The U.S. Is Wronging Nigeria And The Energy Industry With Travel Ban (Article)
By: NJ Ayuk
It is difficult to come to terms with the United States’ decision to include Nigeria in the extension she made a few weeks ago to the infamous “Muslim Travel Ban”, which already restricted movements of people from Iran, Libya, North Korea, Syria and Yemen. Alongside Nigeria, Tanzania, Myanmar, Eritrea, Sudan and Kyrgyzstan were also added to the list of countries with entry restrictions. Effectively, with the struck of a pen, or a whim, President Trump barred a quarter of the 1.2 billion people living in Africa from applying for residence in the United States.
Officially, the extension made to these nations is based on security concerns. Tanzania and Nigeria, particularly, are named by Washington as having failed to meet U.S. security and information sharing standards. Further, Nigeria is singled out for fears that the country harbors terrorists that could pose risks if they entered the U.S.
Much and more of this is difficult to reconcile with the U.S.-Nigeria long-standing allied relations and particularly with recent programs designed to bring the two nations closer together, but before we go there, let’s look at what the reality shows.
Since 1975, not a single incidence of a Nigerian, or for that case Tanzanian or Eritrean, being involved in a terrorist attack on American soil has been recorded. Boko Haram, the extremist group that has terrorized parts of the North of Nigeria (a region from which few migrants come from) in recent years, has never shown any signs of wanting to expand its territory, much less to open remote branches in North America. In fact, the American and Nigerian forces have worked closely together to address that and other challenges, and the Trump administration itself has recognized Nigeria as an “important strategic partner in the global fight against terrorism.”
Further, while Tanzanians and Eritreans have been excluded from what is known as the green card lottery system, Nigerians have been barred from applying for permanent residence visas in the United States. In 2018, 14 thousand such visas were issued to Nigerians, making it by far the most affected by the ban from all the new entrants to the list.
Beyond the sheer pain that fact must cause to the thousands of Nigerian families that have been waiting for years to be reunited in the U.S., from a security point of view, the decision makes no sense. Only permanent visas have been suspended. Tourist and work visas remain as usual. How does barring access to the most strict and difficult to obtain visas but maintaining the less restrictive short-term ones prevent terrorists from entering the U.S.? It is nonsensical. Even the fact that the announcement of the extension was made by the media before these countries’ authorities were even notified is telling of how lacking in protocol the process seems.
The whole thing is perplexing, but beyond the issues of principle, this decision has the potential to hurt the relations between these countries and the U.S., and when it comes to Nigeria, that risks hurting the U.S. too. After all, Nigeria, Africa’s biggest economy, is the U.S.’s second biggest trade partner in sub-Saharan Africa, is Nigeria’s second biggest export destination and it’s the biggest source of foreign direct investment. American companies have extensive investments particularly in the energy and mining sectors in Nigeria, which risk being affected by a breakdown in bilateral relations. Some companies, like ExxonMobil, have been operating in the country for nearly 70 years, since even before the country became independent from colonial rule, and Chevron has also been an active and central participant in the country’s oil industry for over forty years. Both these companies are partners in Nigeria’s mid and long-term strategies to curb gas flaring, develop a gas economy, expand oil production, improve its infrastructure network, raise its people out of poverty, etc.
Nigeria and the U.S., under a bilateral trade and investment framework agreement, sustain an annual two-way trade of nearly USD$9 billion. When the president of the U.S. makes a decision like this, it can affect the relations the country and these companies uphold with Nigeria. Further, it directly clashes with the U.S.’s strategy to counter Russia’s and China’s growing influence in Africa by expanding its relations with the continent.
How does closing the door to Africa’s biggest powerhouse accomplish that? The policy established under the 2019 Prosper Africa initiative, that was designed to double two-way trade between the U.S. and Africa, seems difficult to reconcile with this latest decision. Over the last couple of years, president Trump has made several statements, at varying levels of political correctness, about how he would like to restrict immigration to the U.S. to highly-skilled highly educated-workers. If that is one of the reasons behind the inclusion of Nigeria, again, it fails completely.
Nigerians represent the biggest African community in the U.S., numbering around 350 thousand, and one of the communities with the highest level of education in the US globally. According to the American Migration Policy Institute, 59% of Nigerian immigrants have at least a bachelor’s degree. That is higher than the South Korean community (56%), the Chinese community (51%), the British community (50%) or the German community (38%), and it is tremendously higher than the average for American born citizens (33%).
More than 50% of Nigerians working in the U.S. hold white color management positions, meaning they have access to considerable amounts of disposable income and contribute greatly to the American economy. Those are the immigrants the U.S. wants, the ones that built the American dream! Which only makes this decision ever harder to grasp, unless of course, if we consider that this might have nothing to do with security concerns, and all to do with a populist decision designed to please the president’s most conservative support base as we approach the presidential campaign. If that is the case, then American foreign policy has truly reached a dark age.
From his side, President Buhari’s government has done what is possible to appease the situation, setting up a committee to address the security concerns with U.S. officials and INTERPOL, and restating its commitment to “maintaining productive relations with the United States and its international allies especially on matters of global security”, Femi Adesina the Spokesman for the Nigerian Presidency said.
Last week, the Nigerian government requested the U.S. administration to remove the country from the travel ban, and also announced a reduction in visa application fees for visiting Americans from $180 to $160, in a symbolic gesture meant to reinforce relations between the two nations.
In the meantime, Nigeria’s and other economies risk suffering from this unexplainable decision, and immigrant Nigerians in the U.S. that had been waiting so patiently for the dream of being reunited with their families in the “land of the free” await a resolution for a problem they did not know existed until a month ago.
NJ Ayuk is Executive Chairman of the African Energy Chamber, CEO of pan-African corporate law conglomerate Centurion Law Group, and the author of several books about the oil and gas industry in Africa, including Billions at Play: The Future of African Energy and Doing Deals.
Liberia: President Weah Sacks Bobby Brown Over Fuel Shortages Brouhaha
President of Liberia, H.E. George Manneh Oppong Weah has dismissed the Deputy Managing Director for Operations of the Liberia Petroleum Refining Company, Bobby Brown over gross negligence and fraudulent activities.
