Business News of 2013-12-05

Parliament ratifies two oil exploration agreements

Parliament Wednesday endorsed two agreements for the exploration of oil from the South Deepwater Tano Contract Area and the East Cape Three Points Block Offshore Ghana.

The agreement for the exploration in the South Deepwater Tano Contract Area is among the government, the Ghana National Petroleum Corporation (GNPC), GNPC Exploration and Production Company Limited (Explorco) and AGM Petroleum Ghana Limited.

The interest structure of the partners under the agreement is as follows: AGM - 66 per cent, GNPC - 10 per cent and GNPC Exploration and Production Company Limited - 24 per cent.

The draft agreement will become effective for 25 years if commercial discovery is made.

However, if no commercial discovery is made, the agreement stands to expire after seven years or less.

The contract area applied for lies within the offshore Tano Basin, which is located in the western part of Ghana's Sedimentary Basin.

The area, with a size of about 3,482 km square, lies in a water depth ranging from 2,000 metres to 3,500 metres.

To facilitate the establishment of programmes to train Ghanaian personnel to work in petroleum operations and to ensure transfer of management and technical skills required for the efficient conduct of petroleum operations, the contractor has committed to pay $1 million to the GNPC at the beginning of each year.

Financial obligations

Under the agreement, AGM will bear the cost of the petroleum operation until commencement of production and also bear Explorco's 26.7 per cent share of the cost of two exploration wells to offset previous work done by the GNPC.

The GNPC will also be required to pay for the development and production cost associated with its 15 per cent additional participating interest.

In recognition of risk taken by the GNPC in carrying prior geological and geophysical works leading to enhanced value of the block, the AGM will pay to Explorcoa cash of $20 million within 90 days after the coming into force of the agreement.

East Cape Three Points Block Offshore Ghana

The agreement on the Cape Three Points Block offshore Ghana is among the government, the GNPC, the Cola Natural Resources Ghana Limited and Medea Development Limited B.V.I.

The interest structure of the partners is Cola Natural Resource (Ghana) Limited and Medea Development Limited B.V.I. - 90 per cent participating interest and GNPC - 10 per cent carried interest.

The area applied for is located east of Lukoil/Vanco Deepwater Cape Three Points Block Offshore Ghana

The size is approximately 1,560 square kilometres, with the water depth ranging from 30 metres to 200 metres.

Committee's report

The Chairman of the Mines and Energy Committee, Dr Kwabena Donkor, presented the report of the committee and he was supported by the Ranking Member of the committee, Mr K.T. Hammond.

The House unanimously approved the two agreements when the Speaker, Mr Edward Doe Adjaho, called for a voice vote.

The two agreements were placed before Parliament on December 3, 2013 and referred to the Mines and Energy Committee for consideration and report.