Ghana: COPEC Petitions Parliament To Reject Hikes In Petroleum Sector Levies
A consumer advocacy group in the Republic of Ghana, Chamber of Petroleum Consumers (COPEC) has petitioned Ghana’s Parliament to consider by rejecting the proposed increases in petroleum sector levies announced by the Finance Minister in Parliament last Monday.
The chamber urged the legislative body to do so in the interest of consumers in the West African country.
“We humbly indulge your honest house to consider the plight of the ordinary Ghanaian and dismiss the implementation of tax increment on petroleum products, which will only pose huge financial burden on the citizenry of the Republic of Ghana,” a petition signed by executive secretary of COPEC, Duncan Amoah, said.
Presenting a mid-year budget review statement in Parliament on Monday, July 29, this year, Finance Minister Ken Ofori-Atta said, “Government proposes to increase the Energy Sector Levies by GHp20 per litre for petrol and diesel and GHp8 per kg for LPG, so as to increase the inflows to enable government issue additional bonds to pay down our energy sector debt obligations.
“Based on current indicative prices for petrol and diesel, this translates to GHp90 per gallon.”
However, COPEC, in its petition, kicked against the proposed levies.
“As a country committed to curbing the menace of climate change, COPEC is of the opinion that when the LPG price increases, people will be demotivated in attempt to move from non-environmentally friendly fuels to LPG, hence derailing the aim of government’s LPG penetration target.
“COPEC believes that government can source for alternative means of revenue generation including employing prudent measures to check perennial leakages in the energy sector, where the state loses over GH¢1.6 billion yearly to fuel smuggling, as well as revamping and equipping State Owned Enterprises like TOR to be more productive and profitable.”
Halliburton To Bring Pre-Salt Expertise To Libra Development In Brazil
Halliburton, one of the world’s largest providers of products and services to the energy industry has announced the execution of an integrated services contract with Petrobras for pre-salt development in the Santos Basin.
The two year and six month contract will provide drilling and completion services to drive greater efficiency by applying pre-salt expertise and integrating multiple product offerings and technologies.
“We are pleased to win this work and to collaborate with Petrobras to provide a tailored application of Halliburton technology,” Anouar Fraija, Vice President of Halliburton Brazil said.
“This contract is a testament to our continuous commitment to safety, superior service quality and helping operators maximize their asset value.”
Halliburton has an established track record in Brazil’s pre-salt fields, which have some of the most complex wells ever drilled, and require a broad scope of technologies and capabilities to achieve economical and operational success.
Halliburton also maintains a technology center in Rio de Janeiro, which serves as a global center of expertise for deepwater innovation and training.
The center’s capabilities allow Halliburton to translate offshore knowledge into new technologies that reduce uncertainty and increase efficiency and reliability.
Shell Sells Its GOM Caesar-Tonga Asset For $965 Million
Shell has sold its non-operated interest (22.45%) in the Caesar-Tonga asset, U.S. Gulf of Mexico, to Equinor for $965 million. The transaction is subject to approval of the lease assignments by the regulator.
The transaction represents Shell’s focus on strategically positioning the deepwater business for growth and is consistent with its strategy to pursue competitive projects that deliver value in the 2020s and beyond. The sale contributes to Shell’s ongoing divestment program.
Shell has a leading deepwater portfolio with an exciting development funnel and strong exploration acreage in the U.S. Gulf of Mexico, Brazil, Nigeria and Malaysia heartlands, as well as in emerging offshore basins such as Mexico, Mauritania and the Western Black Sea. Shell currently is the largest leaseholder and one of the leading offshore producers of oil and natural gas in the U.S. Gulf of Mexico.
In April 2019, Shell announced it had signed an agreement to sell its interest to Delek CT Investment. Subsequently, Equinor exercised its right of first refusal under the joint venture operating agreement. The transaction has an effective date of January 1, 2019.
The field is operated by Anadarko Petroleum, holder of 33.75% interest. The remaining interest in the asset following the completion of the divestment is distributed between Equinor (46.0%), and Chevron (20.25%).
