GhanaHeadlineOil & Gas/MiningOpinion

Article: Calm down! The price for the GNPC and Aker/AGM deal is yet to be negotiated – Gabby Otchere-Darko

In this GNPC case, I see a lot of shadow boxing over a transaction. I am struggling to see exactly where the CSOs and the government disagree

I watched Bright Simons on Asaase Radio’s weekly current affairs programme Town Hall Talk yesterday (Friday 20 August), when he was interviewed by the host, Professor Kofi Abotsi, about the move by GNPC to acquire a greater stake and become co-operator on the two blocks controlled by Aker Energy and AGM Petroleum. It was a lively, interesting conversation, which can still be watched on Asaase’s YouTube channel or Facebook page.

The work of bright and sprightly civil society groups, like IMANI, is very useful to how we manage our resources and we must commend them for what they do. Their job is to cut through the theatrics of bipartisan bickering and enrich the debate by giving the public the facts, straight, cloudless and, perhaps, bloodless. Their work does not always have to be confrontational in order for the public to appreciate it.

In this GNPC case, I see a lot of shadow boxing on a transaction over which I am struggling to see exactly where the CSOs and the government disagree. This is so especially because in the area the CSOs are focusing on – the value placed on the transaction – the government has made no commitment for us to critique directly. But, the opposing narrative being pushed appears to make no distinction between what Aker/AGM want and the government’s position.

This became even clearer to me when I listened to Bright Simons on Asaase Radio. Yet Bright’s campaign against the transaction in question is not too clear to me. Is he against the transaction or against the value placed on it by the seller? And, if his issue is about the price, then why is he fighting GNPC and the government?

To put it mildly, there is an intellectual pomposity to his gladiatorial approach to this transaction, which sometimes gives the impression of an exhibition of excess intellectual energy against the wrong targets, in this case, GNPC, the executive and Parliament. It may not be intentional but his style can be so uncompromising and, in my view, not always healthy to the desired ends.

On this issue, he structures his arguments as if the Government of Ghana has already committed to acquire bigger stakes in the two oil blocks at a particular, stated price and his mission is to stop that from happening. But this is not supported by the prevailing facts.

Responding to the energy transition

Typically, Bright dismisses any contrary fact or view that seeks to shed a brighter light on the issues in a way that dims the debate. For example, when he was told by the host that the government was yet to negotiate and agree on a price and had, accordingly, procured the services of its own transaction advisor to help with the valuation, Bright’s response was to dismiss it outright. Somewhat curiously, he argues that the job of the government’s transaction advisor is not about asset valuation but to facilitate the transaction and that the transaction advisor in question, in fact, has an inherent beneficial pro-rata interest if the asset is priced rather high! This, however, is not supported by the structured fee that has been lawfully authorised for the specific services procured.

Generally, he has been efficient in leading a narrative out there which suggests that the CSOs are the ones committed to protecting Ghana against signing on to an overpriced deal which has been badly negotiated. I think this is wrong, premature and unfortunate.

Normally in a negotiation, what the seller wants for an asset can be seen (or, in fact, should be seen) by the buyer as potentially overpriced. It is only when you know what the buyer has offered to pay for the product that you, the third party, can accuse the buyer of selling itself and the interest of its stakeholders short. But, that is not the stage that this negotiation is at. There is clear and unimpeachable evidence that we have not reached that stage yet.

Parliament was going on recess by the end of the first week in August, and there were certain green lights that had to be switched on to pave the way for the negotiation process. Namely, the mandate for the government to go ahead to negotiate the price, while finding the needed funds to conclude the transaction, before bringing it all back to Parliament for final consideration and approval.

The Government of Ghana has made it clear that it is yet to negotiate and agree on a price with Aker/AGM on the intended acquisitions. Here is the evidence before Parliament. On 27 July 2021, cabinet approved, what it called “a new policy direction for the upstream sector”. Cabinet also tasked the Ministry of Finance and the Ministry of Energy to work together to negotiate and agree on a purchase price for bigger stakes in two specific oil blocks, one of them notably rich in oil and close to development, with the strategic view of affording GNPC operatorship status for the first time in its history.

On Friday 6 August, Parliament (both sides of the House) essentially approved the government’s new policy direction regarding the upstream sector and the financial mandate to pursue it. The Minority side are alert to the prospect that whichever party wins in 2024 will certainly do with the enhanced revenues that will come from a significant stake in the rich oil block that Hess Corporation abandoned for richer fields in Guyana and Aker Energy took over and found a bit more to add to its proven wealth. So, all sides are agreed on the deal in principle. The only outstanding issue is: at what price?

