Digging Into the Oil Contract Business

The Minister of Energy Mr Albert Kan-Dapaah, has gone an extra mile by agreeing to submit the contract agreement the government signed with a Nigerian oil lifting company, Sahara Energy Resource Limited to the Parliamentary Committee on Mines and Energy for scrutiny. The minister who appeared in parliament recently to clear the air on the contract that has generated heated debate between the majority and minority said although the agreement is considered as secret he could still make it available to the Parliamentary Committee for study.

He said this is to enable members to determine the transparency or

Otherwise of the agreement. The minister's decision would also end debate on the issue of conflict of interest in the award of the contract.

Mr. Kan-Dapaah was answering an urgent question that stood in the name of Mr Abraham Kofi Asante, NDC-Amenfi West.

Mr Asante wanted to know from the Minister why the contract to lift crude oil from Nigeria to Ghana was awarded to the company without competitive bidding and what the terms of the contract were.

Mr Kan-Dapaah explained that the contract was signed without opening it to tender for competitive bidding because of "conditions of the utmost urgency".The government of Ghana, pressed for the earliest possible deliveries of oil because of imminent short supply, signed an agreement on April 1, this year with the company. "We did not, therefore, have the benefit of time to consider Competitive tendering.", the minister told parliament. The Accra Mail has learnt that Sahara Energy Resources played a key role in getting the two governments to agree on the terms.

Mr Kan-Dapaah said under the agreement the government is to save 7.4 million dollars per annum for the country.

He said the agreement goes deeper than that and as far as he was concerned the contract was transparent and would save hard currency for the country.

The hullabaloo over the lifting of oil hovers around Vitol, which supposedly had likns with the NDC losing the contract to Sahara Energy Resource, also beleived to be close to the NPP and which the new government prefers. Industry experts say the negotiation that led to Ghana benefiting from a 90-day credit instead of the previous 30-day was a government-to-government agreement. Under the new arrangement Ghana does not need Letters of Credit, with their accompanying charges from any international bank in order for Nigeria to let the oil flow. All the country now needs is a guarantee from the Bank of Ghana. The experts argue that in that regard, the previous agreement that gave Vitol the right to lift oil, apart from not benefiting the country, had no basis because there was no agreement between the two governments. Records available show that Vitol started its adventure in Ghana oil in the early 1990s when the GNPC assigned Ghana's crude oil allocation from the Nigerian government to it and other companies, while the Tema Oil Refinery (TOR) had to procure the same oil from the international oil companies at a huge premium.

Vitol's stranglehold over TOR has been so overwhelming that under the previous administration of W.S.Parker Vitol had the exclusive 'offtaker' rights to export petroleum by-products such as LSFO and Naphtha for the next 15 years. This contract, we gather was renewed without any competition since 1997. In October 1999 Vitol negotiated with TOR to supply two cargoes per month, using the LSFO\Naphtha export contract as collateral for TOR's payments. And as part of the arrangement to offset TOR's $185 million RFCC project to expand the refinery, TOR again committed all exports of LSFO and Naphtha to Vitol for the period 2002 to 2012.

In addition, TOR granted Vitol an exclusive right to build and operate a $32.0 million offshore storage facility (SBM) to receive crude oil from Nigeria. This agreement was supposed to compel TOR to buy oil exclusively from Vitol. There was no competitive bidding in the process as well. So much as the saying goes that two wrongs do not a make right, the government of the day has the right to make decisions and take the consequences thereon.