According to the President, Mr Brown will be investigated by the appropriate authorities and, if found guilty, will be prosecuted under the full weight of the law.
The dismissal of Bobby Brown followed findings of a Special Task Force commissioned by the president to investigate the recent shortages of petroleum product on the market.
The West African nation was hit by fuel shortages, leading to long queues at filling stations.
The development brought the transport sector of the economy almost to a halt.
In a statement, President Weah said during this process, any other personnel found to be directly linked to illegality with regards to petroleum movements would face prompt administrative actions, and would also face prosecution under the law.
Among actions the President has taken to avoid recurrence of the shortages are that “All petroleum importers who currently have payments for provisional lifting products still outstanding are hereby given 90 days to restitute the products, either in cash or in-kind; and petroleum importers that willfully transferred products stored at their facilities are also given 90 days to restitute the products, either in cash or in kind.
“The Ministry of Justice is hereby ordered to place such importers in receivership until the products are recovered. Failure to replenish the products within the specified time will result in the revocation of importers’ licences and forfeiture of allocated storage facilities.
“All petroleum importers’ licences are hereby suspended and are to be individually subjected to a performance-based review covering the period January 2017 to January 2020. Re-activation of licences will be done on a case-by-case basis, and those that do not meet performance and capacity requirements satisfactory to the Liberia Petroleum Refining Company will be subject to revocation.”
The President assured petroleum importers that all products accepted into the storage facilities of the Liberia Petroleum Refining Company would be protected from fraudulent and illegal manipulation, going forward.
Source: www.energynewsafrica.com
Saudi Arabia Unveils Plans To Maximize Oil Output
OPEC kingpin Saudi Arabia has unveiled plans to dramatically ramp up oil production, raising the stakes of an all –out price war with non-OPEC leader Russia.
State-owned oil behemoth Saudi Aramco said Wednesday that it had been asked by the Saudi energy ministry to raise its production capacity to 13 million barrels per day (bpd), up from 12 million bpd at present.
The oil-rich kingdom has been pumping around 9.7 million bpd in recent months, but it has plenty of spare capacity to pump more crude, with hundreds of millions of barrels also in storage.
“This bold move to attempt to order production to 13 (million) barrels confirms that Saudi is trying to apply maximum pressure on both Russia and the U.S.,” Cailin Birch, a global economist at the Economist Intelligence Unit (EIU), told CNBC on Wednesday.
“By sending signals that they will flood the market as soon as possible, they may be hoping to either force Russia back to the negotiating table or to prompt a wave of bankruptcies and investment cuts in the U.S. that would have a noticeable impact on shale production,” Birch said.
International benchmark Brent crude is trading at $35.80 Wednesday evening, down over 3.5%, while U.S. West Texas Intermediate (WTI) stood at $32.72 around 3% lower.
Oil prices have almost halved since the start of 2020.
The latest sell-off was preceded by a breakdown in talks between an alliance of some of the world’s largest oil producers late last week.
Markets had been hoping for an agreement between Saudi Arabia and Russia, as well as other OPEC and non-OPEC producers, in order to curb oil output and prop up prices; their failure to agree led oil prices to crash on Monday.
Analysts believe the producer group’s misstep has created an “unprecedented” situation in energy markets, with U.S. shale expected to take the brunt of the pain.
“The Saudi-Russian relationship — political as well as economic — is much more important in the light of U.S. energy independence than it was before the rise of the U.S. shale industry,” Tamas Varga, senior analyst at PVM Oil Associates, also said.
“Therefore, the current stand-off between the second and third oil producers in the world should turn out to be temporary. Painful as far as the global oil balance is concerned but temporary,” he added
Ghana: Calls By Opposition NDC, Others For Reduction In Fuel Prices Misplaced-NPA Boss
The Chief Executive Officer of Ghana’s downstream petroleum regulator, National Petroleum Authority (NPA), Hassan Tampuli says calls by some interest groups including the opposition NDC for the government to reduce prices of petroleum products is a clear indication of their ignorance of the current deregulation policy in the sector.
According to him, those calls are misplaced, premature and smack of cheap politics.
The reaction by Hassan Tampuli follows calls by consumer advocacy group, COPEC, opposition National Democratic Congress (NDC) and some section of Ghanaians asking the government to reduce the prices of fuel at the pumps due to the outbreak of coronavirus which has triggered the sharp fall in crude oil price to below US$40 per barrel.
“So we’ve heard calls from various interest groups; we’ve heard calls from COPEC, the Communications Director of the NDC, my good friend Sammy Gyamfi, and another group associated to the opposition, asking the government to immediately reduce prices of petroleum products. I think that, that call clearly sends the signal that our good friends in the other side have not learnt anything after they lost power, because since 1st July, 2015, when President John Mahama was President of the republic, we have moved from a time when the government would intervene in the pricing of petroleum products to a time where determination of price products is made by oil marketing companies,” he said.
He said the right to either increase or reduce petroleum products are determined by oil companies, yet the NDC is employing mischief to try to confuse ordinary Ghanaians in the price matrix.
“Have they asked Mr Alex Mould how things are done? And if people like Honourable Moses Asaga and Alex Mould speak, I would have been very sad but coming from Sammy Gyamfi, I think about 98 percent of the things he said were all false,” he stated.
“The key indicators are the forex rates, FOB prices, the international price, the taxes, levies and margins are the things that one has to take into accounts,” he explained.
Adding that the way of determining prices are also published in the daily newspapers to show how transparent the system has become.
Touching on when to decrease the price, Mr Tampuli observed that the second pricing window, which is March 15, could witness at least 15 percent reduction per the NPA’s calculation after the OMCs have taken their margins off.
He said for the intervention of the President of Ghana, ordinary Ghanaians would have been paying 40 percent tax levies and margins, adding that today, people pay 26 percent of those taxes, thus 14 percent reduction, denying the Ghana government of Ghc 1.2 billion for the period.
