Ghana: ExxonMobil Selected Sam Jonah’s Company As Partner For DWCTP Oil Block But Gov’t Opposed It

Credible information available to energynewsafrica.com indicates that a company owned by Ghanaian mining mogul, Sir Sam Jonah, was selected by US oil and gas super major, ExxonMobil, as its partner for the Deepwater Cape Three Points oil block offshore Republic of Ghana.

However, the Akufo-Addo-administration rejected ExxonMobil’s joint venture with Sam Jonah’s company.

According to sources, Sam Jonah’s company was selected after a rigorous selection exercise in London but the Government of Ghana did not like the idea, claiming that the company did not represent the larger interest of Ghanaians.

Energynewsafrica.com’s sources indicated ExxonMobil was not happy about Government of Ghana’s position.

The company was compelled by the circumstances to choose Ghana’s leading oil marketing company, GOIL, as its partner.

GOIL’s partnership with ExxonMobil, according to energynewsafrica.com’s sources, was in the view of government, serves the larger interest of Ghanaian since Ghanaians are shareholders of the company.

ExxonMobil signed petroleum agreement with Ghana National Petroleum Corporation (GNPC) on behalf of Ghana for the development of Deepwater Cape Three Point oil block.

However, barely three years after the signing of the agreement, ExxonMobil has relinquished its 80 percent stake in the block.

Speaking to energynewsafrica.com, Dr Jide Agunbiade, a Director at National Oil Varco Inc. and Vice President of the NOV Subsea Production Business Unit based in Houston, Texas, USA, said there were speculations that GOIL was forced on ExxonMobil by political powers.

Dr Agunbiade explained that apart from the fact that ExxonMobil was unhappy about its joint venture, other issues such as the nearly $20 billion write down in the value of its oil and gas assets globally, its biggest-ever impairment, also influenced the company’s decision to leave Ghana.

“Reports have it that GOIL, ExxonMobil’s partner, was forced on them by the political powers. This seemingly forced collaboration of two partners with entirely different development objectives and political interference is another reason Exxon is leaving. After the 2000-2008 presidential regime, it was frequently alleged that the initial zeal from Exxon to pursue the exploration of their assets in Ghana had reduced due to some unknown political reasons. The above factor, plus the fact that they have only made modest investments of US$60 million on some seismic work which would be easily recovered once they sell the asset, are the reasons.

“IOCs in Ghana are generally exempted from VAT. So it is pretty strange that Exxon was asked to pay a substantial amount in VAT. It is alleged that this payment was made before the VAT exemption law was passed. In Ghana, VAT reimbursement, especially from a different ruling government, is extremely difficult. This can drag for years sometimes. Aside from this, Exxon was also not happy about many things, including the alleged fact that they were not satisfied with their J.V. setup in the country,” Dr. Agunbiade said in a response to question posed by energynewsafrica.com.

Below is an excerpt of the interviews

U.S. oil and gas supermajor ExxonMobil has relinquished its 80 percent in the Deepwater Cape Three Point oil block offshore Ghana.

Since 2018 the company has spent close to $60Million, including acquiring seismic data on the oil block.

The work done so far included processing about 2,200 square kilometers (850 square miles) of seismic data, but Exxon didn’t drill any exploration wells.

When reached, ExxonMobil said it is “prioritizing near-term capital spend on the most advantaged assets with the lowest cost of supply in the portfolio, including developments in Guyana, Brazil and the U.S. Permian Basin.”

1. What is your initial comment on the issue?

Response: My initial comment is that this is consistent with Exxon’s recent decision to take nearly $20Billion Write down in the value of its oil and gas assets globally, its biggest-ever impairment, and slash project spending next year to its lowest level in 15 years to put focus on Brazil, Guyana, Permian. From the above, ExxonMobil’s comment that they prioritize near-term capital spend on the most advantaged assets with the lowest cost of supply looks tenable. The other thing that might be driving their decision is that Exxon has been unusually reluctant and slowly pacing this project for a while now, even before the write downs after rumors surfaced that they were not working with their preferred local partner in Ghana. Reports have it that GOIL Ghana Limited (ExxonMobil’s partner) was forced upon them by the political powers. This seemingly forced collaboration of two partners with entirely different development objectives and political interference is another reason Exxon is leaving. Remember that after the 2000-2008 presidential regime, it was frequently alleged that the initial zeal from Exxon to pursue the exploration of their assets in Ghana had reduced due to some unknown political reasons. The above factor, along with the fact that they have only made modest investments of 60 million USD on some seismic work which would be easily recovered once they sell the asset, are the reasons.

2. What does this mean if they say they are “prioritizing near-term capital spend on the most advantaged assets with the lowest cost of supply in the portfolio including developments in Guyana, Brazil and the U.S. Permian Basin.”

Response: This statement can be attributed to these main reasons:
a) The estimated discoveries in these countries are not only more significant but also a great deal of investments has been put into these assets until reaching their current development phases. This poses less financial exposure on Exxon’s capital investment and makes it more worthwhile to channel their resources there. There was a lot of back and forth between Exxon and the government when Exxon was ready to invest in their Ghana asset. Unfortunately, at the moment, investment in the Deepwater Cape Three Point oil block offshore Ghana will be long-term capital spend, something Exxon is getting away from globally. This caused them to focus on these other locations.
b) Time zones and proximity of assets more favorable to Exxon’s operations. For that matter, Guyana, Brazil, and the U.S. Permian Basin are all closer to home than Africa and Ghana. Fewer resources to be spent on logistics and other cost-related activities.
c) Exxon has a better relationship and control at the highest level of political authority in the locations mentioned above than in Ghana.
d) It can also be alleged that extreme local content laws, security concerns and negative political influence also led to this decision. Guyana, for instance, is still discovering itself as an oil-laden country. This implies Exxon will have more authority in making first-hand decisions to maximize revenue and profit.

3. Our checks indicated that ExxonMobil was unhappy about tax exemptions that the Gov’t of Ghana was failing to implement, which limited cash flow to the Ghana office, thus making it difficult to run the office…Can an IOC like ExxonMobil decide to move out of a country it has initiated exploration activities if part of the agreement is not being enforced or if one party doesn’t want to respect the agreement?

Response: IOCs in Ghana are generally exempt from VAT, so it is pretty strange that Exxon was asked to pay a substantial amount in VAT. It is alleged that this payment was made before the VAT exemption law was passed. In Ghana, VAT reimbursement, especially from a different ruling government, is extremely difficult. This can drag for years sometimes. Aside from this, Exxon was also not happy about many things, including the alleged fact that they were not satisfied with their J.V. setup in the country.

4. Can this situation scare investors? If yes, what should Ghana do to attract oil and gas investors?

This situation can scare some investors new to the Ghanaian/African terrain but can also be an opportunity for another IOC to take over and build upon the already existing seismic work that Exxon has executed. An example is a case where Springfield, a local indigenous operator, took over Kosmos’ relinquished asset in Ghana.

Source:www.energynewsafrica.com