Hess Narrows Second Quarter Loss
U.S. oil and gas company, Hess has reported a net loss of $6 million in the second quarter of 2019, compared to a net loss of $130 million for the same period last year on the back of increased oil production and reduced expenses.
Hess also decided to trim its full year capex guidance.
Hess Corporation on Wednesday reported revenues of $1.7 billion compared to $1.56 billion in the same quarter of 2018.
On an adjusted basis, the company reported a net loss of $28 million in the second quarter of 2019. In last year’s second quarter, Hess reported an adjusted net loss of $56 million.
According to the company, the improved adjusted results reflect increased U.S. crude oil production and reduced exploration expenses, partially offset by the impact of lower realized selling prices and higher depreciation, depletion, and amortization expenses.
The company’s CEO, John Hess, said: “Our production is now expected to come in at the upper end of our full-year guidance range, while our capital and exploratory expenditures are projected to come in below our original full-year guidance.
“In Guyana, we have just increased the estimate of gross discovered recoverable resources for the Stabroek Block to more than 6 bboe and continue to see multibillion barrels of additional exploration potential.”
Hess’ Exploration and Production (E&P) net income was $68 million in the second quarter of 2019, compared to $31 million in the second quarter of 2018.
Higher production driven by Bakken & GoM
The company’s average realized crude oil selling price was $60.45 per barrel in the quarter, versus $62.65 per barrel in the year-ago quarter. The average realized natural gas liquids selling price in the second quarter of 2019 was $12.18 per barrel, versus $20.51 per barrel in the prior-year quarter, while the average realized natural gas selling price was $3.92 per mcf, compared to $4.12 per mcf in the second quarter of 2018.
Net production, excluding Libya, was 273,000 boepd in the second quarter of 2019, up from second quarter 2018 net production of 247,000 boepd, or 234,000 boepd excluding assets sold. The higher production was primarily driven by the Bakken and the Gulf of Mexico.
Libya net production was 20,000 boepd in the second quarter of 2019, compared with 18,000 boepd in the prior-year quarter.
E&P capital and exploratory expenditures were $664 million in the second quarter of 2019, compared to $525 million in the prior-year quarter, reflecting increased drilling in the Bakken and greater development activity in Guyana.
For full-year 2019, Hess’ E&P capital and exploratory expenditures are projected to be $2.8 billion, down from original guidance of $2.9 billion.
Source: Offshoreenergytoday.com
Ghana: Gov’t Ignored Several Concerns Raised Over PDS Deal – Minority
The Minority in Ghana’s Parliament has hinted of plans to further investigate the operations of the Power Distribution Services Limited (PDS).
According to the Minority Spokesperson on the Mines and Energy Committee, Adams Mutawakilu, government has been unfair to Ghanaians by not adhering to earlier concerns raised about the agreement.
This comes after the government announced a suspension of the concession agreement with PDS, after the detection of fundamental and material breaches of obligation in the provision of Payment Securities.
Adam Mutawakilu said government should have been more diligent prior to the signing of the concession agreement with PDS claiming the documents presented by PDS prior to the signing of the deal was not genuine.
Mr. Adam Mutawakilu further accused government of not sticking to aspects of the deal which was approved by Parliament.
“The Minority raised issues about the same guarantee or security and insisted that the PDS was expected to have provided the right document before the handing over of the assets of ECG. On several occasions we called on Government that PDS had not provided the right documents and that it was paper documents that was not backed on liquidity and cash…”
“Government had to wait for all this while before coming out to say they had done their due diligence… Government has not been fair to the people of Ghana by not sticking to what Parliament had approved and amending it to suit PDS.”
The Member of Parliament for Damongo also argued that Government’s decision to scrap the agreement deal could have dire consequences for the country on the International front in the future.
He also accused some government officials of sidestepping the agreed rule of engagements for the concession deal.
“We believe that the suspension of PDS goes beyond the provision of the guarantor…We have information on of alleged people fronting and the agreements we had as challenges and in the coming days, we will come out with the truth.”