The NPA boss noted that even the NDC have acknowledged how the cedi has taken a very strong position against all the international currencies.
“So when the prices go up on the international market, Ghanaians will pay accordingly, now that the prices are coming down, nobody is going to tell the OMC’s or the NPA or the government that the prices should come down. It will come down naturally,” he stressed.
Source: www.energynewsafrica.com
Coronavirus Confirmed On Equinor’s North Sea Field
Following suspension of helicopter flights to several Equinor’s offshore installations due to suspected coronavirus case, one person at the Martin Linge field in the North Sea has tested positive on the coronavirus.
Earlier this week Equinor confirmed to Offshoreenergytoday, that it had suspended flights to several offshore installation, including the Martin Linge, while waiting for test results.
In an update on Wednesday, Equinor confirmed that one person had tested positive for coronavirus. The person is not seriously ill, the company added.
Equinor said it is in dialogue with the Norwegian health authorities about further measures. The infected person has been in isolation in his cabin since Monday, March 9.
Measures to prevent further contamination for offshore installations has been introduced.
It has not been decided when the person will be brought ashore.
The person arrived at the field just before noon on March 4. The person had recently been to Austria. When Austria was listed as a high-risk destination, the person was quarantined on board and a test was conducted.
Tests have been conducted on two further persons at the field, who have also visited high-risk destinations. The results of these tests are not yet available.
Medical staff on board follows up all personnel and there are no additional persons with symptoms on board.
Equinor said that the activity on the field would be reduced today. Personnel remains at the installations they are already located on. Equinor is continuously evaluating further measures.
Measures to prevent further contamination are under implementation, including reduction of social gatherings, reduction of meetings, introduction of larger distances between personnel in the canteen, and cleaning of selected common areas.
The Martin Linge field is currently under construction and is planned to start production at the end of 2020.
There are currently 776 persons offshore, working on the project and spread across three installations.
Source:www.energynewsafrica.com
Absolutely Nothing Wrong With “Take-Or-Pay” (Article)
By: Paa Kwasi Anamua Sakyi
In recent times, there has been a strong debate on factors necessitating Ghana’s rising energy sector debt. One of such factors as mentioned, is the “take-or-Pay” (ToP) clause in the Power Purchase Agreements (PPAs) between the Government of Ghana (GoG) and Independent Power Producers (IPPs). GoG as the buyer of the power produced by the IPPs (sellers) have consistently blamed the challenges within the power sector on “take-or-pay” clause, otherwise referred to as “take-or-pay contracts”.
During the presentation of the 2019 mid-year budget review speech, and the 2020 Budget statement to the Parliament of Ghana in 2019, Ghana’s Finance Minister Mr. Ken Ofori Atta explained that Ghana pays the independent power producers (IPPs) for power they generate for the country including those not consumed under a “take-or-pay” agreement. He has on numerous occasions indicated that government will from August 1, 2019 only pay IPPs for power the country actually consumes, and suggesting that all “take-or-pay” contracts will be re-negotiated to convert to “take-and-pay” (TaP) for both Power Purchase Agreements (PPAs) and Gas Supply Agreements (GSAs).
In his estimation, on average less than 40 percent of the contracted “take-or-pay” capacity is actually used, with the country paying over half a billion U.S. dollars annually for excess power generation capacity. His concern was that “paying close to US$500 million per annum for excess power not utilize may contribute to the challenges in the energy sector that pose financial risks to the economy as a whole. More so, Government holds the view that it is as a result of obnoxious take-or-pay contracts signed by the past government, which obligate the country to pay for capacity it does not need.
These assertions are contestable, in that, it is rather the country that failed to plan to absorb or consume the power produced by the IPPs; thus creating the excess capacity we hear today. Government’s computation to arrive at the excess power is flawed as it figure suggest that it based calculation on installed capacity and peak demand. This is quite simplistic and very misleading, if not based on Dependable capacity (4613MW at end 2019), less the 20 percent Reserve margin (922MW at end 2019), and less end 2019 Peak demand (2881MW); to produce excess power figure of less than 850MW at end 2019.
Whatever the excess power is, there are many sectors of the Ghanaian economy that require power for production and service purposes; such as in agriculture, manufacturing, mining, and commerce. Another of such areas to deploy the so-called “excess power” is in rural electrification, a program which government has failed to grow over the past few years, with the country unable to inch close to the 100 percent Electricity Access rate target it set for itself to achieve by 2020.
Again, one cannot conclude that the energy sector challenges are related to obnoxious “take-or-pay” contracts signed in the past, because other very factors such as non-reflective tariff, distribution inefficiencies, and government interference, have also contributed greatly to the rising energy sector debt, which stood at a little over US$2 billion in January 2017 to over US$4 billion by mid-2019. And though Bulk Distribution Companies have recently been paid close to $1 billion, Ghana’s energy sector debt is still over US$3 billion, and the figure keeps rising.
Even the measures proposed in the 2019 Supplementary Budget to confront the issues in the energy sector, clearly shows that the challenges in the sector goes beyond “take-or-pay” issues.
One reality the Government of Ghana must admit is that a “take-or-pay” clause in power purchase agreements as a guarantee instrument is legally accepted by parties to power contract, and as a result, there is absolutely nothing wrong with the arrangement as it exist in Ghana and other parts of the world. Government must accept that this type of clause/agreement amongst others are necessary to achieve final investment decision (FID) for many power supply agreements.
However, it is not out of place for government to consider negotiating or re-calibrating the existing PPAs, as it explores all relevant avenues to deal with the rising energy sector debt. What is most important is how well government explores the PPAs option without an undesirable costs to the country, and not be overly fixated on “take-or-pay” issues.
Take-or-Pay Contract/Clause
Diverse guarantee instruments have been cultivated to deal with various types of risk embedded in projects. Among the contractual arrangements that is able to allocate risks during the operating period; take-or-pay, throughput, and take-and-pay contracts are perhaps the most commonly applied (Razavi, 1996).
