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Business News of Wednesday, 27 October 2021

Source: thefinderonline.com

Court affirms Eni-Springfield unitisation directive, dismisses Eni’s judicial review application

The parties have been instructed to reconcile the amount of each party’s aggregate surplus The parties have been instructed to reconcile the amount of each party’s aggregate surplus

The Commercial Division of an Accra High Court has dismissed a review application filed by Eni Ghana Exploration & Production Limited and its partner company Vitol Upstream Ghana Limited seeking to nullify unitisation directives issued by the Ministry of Energy.

Cost awarded against ENI

Presided over by Justice Emmanuel Kwesi Mensah, the court awarded a cost of GH¢10,000 each which Eni and Vitol will pay to the Attorney General’s Department and the interested party (Springfield Exploration & Production Limited) respectively.

Directive did not violate Petroleum Exploration Act

Justice Mensah ruled that a careful read-through of Section 34(1) of the Petroleum Exploration Act, (Act 919) of 2008 does not show that the Minister of Energy’s directive violated the said provision of the law.

Sankofa and Afina oil fields declared unitised

In 2020, the government declared the Sankofa and Afina oil fields unitised and directed Eni and Springfield to take steps to work together.

Regulation 50(6) of L.I 2359

The imposition was pursuant to Regulation 50(6) of the Petroleum Exploration and Production General Regulation, 2018 (L.I 2359).

Eni file suit on April 12, 2021

However, Eni, in a suit dated April 12, 2021, wanted the Commercial Division of High Court to declare the directives issued on October 14 and November 6, 2020 as illegal, unfair and arbitrary.

Eni says minister did not follow due process in law

Eni argued that the then sector Minister, John Peter Amewu, did not follow due process in law in issuing the directives.

Eni seeks interlocutory injunction

The Italian oil giant prayed the court for an interlocutory injunction restraining the Ministry of Energy from taking any steps to seek to enforce the directive pending the determination of the judicial review.

Eni did not challenge whether the fields straddle or not
Per the contents of the suit, Eni is not challenging whether the fields straddle or not.

Conditions for filing review application

In his ruling, Justice Mensah explained that a review application applies to any judgment order, conviction or other proceedings.

Application did not meet conditions

However, he pointed out that the application filed by Eni and Vitol was not targeted at any judgment order, conviction or other proceedings as stipulated by law but rather targeted at a directive issued by a minister of state.

Application did not seek certiorari

The judge also averred that the application did not pray the court for an order of certiorari, which means provision of Rule 3(2) of Order 55 of C.I 47 does not apply.

Affidavit in support of the application incompetent

Justice Mensah pointed out several flaws in the application and described the affidavit in support of the application as incompetent.

He explained that the affidavit filed by one Abena Owusu in respect of Vitol failed to make any deposition to demonstrate her connection with the company and is therefore made without authority.

Eni drags Ghana to arbitration in London

While litigating in Ghana, Eni also filed a suit at the International Tribunal in London, United Kingdom, to challenge a directive by Ghana’s Ministry of Energy, asking them to unitise Sankofa offshore oil field and Afina oil bloc, operated by Springfield Exploration & Production (SEP) Limited, a wholly Ghanaian upstream player.

Eni seeks 5 reliefs

In a statement filed by three renowned lawyers, namely Craig Tevendale, Andrew Cannon and Charlie Morgan from Herbert Smith Freehills LLP, Eni is seeking five reliefs from the Tribunal.

Claims of breach of contract under Petroleum Agreement

Eni wants the Tribunal to declare that the purported April 9, October 14 and November 6 directives on unitisation and any other steps taken to implement those directives represent a breach of contract under the Petroleum Agreement.

Eni seeks damages payment

The third relief the claimant is seeking is an order that the respondent pays damages in an amount to be quantified for the losses suffered by ENI arising out of Ghana’s breaches of the petroleum agreement, Ghanaian law and international law on a joint and several basis.

Costs and expenses of the arbitration

In addition, Eni is seeking an order that the respondent pays all of the costs and expenses of the arbitration, including the fees and expenses of ENI’s counsel and any witnesses and/or experts in the arbitration, the fees and expenses of the Tribunal and the fees of the SCC on a joint and several basis and /or an order such further or other relief as the tribunal may, in its discretion, consider appropriate.

