The upstream petroleum industry has been in the news recently for all the wrong reasons.
Arbitration between government and ENI, arbitration between government and Tullow and the cancellation of MOUs signed since 2019, were meant to end up as petroleum agreements.
The CEO of the Ghana Upstream Petroleum Chamber, David Ampofo, has been giving some further insights into the various issues.
What does the chamber make of the recent news reports on disputes between government and some of your members?
Let’s be specific. You are referring to the dispute between ENI/VITOL and government over unitisation and the dispute between Tullow Oil and the Ghana Revenue Authority.
Yes, What is the bone of contention between the GRA and Tullow Oil?
Tullow has filed for arbitration with the International Chamber of Commerce in London in respect of two disputed tax assessments received from the Ghana Revenue Authority. Tullow considers the two disputed tax assessments a breach of its rights under its Petroleum Agreement with government.
Petroleum Agreements have stabilisation provisions that fully spell out issues of taxation among others. Creating new legislation and introducing new taxes midway through contracts is certainly problematic. Tullow too has rights that government agencies must be conscious of. Protecting their should not be interpreted as an act of bad faith.
How do you see it being resolved?
Despite the request for international arbitration, Tullow is engaged with GRA in an effort to find an amicable solution for the mutual benefit of both parties. The Chamber supports that. Government and industry need each other.
What about the court case between ENI and the government?
Eni/Vitol have also challenged a decision by the Ministry of Energy for the Unitization of the ENI’s Sankofa and Springfield’s Afina fields. For Eni and Vitol, the decision was premature and fell short of best practice when it comes to unitizations.
The Commercial Division of the Accra High Court ruled against ENI and in favour of Springfield asking ENI, to preserve 30% of all the revenues from the field until the final determination of the legal dispute.
A legal tussle subsequently ensued, with ENI/Vitol eventually initiating action in the International Court of Arbitration against the Government of Ghana. I think the best way forward on this matter is for the parties to seek a resolution out of court through an independent third party. It really leaves a sour taste in the mouth of potential investors.
What do you think of the recent cancellation of MOU’s signed with oil companies?
Well, on the surface it’s pretty harmless, isn’t it? The Ministry of Energy has terminated negotiations with four oil companies after three years of negotiations. The reason offered for the terminations is that the MOUs governing the negotiations have expired and there is no intention of extending them.
It’s a pity. Valuable time and energy has been spent to no avail. There is a need for more transparency on the negotiation process and how it merited termination. The investment community may interpret the termination differently and this may have a negative impact on future licensing rounds.
The Ministry has, however, said the affected companies can reapply for direct negotiations if they are still interested in the blocks. Direct negotiations although legal, can lack transparency and send a negative signal to every other investor apart from the beneficiaries.