In a large scale energy project, the most familiar type of off-take contract is the “take-or-pay” contract. Kaiser and Tumma (2004) explains take-or-pay contract as an agreement between a purchaser and a seller that require the purchaser to either pay for or take delivery of a pre-specified quantity of a commodity or service at a price at specific time intervals (“take”) or pay for the same quantity without taking delivery (“pay”).
In contrast with “take-or-pay”, a “take-and-pay” contract obligates the buyer to both take and pay the contract price for a minimum quantity of commodity each year. This type of contract is often generally described as a “firm off-take” contract. That is, if the buyer fails to take the minimum contract quantity in any period it will be in breach or default of the contract each time such failure occur, and it will become liable to the seller for damages upon the occurrence of each such breach or default (King and Spalding, 2013).
According to Rogers and White (2013), “take-or-pay” contract is widely recognized by lenders, and it is often the most important method by which a seller secures the large external debt financing on limited recourse terms that energy projects typically require. A well-structured “take-or-pay” contract offers the seller with an assured revenue flow that provides sufficient return on the significant project capital investment and risks to which it is exposed. Vinter (1994) asserts that the predictability of revenue flows from the project minimizes the lender’s worry over potential risk of non-payment of the project debt.
Typically, a seller is concerned with two fundamental risks: market demand risk and price risk. A “take-or-pay” contract places the risk of deteriorating market conditions on the buyer by requiring it to always be responsible for the payment for a minimum purchase commitment (sometimes referred to as volume risk shifting), leaving the seller with only the market price risks to manage, which in some cases may be hedged (Rogers and White, 2013). It literally mean that, in the absence of the “take-or-pay” obligation a supplier bears all the risk that the off-taker’s ongoing need for the energy might dry up, or that a price swing might induce the buyer to break the contract.
“Take-or-Pay” contracts have been used by petroleum coke producers, aluminum company calination facilities, municipalities and waste incineration facilities (Kaiser and Tumma, 2004). The arrangement is also common in the energy sector, because of the substantial costs for suppliers to provide energy units such as electric utility, crude oil or natural gas; and the volatility of energy commodities prices.
“Take-or-pay” clauses are accepted the world over, as the arrangement exist in lots of places including Africa; in South Africa, Zambia, Nigeria, Tanzania, and Cote d’Ivoire. In Japan for instance, almost all liquefied natural gas (LNG) is imported under long-term contracts with a take-or-pay clause, although buyers assume considerable risk under such a clause. On the one hand, the government has accepted take-or-pay because it secures a stable supply of LNG (Namikawa, 2003).
Proceeding Cautiously
Reviewing and re-negotiating contracts could assist in achieving significant financial savings both in the short and long-term especially when market forces changes. However, one must to be careful not attract unnecessary costs because the service supplier is under no obligation to concede to you the buyer. In an attempt to re-negotiate, the buyer is essentially asking the seller for a favor. As a result, the buyer’s approach must be more calculated, as he seeks to restructure the contract to bring rates more in-line with current market conditions.
There could be financial or reputational damages if the process is poorly handled. In the instance where government would attempt to unilaterally re-calibrate the PPAs, it would be tantamount to a breach and/or repudiation of those agreements; and cost awaits the state in the form of judgement debt, reputational damage, and sabotages et cetera.
An approach for a collaborative consultation process to address the challenges in the energy sector will be less costly, compared to a unilateral re-calibration of the PPAs. Also an attempt to also blame the “take-or-pay” arrangement or blame the private sector who are the other side to those contracts, will result in government losing the goodwill to re-negotiate.
To this point, it is clear that “take-or-pay” clause as mostly capture in power purchase agreements is not wrong in all respect, and that it is an undeniable fact that risk associated with such capital-intensive projects must be well allocated to protect both the seller and the buyer. Government must therefore focus on areas to deploy effectively whatever “excess power” that may exist, and to correct the inefficiencies in especially the country’s power distribution segment.
Written by Paa Kwasi Anamua Sakyi, Institute for Energy Security (IES) ©2019
Email: [email protected]
The writer has over 23 years of experience in the technical and management areas of Oil and Gas Management, Banking and Finance, and Mechanical Engineering; working in both the Gold Mining and Oil sector. He is currently working as an Oil Trader, Consultant, and Policy Analyst in the global energy sector. He serves as a resource to many global energy research firms, including Argus Media and CNBC Africa
Whatever the excess power is, there are many sectors of the Ghanaian economy that require power for production and service purposes; such as in agriculture, manufacturing, mining, and commerce. Another of such areas to deploy the so-called “excess power” is in rural electrification, a program which government has failed to grow over the past few years, with the country unable to inch close to the 100 percent Electricity Access rate target it set for itself to achieve by 2020.
Again, one cannot conclude that the energy sector challenges are related to obnoxious “take-or-pay” contracts signed in the past, because other very factors such as non-reflective tariff, distribution inefficiencies, and government interference, have also contributed greatly to the rising energy sector debt, which stood at a little over US$2 billion in January 2017 to over US$4 billion by mid-2019. And though Bulk Distribution Companies have recently been paid close to $1 billion, Ghana’s energy sector debt is still over US$3 billion, and the figure keeps rising.
Even the measures proposed in the 2019 Supplementary Budget to confront the issues in the energy sector, clearly shows that the challenges in the sector goes beyond “take-or-pay” issues.
One reality the Government of Ghana must admit is that a “take-or-pay” clause in power purchase agreements as a guarantee instrument is legally accepted by parties to power contract, and as a result, there is absolutely nothing wrong with the arrangement as it exist in Ghana and other parts of the world. Government must accept that this type of clause/agreement amongst others are necessary to achieve final investment decision (FID) for many power supply agreements.
However, it is not out of place for government to consider negotiating or re-calibrating the existing PPAs, as it explores all relevant avenues to deal with the rising energy sector debt. What is most important is how well government explores the PPAs option without an undesirable costs to the country, and not be overly fixated on “take-or-pay” issues.
Take-or-Pay Contract/Clause
Diverse guarantee instruments have been cultivated to deal with various types of risk embedded in projects. Among the contractual arrangements that is able to allocate risks during the operating period; take-or-pay, throughput, and take-and-pay contracts are perhaps the most commonly applied (Razavi, 1996).
