Government replies Tsikata on oil sub-contract

Accra, April 16, GNA - The Ministry of Energy on Wednesday released three agreements covering the Saltpond Off-Shore Production Company to throw more light on agreements the Ghana National Petroleum Company (GNPC) entered into with Lushann in 2000 under the administration of the former Chief Executive, Mr Tsatsu Tsikata.

The Ministry in releasing the agreements was responding to the challenges Mr Tsikata threw to it and its immediate past Minister of Energy, Mr Albert Kan-Dapaah, who he accused of messing up facts about the agreements at a recent press conference following the announcement of a missing oil vessel from the Saltpond Oil Fields.

The agreements are the Sub-Contract Agreement dated January 18, 2000; Joint Venture Agreement and Deed of Transfer of th! e Production Rig, both dated February 25 of 2000.

Mr Kobina Tahir Hammond, Deputy Minister of Energy in an accompanying statement he signed said "the joint venture agreement signed by Mr Tsikata, which he accused the Minister of not having read and which parades under the guise of a sub-contract is not for the provision of services as defined by the law but rather for the production of oil and gas." The statement maintained that parliamentary approval was a critical requirement of the petroleum regime and for Mr Tsikata to say that, that was not necessary under the agreement was not correct.

It declared: "Today, the improvement in the joint venture package, as we reported in our April 3, 2003 press statement would go through the full cycle of approvals to Parliament for ratification.

"It is sad to note that Mr Tsikata trivialises the issue of approval into insignificance by making some weird comparison of the Lushann agreements with the Sahara Crude Oil Management contract. Mr Tsikata would no doubt know that the petroleum laws of Ghana cover exploration and production and not the lifting of crude oil to Ghana."

The statement said: "In the joint venture agreement signed on February 25, 2000, the parties agreed to invest three million dollars as the initial capital of which Lushann was to provide 1.8 million dollars with GNPC contributing 1.2 million dollars. While Lushann was to provide cash, GNPC offered its platform - Mr Louie - for 500,000 dollars and the remaining was to be paid with other assets and services to be provided in the future.

"There was no mention of the assigned value of the wells or the data in that agreement. It is to be stressed that when Lushann entered the Ghana market to do business with GNPC, the rig, data and the wells on the Saltpond oilfields were already in situ and values ought to have been assigned to these essential assets."

It said; "As Mr Tsikata himself stated, a valuation of 500,000 dollars was placed on the production rig (platform). In effect, therefore, when it entered into the agreements with Lushann, GNPC offered the operational control of the field to Lushann at 500,000 dollars. This implies that the data and the wells were handed over with no value assigned."

The statement said that was ludicrous as it was unacceptable and that Lushann had been given prior access to historical data during their exploratory discussions with GNPC and once any data was given any third party there was no way of retracting its value.

"The historical data mentioned in our April 3 press statement is quite different from the data Mr Tsikata referred to in his stateme nt. He was talking about future data that would belong to GNPC."

The statement said the Ministry had dismissed as spurious the claim by Mr Tsikata that the higher figure of 10 million dollars was a result of refurbishment of the production rig and that the new value was on the assets as they were.

"In the renegotiation of the agreements by this Government, not only was the rig re-valued but also value was put on the data and wells. The combined value was the 10 million dollars that was announced."

The statement said the Ministry "reiterates that the assets that have been discussed above have not been sold to Lushann or to any third party. They remain the bona fide property of the Government of Ghana. Lushann has only under the agreements been granted access and rights of use of these assets for the duration of! their agreement with Government/GNPC."

The statement said: "We are proud to state that through the application of the petroleum regime, it has now become possible for the Government to derive up-front benefits" and asked how could Mr Tsikata accuse the Government of wrong doing and why he did not spend more time to secure those benefits for Ghana.

It said: "The claim by Mr Tsikata that financial benefits in the original agreement were better than the just renegotiated agreement is again false. There is no basis for comparison between the two.

"Under the original arrangements, the only financial benefit that was to accrue to GNPC and Ghana was 40 per cent of the net operating profits after making provision for repayment of all loans and financial commitments of the investor.

The statement said: "Nowhere in the joint venture agreement was there any reference to roy alties, taxes, carried interest and others. Since Mr Tsikata claimed that the petroleum agreement was not applicable because he was working under the framework of a sub-contract and a special purpose joint venture, we want to question where the Government and GNPC were going to derive any benefits beyond the 40 per cent.

The Ministry is convinced that Mr Tsikata's actions with respect to the sub-contract and joint venture agreements were a deliberate attempt to circumvent the law and give away the assets of the nation for a pittance.

The statement said the sub-contract was simply a sham and no amount of name-calling would make it otherwise adding: "Whatever rubric the contract fell under, it was an agreement that needed to comply with the petroleum law."