“The inconsistencies of Government in respect to the concession will cast some bad image for Ghana in the international community but I still maintain that doing the right thing should have been done a long time ago.”
Source: Citinewsroom.com
Renegotiating Take-Or-Pay Deals Won’t Incur Judgment Debts – Oppong-Nkrumah Assures
Ghana’s Information Minister, Kojo Oppong-Nkrumah, has dispelled concerns that a decision by government to review some of the current power purchase agreements (PPAs) will result in judgement debts.
According to him, the government is cautiously working to convert the take-or-pay agreements to take-and-pay with some Independent Power Producers (IPPs) in a way that will prevent possible legal issues like a breach of contract.
“Not that we intend to force it down their [IPPs’] throats. We can’t do that. The idea is also to explain to them where the sovereign tends to go, where the red line is, so we begin to work with them,” he said.
The Finance Minister declared “a state of emergency” in the energy sector on Monday, a situation he said was causing the state to bleed scare financial resources.
The challenges in the energy sector, Ken Ofori-Atta stated, could pose grave financial risks to the entire economy.
“At the heart of these challenges are the obnoxious take-or-pay contracts signed by the NDC, which obligate us to pay for capacity we do not need,” Mr Ofori-Atta indicated while presenting the mid-year budget review to Parliament.
He said the country was paying over GH¢2.5 billion annually for some 2,300MW in installed capacity which the country does not consume.
“We shall from August 1st 2019, with the support of Parliament, make take-or-pay contracts a beast of the past,” he stressed.
However, some energy analysts have raised concerns over the issue, arguing that former the move to review the agreements could lead to judgement debt.
Reacting to these concerns, however, Mr Oppong-Nkrumah said the successes already achieved in renegotiating some power deals are evidence that other renegotiations will also be successful.
Baker Hughes Cuts Losses In Second Quarter
Oilfield services provider, Baker Hughes, a GE company, managed to reduce its loss as its revenues increased in the second quarter of 2019.
BHGE on Wednesday posted revenue of $6 billion for the second quarter 2019, up 7% sequentially and up 8% year-over-year. The company’s revenues in 2Q 2018 were $5.55 billion.
The company’s GAAP operating income was $271 million for the quarter, which means it increased 54% sequentially and increased more than three times year-over-year.
Adjusted operating income (a non-GAAP measure) of $361 million for the quarter was up 32% sequentially and up 25% year-over-year.
Net loss attributable to BHGE was $9 million compared to a loss of $19 million in the prior-year quarter.
The company’s orders in the period, which totaled $6.6 billion, were up 15% sequentially and up 9% year-over-year.
Lorenzo Simonelli, BHGE Chairman and Chief Executive Officer, said: “We delivered a solid second quarter 2019 both commercially and operationally. The trends for our longer-cycle businesses remain intact. The Liquefied Natural Gas (LNG) new-build cycle is a strong positive for our company and our international Oilfield Services (OFS) business continues to be very successful.”
He added: “Our outlook for 2019 is unchanged and we remain focused on our priorities of gaining share, improving margins and delivering strong cash flows.”
Ghana: Deal With Excess Capacity In Energy Sector – ACEP To Government
An Energy Think Tank in the Republic of Ghana, Africa Center for Energy Policy (ACEP), has advised the government to focus on addressing excess power generated by the Independent Power Producers and not renegotiating the take or pay agreements with the producers.
Executive Director of the Think Tank, Ben Boakye has noted that the sector’s real challenge is the reckless signing of power agreements which must be addressed.
“The problem the energy sector has is not because we have take-or-pays. It is because we have excess [capacity]. The problem is the reckless signing of more than we need.”
During the mid-year budget review, the Finance Minister said the country was in a “state of emergency” as far as the energy sector was concerned.
The “obnoxious” take-or-pay contracts were cited as a critical risk to the economy by the Minister.
The West African country’s installed capacity of 5,083 MW is almost double the peak demand of around 2,700 MW.