In a large scale energy project, the most familiar type of off-take contract is the “take-or-pay” contract. Kaiser and Tumma (2004) explains take-or-pay contract as an agreement between a purchaser and a seller that require the purchaser to either pay for or take delivery of a pre-specified quantity of a commodity or service at a price at specific time intervals (“take”) or pay for the same quantity without taking delivery (“pay”).
In contrast with “take-or-pay”, a “take-and-pay” contract obligates the buyer to both take and pay the contract price for a minimum quantity of commodity each year. This type of contract is often generally described as a “firm off-take” contract. That is, if the buyer fails to take the minimum contract quantity in any period it will be in breach or default of the contract each time such failure occur, and it will become liable to the seller for damages upon the occurrence of each such breach or default (King and Spalding, 2013).
According to Rogers and White (2013), “take-or-pay” contract is widely recognized by lenders, and it is often the most important method by which a seller secures the large external debt financing on limited recourse terms that energy projects typically require. A well-structured “take-or-pay” contract offers the seller with an assured revenue flow that provides sufficient return on the significant project capital investment and risks to which it is exposed. Vinter (1994) asserts that the predictability of revenue flows from the project minimizes the lender’s worry over potential risk of non-payment of the project debt.
Typically, a seller is concerned with two fundamental risks: market demand risk and price risk. A “take-or-pay” contract places the risk of deteriorating market conditions on the buyer by requiring it to always be responsible for the payment for a minimum purchase commitment (sometimes referred to as volume risk shifting), leaving the seller with only the market price risks to manage, which in some cases may be hedged (Rogers and White, 2013). It literally mean that, in the absence of the “take-or-pay” obligation a supplier bears all the risk that the off-taker’s ongoing need for the energy might dry up, or that a price swing might induce the buyer to break the contract.
“Take-or-Pay” contracts have been used by petroleum coke producers, aluminum company calination facilities, municipalities and waste incineration facilities (Kaiser and Tumma, 2004). The arrangement is also common in the energy sector, because of the substantial costs for suppliers to provide energy units such as electric utility, crude oil or natural gas; and the volatility of energy commodities prices.
“Take-or-pay” clauses are accepted the world over, as the arrangement exist in lots of places including Africa; in South Africa, Zambia, Nigeria, Tanzania, and Cote d’Ivoire. In Japan for instance, almost all liquefied natural gas (LNG) is imported under long-term contracts with a take-or-pay clause, although buyers assume considerable risk under such a clause. On the one hand, the government has accepted take-or-pay because it secures a stable supply of LNG (Namikawa, 2003).
Proceeding Cautiously
Reviewing and re-negotiating contracts could assist in achieving significant financial savings both in the short and long-term especially when market forces changes. However, one must to be careful not attract unnecessary costs because the service supplier is under no obligation to concede to you the buyer. In an attempt to re-negotiate, the buyer is essentially asking the seller for a favor. As a result, the buyer’s approach must be more calculated, as he seeks to restructure the contract to bring rates more in-line with current market conditions.
There could be financial or reputational damages if the process is poorly handled. In the instance where government would attempt to unilaterally re-calibrate the PPAs, it would be tantamount to a breach and/or repudiation of those agreements; and cost awaits the state in the form of judgement debt, reputational damage, and sabotages et cetera.
An approach for a collaborative consultation process to address the challenges in the energy sector will be less costly, compared to a unilateral re-calibration of the PPAs. Also an attempt to also blame the “take-or-pay” arrangement or blame the private sector who are the other side to those contracts, will result in government losing the goodwill to re-negotiate.
To this point, it is clear that “take-or-pay” clause as mostly capture in power purchase agreements is not wrong in all respect, and that it is an undeniable fact that risk associated with such capital-intensive projects must be well allocated to protect both the seller and the buyer. Government must therefore focus on areas to deploy effectively whatever “excess power” that may exist, and to correct the inefficiencies in especially the country’s power distribution segment.
Written by Paa Kwasi Anamua Sakyi, Institute for Energy Security (IES) ©2019
Email: [email protected]
The writer has over 23 years of experience in the technical and management areas of Oil and Gas Management, Banking and Finance, and Mechanical Engineering; working in both the Gold Mining and Oil sector. He is currently working as an Oil Trader, Consultant, and Policy Analyst in the global energy sector. He serves as a resource to many global energy research firms, including Argus Media and CNBC Africa
Ghana: Vivo Energy’s CSR Project Wins Best Community Relations Programme
Vivo Energy Ghana’s flagship sustainability project, ‘Energy for Water and Education’ has been adjudged the Best Community Relations Programme of the Year at the 8th National PR and Communications Excellence Awards.
Under this project, Vivo Energy Ghana (Shell Licensee), its employees and business partners handed over two newly constructed hand-pump boreholes to Hiamankyene community and rehabilitated the Brengo Presbyterian Basic School in the Ashanti Mampong Municipality to support the government efforts in achieving the SDGs 4 and 6, which centre on Quality Education and Clean Water and Sanitation respectively.
In addition, the company also donated educational materials to the people and school children in the community.
The Energy for Water and Education programme involved the regular consultation and engagements of various stakeholders including the project community and the municipal assembly in the planning and the implementation to ensure the successful execution of the project.
Commenting on the awards, the Managing Director of Vivo Energy Ghana, Mr Ben Hassan Ouattara expressed his appreciation to staff, business partners and all stakeholders for making the project a success.
“Your commitment level to impacting Hiamankyene community is unmatched. I want to express my profound gratitude to everyone for the personal contributions towards the project and I am very happy about the lives that we have changed and the communities we have impacted. This award is an affirmation of the hard work and commitment we invested into this project”, he said.
Receiving the award, the Corporate Communications Manager of Vivo Energy Ghana, Mrs Shirley Tony Kum, dedicated the award to the chief and people of Hiamankyene and project implementing partners. She further reaffirmed the company’s commitment to helping the government achieve the Sustainable Development Goals through its various strategic sustainability projects.