President Akufo-Addo assures amicable solution

Reacting to Eni filing arbitration in London, President Nana Akufo-Addo, in a meeting with the chiefs in the Western Region at the Western Regional House of Chiefs during his tour of the region, assured amicable resolution of the impasse between Ghana and Eni.

“I’m still very upset that at the end of the day, the matter that we were having a discussion on has become the subject of notice of arbitration. We should settle this matter, and I will do my possible best to resolve it,” he stated.

Following an independent evaluation of the Cenomanian Channel and hydrocarbons volumes on each side of the reservoir, the Ministry of Energy directed Springfield and Eni to engage.

Stalemate emerged

In the course of the engagements, a stalemate emerged.

Fearing revenue losses, Springfield filed a case at court to protect its interest.

The court has ordered Eni to deposit 30% of monthly revenue into an escrow account pending unitisation.

In response, Eni challenged the capacity of Springfield, arguing that it is only the Energy Ministry that can compel it to abide by the directive.

Eni lost the challenge as the court ruled that as an interested party, the outcome of the case can affect Springfield.

Springfield then filed for preservation of funds.

At this point, Eni filed an application against the Attorney General and Minister of Justice, as well as the Energy Ministry, seeking judicial review of the directive.

Springfield - 54.545%

Under the arrangement, Afina, which is operated by Springfield, holds 54.545% of the combined field on a count of the volume of discovered oil and gas resources in the West Cape Three Points Bloc.

Eni Ghana - 45.8%

On the other hand, Eni Ghana, which operates the Sankofa field, will hold 45.8% percent interest in the combined field.

Oil production to increase from 58,000 barrels to 115,000 barrels

The combined field, operated by ENI, currently produces circa 58,000 barrels of oil per day and has potential to expand to circa 115,000 barrels of oil per day within the next few years.

Springfield becomes the first indigenous Ghanaian E&P company
With this, Springfield becomes the first indigenous Ghanaian exploration and production (E&P) company with oil production in Ghana.

Optimum exploitation and recovery of Ghana’s petroleum resources
According to the letter, John Peter Amewu imposed the terms and conditions for unitisation of the Afina and Sankofa fields to ensure optimum exploitation and recovery of Ghana’s petroleum resources.

Eni, Springfield failed to submit a joint report

The letter explained that the imposition became necessary because Springfield Exploration & Production and Eni Ghana Exploration & Production Limited failed to submit a joint report indicating each party’s respective interest in the accumulation as demanded by the Energy Minister.

Eni, Springfield failed to exchange data

It said the joint report was to be prepared after the companies had signed a confidentiality agreement for the purpose of exchanging data to determine each party’s shares in the accumulation.

They were also to conduct their respective independent analysis to determine the extent of straddling of accumulation and the Tract Participation of the two blocs. However, the companies failed to do as directed by the Energy Minister.

GNPC conducts independent evaluation

Therefore, when the deadline for submission of the report elapsed on September 18, 2020, the Energy Minister directed Ghana National Petroleum Corporation (GNPC) to conduct an independent evaluation of the Cenomanian Channel and hydrocarbons volumes on each side of the reservoir.

Cenomanian Channel straddles the 2 blocs

The results of GNPC’s evaluation confirmed that the Cenomanian Channel straddles the two blocs.

Hydrocarbon accumulation straddles the 2 blocs

In addition, hydrocarbon accumulation straddles the WCTP Bloc 2 and OCTP Bloc.

Over 1.1 billion barrels of crude oil in the 2 blocs

According to the findings of GNPC, the in-place oil volume for WCTP Bloc 2 side of the accumulation is estimated at 642 million of barrels of crude oil (MMbbls) and the OCTP Bloc side of the accumulation is 535 MMbbls.

Based on the GNPC’s independent report, the initial Tract Participation was concluded to be 54.545% for WCTP2-Afina and 45.5% for OCTP2-Sankofa.

The minister directed Eni to issue to the parties a schedule indicating past expenditures for unit operations prior to the effective date and schedule of indicating past production of unit petroleum and revenues derived from sale of such unit petroleum from the unit area prior to the effective date.

The parties have been instructed to reconcile the amount of each party’s aggregate surplus or deficiency of such actual net expenditures and reconcile their financials.

The minister ordered the parties to undertake a redetermination exercise within 18 months of the date of the letter.

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