was based on that high $7.9 billion. The reality in doing the actual development is that the price is down,” he explained on Eyewitness News.

However, there is a clause in the agreement that allows government to renegotiate the gas price, Dr. Donkor revealed.

He thus urged the government not to buy at the negotiators price because development cost, which drive prices, have since come down substantially.

“Fortunately for us, the negotiators of the petroleum agreement foresaw such a possibility and therefore inserted a clause that enables Ghana to renegotiate the gas price if development turns out to be lower than projected. We as a country must trigger that clause and renegotiate downwards so that the Ghanaian power sector can be competitive.”

“In this sector, all the initial ones are projections, but having been in actual development, they now have the actuals which are substantially lower than the projected. Therefore the partners have no choice if the Ghana side triggers the appropriate clauses.”

The Ghana National Petroleum Corporation (GNPC) and the Petroleum Commission, have a role to play this regard with the latter expected to vet the actual expenditure “and then having vetted the actual expenditure, they will have to impress on the GNPC to invoke the appropriate clauses,” the MP explained.

“It is no longer a matter of buying at that price. It is a matter of buying at a lower price. The question now is how aggressively do we negotiate downwards using the provisions already in the petroleum agreement.”

Dr. Donkor’s posture, appears to correspond with the NPP’s previous position when the party was in opposition.

In February 2016, the NPP in a message to welcome the Italian Prime Minister, Matteo Renzi, who was on a two-day visit to Ghana, asked him to use his influence to review portions of Ghana’s deal with ENI, a state-owned Italian oil conglomerate, to ensure that both countries benefit fairly.

In a statement signed by Nana Akomea, the NPP’s Director of Communications, it said the ENI-Sankofa 20-year gas deal for the exploitation of the Offshore Cape Three Points Block (OCTP), does not give Ghana value for money.

Among several issues raised, the NPP said “the Government of Ghana’s provision of financial terms to ENI and its partners of 20% return on investment, instead of the normal 12.5%, is an unusually high rate for commercial transactions of this nature, especially as GNPC assumes all the risk in the project.”

We’ll cancel some power contracts if necessary – Nana Addo

President Nana Addo in his first state of the nation address, served notice his government will audit all Power Purchase Agreements (PPA) signed between the Electricity Company of Ghana(ECG) and Independent Power Producers(IPPs) under the erstwhile National Democratic Congress (NDC) government.

He said the process will lead to some of the contracts being cancelled or reviewed where necessary. The NPP in opposition then, accused the previous government of signing bad deals in the energy sector.

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(Via: CitiFM Online Ghana)

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