The National PR and Communications Excellence Awards is an annual event organised by the Institute of Public Relations, Ghana to recognise the achievements of public relations professionals, corporate institutions, public relations agencies and celebrate the best of Ghana’s PR and Communications industry.
Source: www.energynewsafrica.com
Ghana: David Ampofo Takes Over Ghana Upstream Petroleum Chamber As New CEO
The Ghana Upstream Petroleum Chamber has appointed David Ampofo as the new Chief Executive Officer.
David Ampofo is an award-winning Ghanaian journalist, communications expert and social entrepreneur.
He is the founder and Chief Executive of Channel Two Communications, an advocacy communications firm based in Accra, Ghana and the host of Time with David, Ghana’s premier talk show.
David takes over from Charles Darku, a former Managing Director of Tullow Oil Ghana, who also happened to be the first Chairman and CEO of the Chamber.
Commenting on the appointment, Mr Kweku Andoh Awotwi, Chairman of the Council of the Chamber and the Executive Vice President of Tullow PLC, said : “We are happy to have David join us and trust that David’s good advocacy skills will not only benefit the members of the Chamber, but the industry as a whole.
“David has distinguished himself as a Public Affairs professional, a passionate advocate and a critical thinker with outstanding communication skills,” he added.
On his part, Mr David Ampofo said, “I am looking forward to working with members and all industry stakeholders, including the government, in a collective effort to ensure that there is maximum value realised for both investors and the people of Ghana.”
About the Chamber
The Ghana Upstream Petroleum Chamber represents the shared interests of companies involved in oil and gas exploration and production as well as oil field services in the country.
The Chamber promotes, enhances and facilitates the growth of the industry through networking, education, industry information and advocacy for a favourable business environment.
As the voice of the industry, the Chamber provides advocacy services to its members and helps them navigate the regulatory framework.
The Chamber also offers a platform through which the industry can be reached by stakeholders from across the economy, including local communities
Ghana: Opoku Danquah Jnr. Appointed Deputy CEO Of GNPC
The President of the Republic of Ghana, H.E Nana Akufo-Addo has appointed Mr Opoku Ahweneeh Danquah Jnr as the deputy Chief Executive Officer of the country’s national oil company, GNPC.
In a letter signed by Nana Bediatuo Asante, Secretary to the President, and addressed to the Energy Minister, it said: “Kindly take necessary steps to give effect to the appointment in accordance with the relevant provisions of the Ghana National Petroleum Corporation Act, 1983(P.N.D.C.L .64).”
This is the second time a deputy CEO has been appointed to the West African nation’s national oil company since its establishment in 1983 and started operations in 1985.
In 2016, Mr. Thomas Manu was appointed as Deputy Chief Executive for Exploration & Production while Kwame Ntow Amoah was also appointed as deputy CEO for Commercial and Corporate Services .
Mr. Opoku Ahweneeh Danquah Jnr is a product of The Fletcher University (Turfs University), Middle College and Presbyterian Boys Secondary School.
Prior to his appointment, Mr Opoku Danquah Jnr worked with General Electric (GE), Houston, Texas, Director of Research, Houston, Texas, Wood Mackenzie, as Energy & Industry Senior Analyst Houston, Texas.
Mr Opoku Ahweneeh Danquah Jnr is a product of The Fletcher University (Turfs University), Middlebury College and Presbyterian Boys Secondary School.
He also worked with Hart Energy Upstream/Middlestream Oil & Gas in Houston, Texas, USA, as their Director of Research.
Additionally, he worked with Schlumberger, oil and gas services provider as the Head of Research/Analytics and Strategy Marketing Manager.
New Doc 2020-03-08 20.50.54
Source:www.energynewsafrica.com
New Doc 2020-03-08 20.50.54
Source:www.energynewsafrica.com South Africa: Eskom Moves Loadshedding To Stage 4 After Koeberg Unit 1 Breaks Down
South Africa’s power utility Eskom announced that load shedding will move to Stage 4 from 14:00 on Tuesday [10 March] after Koeberg Unit 1 tripped.
The utility said the unit has been disconnected from the grid due to a fault on the turbine side; however, the nuclear reactor remains safe.
Eskom assured that “the teams are investigating the root causes of the fault, and will advise of the remedy as soon as it is established. The loss of approximately 930MW unit puts further strain on the generation fleet, necessitating an increase in the stage of load shedding.
“As the ageing fleet is currently constrained, unpredictable and vulnerable, we advise South Africans that the stage of load shedding may change at short notice should there be any unexpected change in the generation system performance. Demand has also risen incrementally since January.
Eskom urges customers to revisit their load shedding schedules on the Eskom or local municipal websites, depending on their electricity supplier, to review amendments.
Source: www.energynewafrica.com
Angola: BP Awards Subsea Job To TechnipFMC
TechnipFMC has been awarded a significant integrated engineering, procurement, construction, and installation (iEPCI) contract from BP Angola for the Platina field development, located offshore Angola.
The Platina field is located in Block 18 at water depths ranging from 1,200 to 1,500 meters.
TechnipFMC said on Tuesday that the contract covers the manufacture, delivery and installation of the subsea equipment including subsea trees, a production manifold with associated subsea control and connection systems, as well as rigid pipelines, umbilicals and flexible jumpers.
Commenting on the contract, Arnaud Pieton, who is the President Subsea at TechnipFMC, said: “We are very pleased to have been selected by BP for this important deepwater development offshore Angola. We are committed to BP and to supporting the Angolan oil and gas industry. This iEPCI follows iFEED work and will utilize our local assets such as our service base in Luanda and our umbilical factory in Lobito.”
For TechnipFMC, a “significant” contract is worth between $75 million and $250 million.
In December 2018 BP signed an agreement with Sonangol to progress to final investment decision the development of the Platina field.
Platina was BP’s first new operated development in Angola since the PSVM project in Block 31 began production in 2013. It is be the second phase of development in Block 18 – the Greater Plutonio project started up in 2007.
Discovered in 1999, the Platina field is planned to be developed as a subsea tie-back to the existing Greater Plutonio FPSO vessel.