Of the installed capacity, 2,300 MW has been contracted on a take-or-pay basis meaning Ghana is contractually obliged to pay for the excess capacity though it does not consume it.
“This has resulted in us paying over half a billion U.S. dollars or over GHS 2.5 billion annually for power generation capacity that we do not need,” the Finance Minister said during the budget review.
He noted that the government intended to renegotiate and convert all take-or-pay contracts to take-and-pay contracts.
But Mr. Boakye said the country could also explore other alternatives beyond converting all contracts.
As another option, he suggested that the country could opt out of some contracts “and pay the damages.”
“If you recognize that damages for cancelling the contract is better to wait for five years to pay $1 billion, then you take the option and pay the $200 million to save the difference.”
Source: citinewsroom.com
Ghana Energy Awards 2019 To Be Launched Today
Ghana Energy Awards, GEA, is set to launch the third edition of the Awards at the Challenge House, Abelemkpe, Accra on Wednesday, July 31, 2019.
The launch is to announce the theme for this year’s awards and open nominations for the various categories for energy sector companies and personalities in the country to apply for nominations.
Dr Kwame Ampofo, the Chairman of the Awarding Panel, said the Awards is chiefly to honour hardworking individuals and organizations in the country’s energy sector while at the same time promoting competition and quality service.
According to him, the award scheme is programmed to get better every year in terms of quality delivery, attendance, assessment of nominees which is a totally transparent process and a reflection of major activities in the industry.
Last year, he said, was far more impressive in terms of attendance, publicity and the overall organisation, however, this year, “we are expecting and working toward a better event in all regards,” he added.
The Awards is considered by industry players and regulators as truly the ‘Mother of all awards’ in the country’s energy sector.
He believed innovative awards such as the special Non-Competitive category which both previous editions have been received by noble personalities make the awards scheme unique and separate it from all other awards.
Dr Ampofo revealed that the 2019 Awards will feature a special set of awards for high-level achievers in the country whose patriotism and efforts have moved the country forward. This set of awards is non-political but for politicians who the entire country will admit deserve acknowledgement for their labours to ensure economic growth.
Henry Teinor, organiser of the awards said that this third edition of the awards will be exciting as more industry stakeholders will be involved in the entire awards process.
He said the Organising Committee decided to do the launch three clear months to the event so that prospective candidates will have ample time to gather their documents and evidences to support their applications.
“We are watching out for projects, new deals, strategic achievements of companies in the sector. We are also looking out for organizations that ensure compliance with industry regulations and standards,” he added.
Some prominent categories of the awards are the Energy Personality of the Year, both male and female categories, the Rising star award, Energy Reporter, Energy Institution, Energy efficient organization of the year, as well as the Non-Competitive categories.
Ghana Energy Awards is scheduled for the last Friday of every November and is endorsed by the Ministry of Energy and World Energy Council, Ghana and is validated by Mazars Ghana.
Ghana: We’ve Acted In Good Faith-PDS Replies Gov’t
The Public Distribution Services (PDS) Ghana Limited has responded to the decision by government to suspend the concession agreement between them.
In a statement signed by CEO of PDS, it said, “PDS wishes to state for the record that it has always acted and will continue to act in good faith at all times.
“PDS will go through due process by complying with the terms of the Transactions Agreements executed between it and ECG on one hand and GoG through MoF on the other hand.”
Government, through the Information Minister, Kojo Oppong Nkrumah, yesterday July 30, 2019, announced that it had suspended its agreement with PDS over some breaches.
Ghana: Gov’t Suspends Concession Agreement With PDS
Government of Ghana has, with immediate effect, suspended its concession agreement with Power Distribution Services (Ghana) Limited.
PDS took over the power distribution business from the state power distributor, Electricity Company of Ghana (ECG), from March 1, 2019.
However, barely four months into its operation, government has suspended the deal.
A statement from the Ministry of Information said the decision was taken after government had discovered some breaches in the company’s obligation in the provision of payment securities.
It would be recalled that the Independent Power Producers (IPPs) in the West African country threatened to shutdown their power plants over failure of ECG/ PDS to settle their huge indebtedness to the tune of about $700m.