The overarching plan is for Ghana to quickly build capacity to become an operator of the country’s hydrocarbons, for fear of leaving them stranded, as the energy transition push by the West gains additional momentum under a Biden administration in Washington. A new report from the world’s leading energy organisation, the International Energy Agency, issues the strongest warning yet against fossil fuels, arguing that the world needs to stop exploiting and developing new oil and gas fields in 2021 in order to prevent dangerous climate change in the future. And the oil majors are compelled to listen. The COP26 UN climate talks, scheduled to take place in Glasgow, Scotland this November, are expected to hammer the nail deeper against future investments in hydrocarbons.

A case in point is Nigeria. After half a century of pumping billions of barrels o crude oil out of Nigeria’s swamps, Royal Dutch Shell now wants to sell its onshore stake in the Niger Delta, saying it is no longer in line with Shell’s plans to transform itself into a clean energy giant. Nigeria has to respond to this in a way that finally affords the country a much greater say and share in her rich resources.

Shell, Total and BP were among the first oil giants to commit to zero emissions targets by 2050. Last May, shortly before ExxonMobil announced its pull-out from Ghana, its shareholders voted in Houston for a proposal to compel the company to reduce pollution by its customers, and forced the ousting of two ExxonMobil directors seen as anti-climate change. The energy transition is on and it is real.

If we in Ghana want to get the billions of barrels of crude oil that we believe we have in the ground then we need to do so quickly. We know we need the revenues to develop our human resource, build our infrastructure and diversify the economy. But how? We must, in short, take the destiny of finding and producing our oil into our own hands.

The risk of oil prices collapsing in the foreseeable future appears not strong. So, the debate should not be whether or not GNPC should do it. It is about negotiating for the right price for a deal that can kickstart that whole GNPC transition, so to speak. It is an exciting future if we get it right.

Healthy debate

The debate is on but it is pretty disparaging to speak from the assumption that GNPC and the government want a bad deal for Ghana but Bright Simons and the CSOs know better and want a good deal for Ghana. Sadly, this kind of attitude gets in the way of a healthy collaboration between CSOs and the government on the value to extract for Ghana. If the two can find a way to operate with mutual respect, Ghana will be the better for it.

At this stage of the transaction, CSOs can be more constructive, encouraging or even cautioning the government with sound arguments, laced with sprinkles of modesty, even if a touch spicy, to help the government negotiate strongly on behalf of all of us. That is different from projecting your thoughts as if you know it all and the government does not know what it is about. The public documents before Parliament make it clear that the issues are now being joined to have an informed and healthy debate over the price.

The cabinet memo of 27 July attached to the parliamentary memorandum submitted by the Energy Minister showed that what cabinet approved for the consideration of Parliament were: (1) the provision of a loan ceiling of US$1.65 billion to finance the acquisition by GNPC, through GNPC Explorco, of 37% interest in Deepwater Tano/Cape Three Points operated by Aker Energy and a 70% stake in South Deepwater Tano operated by AGM Petroleum, “at a price to be negotiated which might not exceed US$1.3 billion and GNPC Explorco share of capital expenditure to Pecan Phase 1 First Oil of US$350 million”; (2) “establishment of a joint operating company between Aker Energy and AGM, and GNPC Explorco”; and (3) “mandate the Minister for Energy and the Minister for Finance to agree on a purchase price with Aker Energy/AGM”.

Yes, Lambert Energy Advisory Ltd was jointly hired by GNPC, Aker Energy and AGM Petroleum to conduct an independent valuation of Aker Energy’s 50% interest on DWT/CTP and AGM’s 80% interest in the SDWT block. This was after Aker and AGM had their own valuation done. Lambert Energy has placed a value of US$1.8 billion and US$700 million, respectively, on the two assets. It does not mean that is the price to be paid, or that the government has accepted to work with those numbers. On the contrary. The final value will be determined by other factors, including some that are being said by the CSOs, such as the interrogated value of the SDWT block, including Explorco’s shares which were ceded before AGM felt incentivised enough to spend good money to drill any exploration wells on that block.