At the time, BP said that the final investment decision for the development was anticipated in the second quarter of 2019 with first oil then expected in late 2021/early 2022.
The production license extension will enable later life production from the Greater Plutonio fields as well as the future output expected from Platina.
Source:www.energynewsafrica.com
Equinor Suspends Helicopter Flights While Waiting On Coronavirus Results
Norwegian oil and gas giant Equinor has suspended helicopter flights to several offshore installations due to suspected coronavirus case, but the test results are still not in.
Spokesperson for Equinor told Offshoreenergytoday that the flights are temporarily suspended to the North Sea rigs Askepott and Askeladden and to the Oseberg field center and Martin Linge field.
The Askepott rig is located on the Oserberg field and the Askeladden is on the Gullfaks field.
The spokesperson explained that the suspension is while waiting on test results. There has been no corona confirmation so far and ordinary operations continue at these fields today, according to the spokesperson.
In addition to the effect it has on global oil demand and oil prices, the coronavirus outbreak has also negatively impacted a number of oil and gas companies’ operations.
As previously reported, Italy’s Saipem already in February advised its employees to stay at home and canceled and reduced to the minimum all missions to and from the risk areas abroad.
U.S.-based Talos Energy this week cancelled its investor and analyst event, which was supposed to be held in New York.
Ghana: COPEC Demands Reduction In Fuel Prices As Crude Oil Price Hit Below US$40
A consumer advocacy group in the Republic of Ghana, Chamber of Petroleum Consumers (COPEC) is urging Oil Marketing Companies (OMCs) in the country to reduce their ex-pump prices for consumers to reflect the sustained decline in the global crude oil prices.
According to COPEC, consumers could be benefitting from a reduction of between 10 percent-32 percent compared to the 2 percent that consumers have been given over the past few weeks.
At about 07:40 am Monday, WTI was trading around $30.00 per barrel while Brent was trading about $33.87 per barrel.
Despite the sustained decline in crude oil prices on the international market, consumers in the West African country are still paying higher for the commodity at the pump, a situation COPEC argues is not the best.
“The Chamber of Petroleum Consumers Ghana (COPEC GH), from a market analysis of the current indicative pump prices of both gasoil and gasoline for the first window of the current month, under review (1st and 15th of March) among some 63 OMCs, have found that petroleum consumers are surprisingly still being charged rather too high although oil prices on the international markets have declined and the FX has appreciated significantly against the US dollar,” COPEC said in a statement issued and copied to energynewsafrica.com.
COPEC noted that the petroleum downstream regulator, National Petroleum Authority (NPA), on its website duly, acknowledges that prices have declined by 9.65 percent between the last pricing window in February and the first pricing window March 2020 alone yet Ghanaian consumers have hardly seen anything beyond one percent within the period of reductions.
“It is our expectation in the coming few days that the various Oil Marketing Companies and the BDCs will ensure the Ghanaian is given nothing but the full benefit of these sustained reductions in fuel prices on the international markets.”
Meanwhile, COPEC wants Ghana’s price stabilisation and recovery levy scrapped, explaining that its continuous imposition is inimical to the consumer.
“The PSRL must be immediately scrapped from the price build up and a more sustainable source of funding be instituted for premix in order that the whooping 16p/litre charge on fuel prices can be dropped permanently to ease the pressure on pump prices immediately. Forthwith, we cannot continue to deceive the Ghanaian of a deregulated petroleum pricing environment which is somehow also micromanaged against the very people we expect to bear with when there are increases but someway somehow deny those same people any reductions when the indications point in that direction,” COPEC indicated.
Find below the full statement
ENSURE PETROLEUM PRICES IN GHANA REFLECT THE DECLINE IN INTERNTATIONAL OIL PRICES AND A STRONG CEDI
The prices of Oil on the International Markets has seen a very steady decline since the beginning of January 2020 to date ( March ) due mainly to a decline in demand as a result of the raging endemic COVID 19 across the globe causing a huge slowdown in global demand for oil especially in production factories across China as well as the ramping up of oil production by other Non-OPEC members across the world particularly the deployment of Shale production technologies in the United States of America (Energy Information Administration, 2020).
Between January and March, 2020, Gasoline prices have declined from $612/metric to current $496/metric, whiles Gasoil has declined from over $617 to current $502/metric, Brent crude oil price has also declined from $ 64 per barrel to $45.27 per barrel as at 6th March, 2020 reflecting 29.3% decrease (Oilprice.com). The West Texas Intermediate (WTI) crude prices has also declined from $63.27 per barrel in January, 2020 to $41.28 per barrel in March, 2020 reflecting 34.76% decrease (Oilprices.com).
Coupled with the steady decline in International Oil prices, also is, the nominal appreciation of the local currency, the cedi, which has recorded an appreciation of over 5% from earlier depreciation figures of over 5.85/$ to currently trade at below 5.40/$ according to latest BOG figures. The Bank of Ghana in January posited that the cedi in the first month of the year appreciated 0.3 percent against the dollar after its initial declined to same, made a 1.9 percent gain on the British pound while recording a 2.3 percent appreciation against the Euro and has since made significant gains against the major trading currencies.
The Chamber of Petroleum Consumers Ghana (COPEC GH), from a market analysis of the current indicative pump prices of both Gasoil and Gasoline for the first window of the current month under review (1st and 15th of March) among some 63 OMCs have found that petroleum consumers are surprisingly still being charged rather too high although oil prices on the international markets have declined and the FX has appreciated significantly against the US dollar.
The implication of paying higher prices in the current window when prices should have declined at all pumps means that the expected reliefs petroleum consumers in Ghana should have benefited from the full price deregulation programme is hardly being realized nor sustainable and thus unexplainable as prices have often headed south anytime these two indicators captured above indicate otherwise, consumers in the country are clearly not benefiting in anyway whatsoever from the observed sustained declines in international market prices and the performance of the local currency.
