Prof Hinson: True facts about GNPC’s increased stake in Aker blocks some CSOs don’t want you to know
Professor Robert Hinson writes on the facts concerning the Ghana National Petroleum Corporation (GNPC) acquisition of stake in Aker oil blocks
Many things are admirable about Ghana, compared to our neighbouring countries. Among these are free speech, fair elections, peaceful transitions of power and an empowered civil society.
In some ways, Ghana has more in common with the United States’ democracy than many countries on our continent.
However, in the not-too-distant past, the United States seemed to have gone through a dark media era where it seemed President Donald Trump attempted completely to wipe out the boundaries between truth and lies, between actual news and fake news, to the point that the truth did not matter any more – and the same seems to be happening in Ghana from selected civil society actors.
One particular civil society actor, Bright Simons, seems to have taken umbrage at the move by the Ghana National Petroleum Corporation (GNPC) to significantly increase Ghana’s ownership interest in offshore oil blocks and has communicated his deep misgivings in a multiplicity of articles, the latest being one he penned for the influential Economist magazine.
I will attempt in this article to present some misrepresentations in some of the positions held by the leading civil society actor Bright Simons, and, like we do in the academy, present some counter-facts on some of the misrepresentations he made.
There are serious challenges with some recent assertions Mr Simons has made regarding GNPC’s move to put Ghanaians ultimately in complete control of the nation’s oil resources. It would seem that Mr Simons is either not in full possession of some of these true facts he uses to construct some of his arguments, and therefore, in making some of the arguments he makes, ends up smearing the name of GNPC.
GNPC, by the way, is an institution that was voted by the Natural Resource Governance Institute as the best-governed national oil company in sub-Saharan Africa. Indeed, with the recent ENI-Springfield unitisation, Mr Simons also seemed once again to make GNPC the villain in another article.
A world of “rich discoveries”
Like I alluded to earlier, intellectual contestation is normal in the academy, so let me point out nine misrepresentations I perceive in relation to GNPC’s latest move to increase ownership in offshore oil blocks and offer some counteracts to some of those assertions.
1. “Most analysts nowadays use a US$50 per barrel oil price.” FALSE.
Mr Simons makes this categorical statement without listing any of the analysts he refers to. These are easily verifiable figures which should have been checked before they were published. The long-term price forecasts by various analysts (all in US$ per barrel) are:
Morgan Stanley – 60
Credit Suisse – 60
RBC – 67
Commerzbank – 70
CIBC 63
JPMorgan – 60
Deutsche Bank – 60
UBS – 60
HSBC – 63
IHS – 67
Not a single one uses US$50 per barrel. With the current oil price of US$72 per barrel, it is pretty far fetched to have a valuation figure of US$50 per barrel.
2. Kjell Inge Rokke has a windfall of more than US$1 billion. FALSE.
This is false because it ignores the US$800 million spent by the Aker owner to add approximately 267 million barrels of oil to the two blocks.
Moreover, it is profoundly inconsistent with Mr Simons’s own claim that $300 million has been spent on the two blocks.
Using Mr Simons’s own analysis, if the price is set at a maximum of $1.1 billion and $300 million has been spent so far, how can the windfall, if at all, be more than $1 billion? This is yet another misrepresentation.
3. Aker and TRG have spent only $300 million. FALSE.
It would seem that Mr Simons has been skimming through the annual reports of Aker and TRG looking for spending by Aker Energy and AGM. However, he seems unaware that Aker Energy and AGM have debt and commitments not listed in the annual accounts of their parent companies. Verifiable figures from GNPC suggest that Aker Energy and AGM have spent between $700 million and $800 million on the blocks.
4. Aker was founded in 2004. FALSE.
Aker was established more than 175 years ago and its history is clearly stated on the Aker website, www.akerasa.com.
5. Lambert Energy had no access to audited reservoir data. FALSE.
Mr Simons claims that the independent third party Lambert Energy did not have access to audited reservoir data for the two oil blocks. That is factually incorrect, as third-party reservoir data was available in the virtual data room used for the valuation.
My sources within the civil society space confirm to me that, on a call with Lambert Energy, Mr Simons said himself that he had not been able to listen fully, due to conflicting engagements. On this point, it would seem that Mr Simons does have a full grasp of the facts, and therefore cannot make the categorical claim he makes. His pronouncements do not represent the facts.
6. GNPC will merge the fields. FALSE.
Mr Simons claims that GNPC is to merge the fields and create an SPV. How can two fields be merged, physically? Again, Mr Simons makes this postulation to fit his narrative. GNPC is only saying that the joint operator company will be the operator of both fields. The fields and the licences cannot be merged; that is not possible legally under Ghanaian legislation, nor physically, unless there is contact between the fields.
7. There are considerably richer discoveries made in Ghana which have not been commercialised, like Wawa and Akasa, and the Erin Energy block. FALSE.
It is unclear why Mr Simons claims that these fields are richer than Pecan and Nyankom. These fields cannot be described as “richer discoveries” by any stretch of the imagination. According to Woodmac, the Akasa field was downgraded to sub-commercial, the Erin Energy block holds no fields bigger than 40 million barrels and Wawa holds 50 million barrels plus gas. Clearly, none of these discoveries is anywhere close to Nyankom and Pecan in Mr Simons’s chosen world of “richer discoveries”. For the avoidance of doubt, Woodmac lists Nyankom at around 130 million barrels.
8. The commerciality of the fields is broadly unchanged since 2018. FALSE.
Mr Simons seems to be ignoring the widely published fact that, in 2018, Aker first added 100 million barrels of oil to the Pecan discovery and then, in 2019, discovered 167 million barrels of oil in Nyankom. These investments completely improved the commercial viability of the fields. Also, Aker made the cost of developing the Pecan field cheaper, thereby increasing profitability. Aker achieved this by reducing the break-even from US$45 per barrel to $30 per barrel in the new development concept.
Before the outbreak of COVID-19, which disrupted the global oil and gas supply chain, Aker was ramping up for a final investment decision on the Pecan Field. In line with this, in early 2020, a letter of intent had been issued to Yinson for the construction of the FPSO for the Pecan Field development. Also, Fugro had been appointed to perform geophysical and geotechnical surveys to optimise the Pecan subsea field layout.
9. The owner of Aker said that he and his partners would spend US$4.4 billion to produce oil, then changed his mind and settled on US$2.5 billion. FALSE.
Low oil prices experienced in 2020 following the outbreak of COVID-19 revealed that the earlier proposed development concept for the Pecan Field worth $4.4 billion with a break-even price of $45 per barrel was not commercially viable. This necessitated a revision to a phased development concept with a break-even of $30 per barrel, making the project more commercially viable.
These are the top nine issues about Ghana’s bold move to take full control of its oil resources that have so far been misrepresented. I pray this article has brought some clarity to some of the issues that have clearly been befuddled.
Professor Robert E Hinson is based at the University of Ghana Business School but works across several universities globally. He was recently ranked the number-one marketing scholar in Africa.
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