After weeks of debate, the Ministry of Finance intervened by releasing an amount of GHc 200m to settle part of the debts.
It is not clear whether the recent issue also influenced government’s decision to suspend the deal.
Ghana: ‘Take And Pay’ Policy Will Scare Away Investors-Former GNPC Boss Warns Gov’t
A former Chief Executive Officer of Ghana’s National Oil Company (GNPC) Mr Alex Mould is incensed by the country’s government’s plans to re-negotiate all ‘take-or-pay’ power purchase agreements signed under the previous regime to take-and-pay.
The former government official, in a Facebook post on Tuesday, July 30, 2019, described the decision, which was contained in a mid-year budget review presented by the country’s Finance Minister Ken Ofori-Atta, in parliament, as irresponsible, arguing that the move would scare away prospective investors.
“The irresponsible statement by the Finance Minister to renegotiate all take-or-pay power agreements to take-and-pay will scare away prospective investors, not only in the power sector but even more in the development of any future gas Exploration and Production field.
“If investors agree to take-and-pay agreements, government will have to provide even greater security support packages to make the financing of the development of these gas fields intended for Gas2Power possible,” he explained.
“An analogy is where a caterer agrees with a company to provide meals for 200 staff, based on the demand forecast at the time.
“She then gears up, enters into debt to buy equipment to provide 200 meals a day; only to find out later that the company decides unilaterally, or for some other reason, to reduce the meals to 150 people, there will be consequences for everyone involved…the off-taker, the supplier, the supplier’s banks etc. How does the caterer pay for the debt with reduced revenue and reduced margins?” he posited.
Below is the full post
The irresponsible statement by the Finance minister to renegotiate all take-or-pay power agreements to take-and-pay will scare away prospective investors not only in the power sector but even more in the development of any future gas Exploration and Production field;
If investors agree to take-and-pay agreements government will have to provide even greater security support packages to make the financing of the development of these gas fields intended for Gas2Power possible
The finance minister has been ill advised and it shows his teams lack of experience in financing infrastructure projects;
An analogy is where a caterer agrees with a company to provide meals for 200 staff based on the demand forecast at the time.
She then gears up, enters into debt to buys equipment to provide 200 meals a day ; only to find out later that the company decides unilaterally, or for some other reason, to reduce the meals to 150 people
There will be consequences for everyone involved – the off taker, the supplier, the supplier’s banks etc.
How does the caterer pay for the debt with reduced revenue and reduced margins?
It’s a joke; they cannot do it for new IPPs; no new projects will achieve Financial Investment Decision (FID); perhaps they can do it for old IPP plants that have fully amortized their initial costs.
If this is done unilaterally, or without Agreement with the stakeholders in the IPP financing, this may actually cause the breach of financial covenants between the IPP and its financial institutions; this could actually result in default, and potentially judgement debt against the state
The World Bank provided up to $700m in Guarantees – it’s largest ever financial guarantee to a project – to back a take-or-pay E&P Gas field development and also the financing of 4 take-or-pay power plants in Ghana; lets see if they can go renegotiate with the World Bank – that’s where they need to start so we see how serious they are;
The financial institutions that financed these plants will not agree to a renegotiation unless Govt provides more support or guarantees in the form, possibly, of StandBy Letters of Credit to provide comfort of default from the already bankrupt power sector;
A take-or-Pay contract will have lower tariffs than a take-and-pay contract!
Lastly it was disingenuous of the finance minister to deceive the public with the amount of dependable (24/7) sustainable power generation capacity which is more in the neighbourhood of 3,500mW rather than the 4,593MW
The issue I raise here is with the Minister’s statement that has to do with him saying that he will renegotiate “ALL” IPP PPAs to make them take-and-pay from take-or-pay
It is possible to renegotiate those old IPPs that have most likely paid down all their initial capex but quite impossible to do that for relatively new IPPs, and impossible to do that for new IPPs
We should also not confuse the Put-Call Option Agreements, PCOA, with take-or-pay Agreements.
