The Ghana National Petroleum Corporation (GNPC) has defended its decision to secure a $700 million loan facility from the Deutshe Bank of Germany.
The Corporation said the loan will be used to support its increasing oil and gas infrastructure investment and cash call requirements from its participating and commercial interests.
Private legal practitioner Gabby Asare Otchere-Darko had threatened to sue the GNPC’ if it went ahead to contract the loan, because according to him, the Corporation is illegally contracting the loan.
[contextly_sidebar id=”88q4AF3llUpBtLTT4xJKRDPimUjaFtch”]He accused the Corporation of attempting to obtain the loan without Parliamentary approval and admonished the government to step in.
Since the news broke a week ago, the GNPC has come under fire from Civil Society Groups (CSOs) and the Minority in Parliament.
But in an interview with Citi News, the Chief Executive Officer of the GNPC, Alex Mould said the allegations suggesting that it is using the country’s oil as collateral is misplaced.
He also clarified that his outfit is not contracting the loan on behalf of the Ghana government.
“I know some people have been mischievous, saying that GNPC is raising this money to give to government. GNPC is not raising the money to give to government,” he stressed.
According to him, “we have now secured the facility which we are in discussions for conditions precedent to draw down for a $700 million.”
Read below the full statement from the GNPC here:
BRIEF ON $700 MILLION GNPC LOAN
1. Is GNPC acquiring a $700M?
Yes.
2. What are the terms?
Tenor –5 years
Pricing – 3months Libor + 3.9% plus fees; all adding up to 4.43%
Status – GNPC currently in discussion with the lenders to complete the conditions precedent for finalising
3. Why Borrow?
The PRMA (or indeed public sources) cannot fund the Corporation on a sustainable basis given the national consensus for increased national participation in the industry. Within 15 years from the PRMA coming into force, funds for GNPC capitalisation would cease.
GNPC has to be prudent and build up capital for its growth. This is normal commercial practice. No serious company lives from year to year (hand to mouth).
4. What will the loan be used for?
The funds raised would be used to: 1. Support GNPC’s increasing oil and gas infrastructure investment and cash call requirements from its participating and commercial interests.
- GNPC is in negotiations with the Offshore Cape Three Points (OCTP) partners to pay for the pipeline and receiving facility in the OCTP (Sankofa-GyeNyame field) gas development project to enable a lower gas price to Ghanaian consumers. This investment would amount to US$493 million. This will save the country from paying 22% interest if the partners were to pay for that investment. • GNPC has an immediate requirement of US$105 million to pay as part of natural gas price negotiated with the OCTP partners. The effect of these measures is to lower gas prices paid by Ghana to the OCTP partners and thus, reduce electricity costs to Ghanaians. • The Corporation has a commitment to pay US$ 36 million, being 40% of the pipeline cost to connect the TEN Field gas to the Jubilee FPSO. This is necessary to send the TEN Field gas to the Ghana National Gas Company (Ghana Gas) for processing. This will save the country from paying 15% interest if the partners were to pay for this investment.
- Provide guarantees to the Offshore Cape Three Points (OCTP) Contractors for the offtake of natural gas from the field. Based on expected outcome of on-going negotiations, GNPC expects to raise a bank guarantee of about US$200 – US$300 million. 3. Augment the Corporation’s working capital, including oil and gas trading working capital needs. 4. Support Explorco capitalisation and working capital.
The facility is not for undertaking exploration. Nobody borrows to finance exploration. However, there are ongoing development costs. Although we are carried for some of these costs, in some cases, we have to pay ourselves to avoid higher interest costs from our partners. For example, if Kosmos pays our share of costs under the West Cape Three Points block Petroleum Agreement, it would charge 25% which is their cost of raising equity from their investors.
5. Does GNPC need a Parliamentary approval to secure a loan?
Approvals required for GNPC borrowing, in line with Section (15) of Ghana National Petroleum Corporation Act, 1983 (PNDC Law 64) include:
- Approval by the Hon. Minister of Finance upon recommendation by the Hon. Minister for Energy and Petroleum.
- GNPC secured this approval from the Minister for Finance upon recommendation by the Minister for Energy and Petroleum.
- GNPC does not require Parliamentary approval to borrow
- GNPC sought and secured a legal opinion from the Attorney General as well to this effect.
6. Is GNPC using Ghana’s oil as collateral?
No, GNPC is not using the country’s oil resource as collateral. GNPC is only using its share of oil revenue, as provided for by the Petroleum Revenue Management Act (PRMA), to secure the loan.
Government’s share is not included at all. So whatever the PRMA envisages as allocations for the Stabilization and Heritage Funds, as well as for annual budget purposes, are not affected.
7. How Competitive was the Process?
- GNPC embarked on a competitive process in March 2014, to raise US$500 – US$700m from the international financial market.
- The process followed was in line with the GNPC Law 64
- Request for Quotations (RFQ) was sent to 20 banks and crude oil traders, out of which 18 local and international companies responded with proposals.
- Eleven (11) companies were invited for meetings in Accra over a 7-day period for further discussions and clarification on their proposals.
- Five (5) short-listed companies were invited to conduct due diligence and, if they deemed necessary, revise their proposals after GNPC provided them with information they required and answered their questions • At the end of the evaluation 3 companies were chosen as lenders
GNPC’s Overarching strategic goal
In 2012, the Ghana National Petroleum Corporation (GNPC) set for itself a new medium to long-term objective, with an Overarching strategic goal to be a stand-alone operator in 7 years and efficient world class operator in 15 years
– In pursuit of this, GNPC initiated an accelerated growth strategy, anchored on 4 pillars:
– Building capacity and Expanding E&P Activities • Replacing and Growing Reserves • Efficient Capitalisation and Optimum Participation
– Catalysing Local Content Development
The guiding principles behind the strategic pillars are:
- National Interest Driven
- Commercially-driven, to include control over assets, adequate capitalization and substantial operational autonomy.
- To use cutting edge technology through continuous re-investment in innovative technology development, and people.
- Adopt good corporate governance practices that would enable the Corporation to compete over time with majors and super majors.
- To be a catalyst for local content development in Ghana.
Investments in the sector are huge:
Ghana’s oil and gas sector is nascent but has great promise
– Jubilee Phase 1 cost US$5.8 billion
- TEN is expected to cost US$5.9 billion
- Sankofa Gye Nyame is expected to cost US$6.3 billion GNPC is investing $54Million to increase its stake in the Deepwater Tano Cape Three Points (DWT/CTP) block, in which together with Hess it has made seven discoveries.
- About US$15 –US$20 billion is expected to be invested within the decade to appraise and develop new discoveries
- Industry is growing in size and is expected to reach USD20 billion by 2015 and USD60 billion by 2022
– The industry is big, with long value chain
– GNPC is repositioning itself to take commercial leadership in the industry, to become Local content ENABLER.
– GNPC to leverage operatorship to build local content into the procurement process
– Numerous direct and indirect jobs to be created out of GNPC’s activities
– By investing in strategic infrastructure and
– supporting development of indigenous businesses, particularly creation of E&P capacity Content & Local Participation
By: Efua Idan Osam/citifmonline.com/Ghana
Follow @osamidan