Parliament approves petroleum agreement

Page 14, June 27, 2009
Story: Emmanuel Adu-Gyamerah & Daniel Nkrumah

PARLIAMENT has approved the petroleum agreement among the Republic of Ghana, Ghana National Petroleum Corporation (GNPC) and Vanco Ghana Limited and Lukoil Overseas Ghana Limited in respect of Cape Three Point Deepwater Block Offshore Ghana.
According to the committee, the contract is “a good one and is in the interest of the nation” and also “an improvement over the original Vanco agreement ratified by the House in 2002”.
In its report on the agreement, the committee noted that the agreement was negotiated within the framework of the Petroleum (Exploration and Production) Law 1984, PNDCL 84.
According to the report, in the new Petroleum Agreement, Vanco, the current operators would have 28.339 per cent ownership interest and Lukoil would also have 56.661 per cent ownership and would thus be the operators of the project after the drilling of the first exploratory well.
The report said, “GNPC has 15 per cent carried interest through exploration and development,” adding that “GNPC has the option to take an additional paying interest of up to five per cent upon commercial discovery”.
According to the report, the agreement provided an exploration period of five years which comprised an initial exploration period of three years, first extension period of one year and a second and final extension period of one year.
It said within the first three years, the contractor shall acquire, process and interpret a minimum of 1,500 square kilometers of new 3-D seismic data and shall drill a minimum of two exploration wells in the contract area.
“The contractor shall invest a minimum of $100,000,000.00 for work in the initial exploration period,” the report added.
It indicated that in the second exploration period, the contractor shall reprocess existing data where required and drill a minimum of one exploration well in the contract area with a minimum expenditure for the first extension period pegged at $45,000,000.00.
The third extension period also has same schedules and expenditure requirement, the report noted.
It said in the event of commercial discovery, benefits to be accrued to the state were Royalties: Oil (Shallow Water), 12 per cent, Oil (Deep water) 10 per cent, Gas, 5.0 per cent; GNPC carried interest, 15 per cent; GNPC additional interest, 5.0 per cent; Corporate Income tax, 35 per cent.
It said under the new agreement, the state shall be the sole owner of any associated gas produced from the contract area and gave the GNPC the right to take off all associated gas for its own use.
The report also indicated that the new agreement required the applicants to pay to the GNPC $200,000.00 annually during the initial exploration and extension periods and $300,000.00 during the development and productions periods.
“This is to help GNPC develop a programme to train Ghanaians in management and technical skills associated with petroleum operations,” the report said.
It said other benefits to the state included additional oil entitlements upon the attainment of agreed Rates of Returns and also surface rental charges.
The report said during deliberations, the committee observed that as part of the agreement, Vanco Ghana Limited and Lukoil Overseas Ghana Limited had their registered mail and contact addresses at Houston, Texas in USA and Moscow, Russia respectively.
It said the committee was of the view that such an arrangement would put additional responsibility on the State during its dealings with the contractor, adding that as a condition for recommending the agreement for approval, the committee directed that Vanco and Lukoil should provide their contacts to their registered addresses and telephone numbers in Ghana.
It said subsequently that the applicants had provided their local addresses.