Further Findings
The application of the price stabilisation and recovery levy is currently serving an inimical contradictory purpose to its original purpose for which it was introduced, i.e to gather some savings that could be applied to cushion Ghanaian consumers whenever world market prices become unbearable, or other geopolitical factors make fuel prices unreasonable to Ghanaian pockets to now become a revenue generation source that is rather applied needlessly to premix subsidies knowing very well the high levels of corruption that the whole premix programme is bedeviled with from frequent news of diversions to hoarding and resale by persons engaged in the process.
The Chamber found that international market prices on the average have cumulatively declined by between 10% to 32.03% between January and March, 2020, the National Petroleum Authority (NPA) on its website duly acknowledges that prices have declined by 9.65% between the last pricing window in February and the first pricing window March 2020 alone yet Ghanaian consumers have hardly seen anything beyond 1% within the period of reductions.
The NPA clearly agrees to the fact that oil prices are falling averagely by around 9%. Monthly within the period yet due to its own reintroduction of the price stabilisation and recovery levy by a full 14 and 16 pesewas per litre in the first window of February it is unable to insist on price reductions by the various Oil Marketing companies at the pumps.
The petroleum consumer in Ghana only benefited from an average decline from GH¢5.48 per Litre in January to GH¢5.40 per Litre in March for Gasoil representing 1.46%. The average reductions petroleum consumers benefited on Gasoline between January and March 2020 currently stands at 1.47% reflecting a change from Gh¢5.46 per Litre in January to GH¢5.380 per Litre in March. The implication is that while petroleum consumers globally should be benefiting by almost 30% declines, the Ghanaian consumer is this far only see reductions for only less than 2%.
The Chamber also finds the amount on the Price Stabilization and Recovery Levy (PSRL) is not only too high but hardly justifiable, the NPA under the present circumstances seem to be at liberty to apply and withdraw at will, and that has been used in many instances to curtail increases and reductions which works against the spirit of a full price deregulation programme which insists Government must have no hand in setting of prices but leave same to the forces of demand and supply.
The NPA is expected to among other things ensure fair pricing, embark on continuous research and regulate to bring about absolute fairness to both ends of the petroleum downstream but it is becoming increasingly difficult to see on a day to day basis how these key mandates are being pursued for the benefit of the ordinary Ghanaian who continues to expect nothing but a corresponding reduction in pump prices when the international market prices and other key factors indicate so, A careful look at the prices at the pump in March juxtaposing with the strong performance of the Ghana cedi against the US dollar and the steady decline in international oil prices with a stay in prices at the pumps for Ghanaians suggest only one thing, consumers are simply being given a raw deal at the pumps currently and this must change without any further attempts to hoodwinked us with any grammar.
We further believe that given the above indices, that prices at the various pumps if not being manipulated and suppressed someway somehow should be should be selling at no more than the averages of GH¢4.60/litre currently instead of the above 5.38/litre
Conclusion
It is our expectation in the coming few days that the various Oil Marketing Companies and the BDCs will ensure the Ghanaian is given nothing but the full benefit of these sustained reductions in fuel prices on the international markets.
It cannot be justified under the current circumstances that the Ghanaian is still being charged for so high when the key indicators of pricing are all pointing to a downward trend, the Ghanaian consumer benefiting about only 2% reductions out of a possible 10%-32% within the period cannot be justified and this must change immediately.
Recommendation
The various Petroleum Service Providers (Oil Marketing Companies and BDCs) must at all times ensure that local pump prices reflect the reality or adequate percentage changes in international oil prices Platt and crude (WTI and Brent) as they always seem to do when prices point to increases in the spirit of fairness to the Ghanaian consumer in a full price deregulated environment in practice currently.
The PSRL must be immediately scrapped from the Price Build Up and a more sustainable source of funding be instituted for premix in order that the whooping 16p/litre charge on fuel prices can be dropped permanently to ease the pressure on pump prices immediately forthwith, we cannot continue to deceive the Ghanaian of a deregulated petroleum pricing environment which is somehow also micromanaged against the very people we expect to bear with when there are increases but someway somehow deny those same people any reductions when the indications point in that direction.
Signed
Duncan Amoah Benjamin Nsiah.
Executive Secretary Pricing and Research
Ghana: Gov’t Urged To Engage Malian Counterpart To Resolve Petroleum Export Trade Challenges
The Chief Executive Officer of the Chamber of Bulk Oil Distributors (CBOD) in the Republic of Ghana, Senyo Hosi has underscored the need for the government of the West African nation to engage its counterpart in neighbouring country, Mali, in order to resolve some pertinent issues which have reduced the volumes of petroleum products exported from Ghana into the Malian market.
He said Ghana’s ability to ensure that these bottlenecks were addressed would enhance growth in the sector.
It has emerged that the volumes of petroleum products imported by Mali from Ghana have dropped significantly due to demand for bank guarantee, which requires a 100 percent cash payment, currency differential and National Petroleum Authority’s (NPA’s) exporting guidelines.
Senyo Hosi observed that the Sahelian market presents a very good opportunity for Ghana to take advantage, explaining that Ghana can supply 50 percent of the demand by Malian market.
He made this call when a delegation from Mali’s National Office for Petroleum Products (ONAP) paid a courtesy call on CBOD.
“Our conversations have been mainly focused on optimizing the service quality and our competitiveness to be a dominant contributor to their market. Ghana is currently doing just 1% of the Malian consumption. We have lost grounds significantly to the likes of Senegal, Cote d’Ivoire, Benin and Niger as well. Our ability to grow will be dependent on our ability to penetrate our landlocked or Sahelian markets. Our ability to optimize the utilization of our assets particularly the storage facilities we have in Ghana will also be dependent on our ability to influence the volumes that are triggered in the landlocked countries.”
Hosi identified one of the barriers to effective trading between Ghana and these countries as currency differentials.
He, therefore, recommended that modalities be defined to enhance effective trading in the ECOWAS sub-region.
“We trade in dollars and them in CFA so the benchmark will be Euro,” he said.
He added that efforts should be made to reduce transaction cost to make business in the sub-region to propel competitiveness.
He also urged Ghana to make her Bolga depot strategic to serve Mali, Burkina Faso and the other Sahelian market.
Source:www.energynewsafrica.com