The authorisation granted by Parliament on 6 August also makes the point. It authorises, among other things, “the Minister for Energy and the Minister for Finance [to] commence negotiations to agree on a purchase price with Aker Energy Ghana Limited and AGM Petroleum Ghana Limited not exceeding an amount of US$1.1 billion”. Thus, Parliament, even before knowing the negotiated price, has brought down by some US$200 million the ceiling under which negotiations should take place. It is, therefore, unfair, to hear uncomplimentary remarks over the legislature’s approach to this transaction so far.

Moreover, the Minister for Finance has since 6 August obtained approval from the Public Procurement Authority for a transaction advisor for the government and this approval came with a fixed ceiling: “transaction fee not exceeding US$750,000”. Bank of America Securities, a division of Bank of America with expertise in oil and gas transactions, has been mandated by the government “to provide a fairness opinion/independent valuation” on the transaction. Independent from what Lambert Energy has done. BofA Securities has since been given access to GNPC’s data room to begin its work.

There may be other blocks besides these two, like the ones previously controlled by Erin, ExxonMobil, etc, which GNPC can concentrate on. The truth is, in terms of fields due for development, Pecan offers the earliest production option because of the work done so far, including on the procurement of an FPSO. There is also more work to be done to prove the resources we have in easier fields such as the Voltaian Basin onshore. Until then, for now, deepwater remains our best option for oil production. And if GNPC is to lead this, it has no choice but to team up with an operator with experience in such an environment. Lukoil is a partner in the DWT/CTP block but it knows its limits when it comes to deepwater experience, explaining why it never opted to be an operator. That is why Aker Energy, which is ready to deal, with experience from Aker BP on the North Sea Continental Shelf, appears a natural co-operator partner for GNPC.

I believe there is every reason for our negotiators to get a good deal for Ghana. We should, of course, be interested in what is in this deal for the Norwegians, who are ready to sell down, but interested in remaining as co-operators and probably with lucrative proprietary interest in the FPSO that will eventually do the work. They know there will be good business for them, including their affiliated entities. But, we should also not lose sight as to what is in this deal for Ghana, potentially, what Ghana wants from it, and use that to negotiate properly. Ghana stands to gain more than we have so far done in the sector if we have GNPC as a national oil company properly so called, with operational capacity. The potential to grow Ghanaian-owned businesses in the industry more aggressively over the next 30 years is also much higher now.

My point here is pretty simple. We should all be focused on getting the best deal possible for Ghana, knowing that negotiations involve at least two parties with none wanting to lose out. The contribution from CSOs is very necessary and must be encouraged. Bright Simons must be encouraged. But the words of encouragement should also include a suggestion that their contributions are better couched in a constructive language and posture that do not needlessly impugn the integrity of those elected and/or appointed to take decisions. This will allow for mutual respect, understanding and co-operation, even where there are fundamental disagreements on what works best for Ghana. Theatrics are best performed in the arena of partisan politicking.

Doing the right thing

There are a lot of useful things being said by commentators on the transaction, but, as commentators, we should not be content with the impression that we are infallibly right and, presumably, the only ones looking out for the interest of the state. That is not neat. Mr Simons spoke very disparagingly of GNPC on Asaase as if Dr K K Sarpong and his team of technocrats and advisors do not know what they are doing. He spoke as if the price of the acquisition is already a done deal. Yet, as shown above, every step, from cabinet, through Parliament and since then, shows that the government, along with GNPC, is still in the process of negotiating and agreeing on a fair value price with Aker/AGM.

The price currently on the table from the sellers may be good or bad in the final analysis. What is important is that the public must know that it is, at this point, far from a done deal. Whichever deal is agreed by all negotiating parties must be done with utmost transparency and justification to the Ghanaian people. The final bill to the exchequer must be one that assures the public that, ultimately, the interest of the country was not compromised and that we stand to gain far more. So that in the end, even if a Bright Simons is not happy because the price he pushed for was not where the deal landed, the nation will know that the right deal was negotiated for Ghana.

This is an example of a transformational transaction where CSOs need not be confrontational in order to be seen to be protecting the national interest. At least, not at this stage. When you strip bare what they say they want and what the government wants done, all appear to be, in substance, on the same side!

Bright is no doubt an asset to this nation. I will encourage him to do more, even if with an occasional flirtation with modesty. Let us be guided by that as we all seek to get the best for Ghana.

Gabby Otchere-Darko is the senior partner for Africa Legal Associates, a corporate law firm in Accra, Ghana

Asaase Radio 99.5 – tune in or log on to broadcasts online
Follow us on Twitter: @asaaseradio995

Show More

Related Articles

Back to top button

Adblock Detected