PCOA replaces the Government Support and Consent Agreements that basically mitigates the political and country risk when a default occurs due to Gov’t interference ie country specific – since Gov’t controls PURC, and the whole power value chain, gov’t interference is a huge risk for the investors and their financial institutions
The take-or-pay on the other hand is more related to off takers payments for power received – ensuring debt service payment of the capital expenditure financed by the investors financial institution; it is a project financing requirement in the power sector (and in most infrastructure project).
Pls note that both Bui and Sunon Asogli, both signed by the NPP gov’t where take-or-pay Agreements
If the IPP has paid off its initial capex then there is the need to renegotiate
The IPP needed a take-or-pay Agreement in order to secure the original capex financing
If we send a message out to the power sector investor community that we would no longer be entering into take or pay agreements, as explicitly stated by the Finance Minister, it would be impossible for them to reach Financial Investment decision, nor raise the funding from the project finance banks
BP’s Second Quarter Profit Stable As Production Grows
UK oil major, BP posted a profit of $2.8 billion for the second quarter 2019, which is similar to the company’s performance in the same period last year, while its production increased during the period.
BP said on Tuesday that its underlying replacement cost profit for the second quarter of 2019 was $2.8 billion, similar to a year earlier. The quarter’s result largely reflected continued good operating performance, offset by oil prices lower than in the second quarter of 2018, the company said.
Underlying RC profit is after adjusting RC profit for a net charge for non-operating items of $861 million, mainly relating to impairment charges, and net adverse fair value accounting effects of $175 million (both on a post-tax basis).
The company’s non-operating items in the second quarter of $0.9 billion, post-tax, were related mainly to impairment charges.
BP reported oil and gas production for the quarter averaged 3.8 million barrels a day of oil equivalent, 4% higher than a year earlier.
With the start up of the Total-operated Culzean project (BP 32%) in the North Sea this quarter, four upstream major projects have begun production in the first half of the year.
Final investment decisions were made for the Thunder Horse South Expansion Phase 2 project in the U.S. Gulf of Mexico and the MJ project on Block KG D6 offshore India. BP and partners also agreed additional investment expected to increase and extend production from deepwater Block 15 offshore Angola.
BP CEO, Bob Dudley, said: “At the midpoint of our five-year plan, BP is right on target. Reliable performance and disciplined growth across our businesses are delivering strong earnings, cash flow and returns to shareholders.”
Organic capital expenditure for the second quarter and half year was $3.7 billion and $7.3 billion, respectively. BP reported $3.5 billion and $7 billion for the same periods in 2018.
Source: offshoreenergytoday.com
Ghana: WAPCo To Upgrade Tema Regulating And Metering Station
The newly appointed Managing Director of the West Africa Gas Pipeline Company Limited (WAPCo), Greg Germani, has told energynewsafrica.com that the company intends to expand its regulating and metering station in Tema to increase its capacity.
The move, according to Mr Germani, is as a result of the increasing demand in supply of gas for power plants in the Tema power enclave.
“Right now we are seeing a growing demand at Tema and we need to expand our Tema facility to meet the demand. So we are working with the support of the Ministry of Energy, Ghana National Petroleum Commission and Eni to expand our facility at Tema to increase the capacity so that more gas will be able to be delivered to the Tema enclave”.
Mr Germani said the Tema facility is being expanded from its current capacity of 140mmscfd to over 200mmscfd to meet the anticipated demands.
He noted that gas supply from Nigeria to Tema has increased saying, “We are starting to see flows from 90 to 110 mmscf a day”.
He said the completion of WAPCo’s new facility at Takoradi to receive natural gas from Ghana Gas facility has made it possible for WAPCo to transport natural gas from Takoradi to Tema. In June an average of 30mmscf of natural gas was transported daily from Takoradi to Tema, he said.
He said the pipeline is available and is run efficiently to operate at over 90 percent reliability to deliver gas from both ends, whether from Nigeria or from Takoradi in Ghana.