Kosmos Broke NO Laws -GET

Ghana as a sovereign country must safeguard her interests at all times. Kosmos, as a for-profit business must also safeguard its interests at all times. When the interests of these two entities conflict, it is imperative that facts, not fiction be put out in the media. Lying, misrepresenting the facts, and shouting from the roof tops would not help anyone. Ghana Energy Transparency(GET) has looked into accusations by GNPC that Kosmos broke Ghana’s laws by illegally sharing data with a third party, and can state that while certain contractual provisions may not have been followed to the letter, no laws were broken.

Besides a change in government, it is difficult to put a finger on what else changed to cause GNPC to turn on Kosmos. But when it did, the national oil corporation threw literally the kitchen sink at the very company that put Ghana on the oil producing map. One by one, officials at GNPC have had to come out and acknowledge facts different from what they had said previously. First, GNPC accused Kosmos of ignoring the former’s right of first refusal. This generated a very heated national debate only for GNPC to admit it has no such provision in the Petroleum Agreement it signed with Kosmos.

Next it was pre-emptive rights for GNPC. The fact is that GNPC’s initial stake makes it a voting partner just like all the other four partners. After yet another heated debate, GNPC reluctantly admitted that its statements were false. Then it was Kosmos supposedly preventing GNPC from buying its stake for Ghana. It is hard to imagine why Kosmos would turn down a competitive bid from GNPC knowing that it would be the easiest sale of its stake. Last week, GNPC Director Kwame Ntow Amoah had to admit again that GNPC has never made an offer to Kosmos for its stake in the Jubilee Field. Are we seeing a patern here?

Today the latest accusation is that Kosmos broke Ghana’s laws by showing data “that GNPC had released to Kosmos” to third parties. But once again, here are the facts for all to decipher and draw their own conclusions.

First, what is at stake is a contractual provision, not law. Raising a possible infringement on a contractual provision to the level of breaking the law is yet another disingenuous ploy to pollute the minds of an otherwise thoughtful and fair Ghanaian public. Second, Kosmos spent over $30 million to acquire, process, and interpret the 3D seismic data that GNPC is conveniently calling “GNPC Data.” Ghana spent nothing in the data acquisition. Thus, although the Petroleum Agreement (PA) makes GNPC part owners of the data entirely paid for by Kosmos, calling it “GNPC Data” is deceptive.

If anything, GNPC is guilty of selective enforcement of the provisions of the Petroleum Agreement, which states in part that “all data, information and report, including interpretation and analysis supplied by contractor (not GNPC) required or produced pursuant to this agreement, including without limitation, that described in article 16.1, 16.2 and 16.3, shall be treated as confidential and shall not be disclosed by any party to any other person without the express written consent of the other parties” (Article 16.4 PA CTP).

Basically what that means is that all parties must be in agreement and be party to the confidentiality agreement signed with any third party that wants to see the data. GNPC is now claiming that Kosmos’ sharing of data with ExxonMobil has been injurious to GNPC. In fact, each time that data has been shared with third parties, Ghana has benefitted so GNPC has consistently raised no objections.

The agreement also states that “any party disclosing information or providing data to any third party under this article shall require such persons to undertake the confidentiality of such data. Promptly after the effective Data, the parties shall agree upon a mutually acceptable international petroleum industry standard form of confidentiality agreement” (Article 16.6 PA CTP). Nearly everyone uses the confidentiality agreement dictated by Association of International Petroleum Negotiators (AIPN), a non-profit organization founded in 1981 to enhance the professionalism of cross-border energy negotiators throughout the world. Due to AIPN’s neutrality, many countries, IOCs and legal agents use its standardized confidentiality agreement.

Here are a few examples. Vitol opened a data room for several months and showed data to prospective farm-in partners without any query from GNPC. Sabre Oil did the same and even charged companies who went in to see the data and still attracted no query from GNPC. In 2006 when part of Kosmos’s stake was farmed out to Anadarko Energy, GNPC did not raise an eye brow when it knew the data in question was shown without all parties agreeing to the confidentiality agreement. When Devon Energy sold its stake to Afren, GNPC knew that data it co-owned with Devon was shown to Afran without the due process but it blessed the sale. The fact is that because these confidentiality agreements conform to standards set by AIPN, most national petroleum corporations customarily look the other way when data is shared under those AIPN standards.

But the most serious instance of double standard came in GNPC’s own secret negotiations with China;s CNOOC and Sinopec. Even before Kosmos shared the said data with ExxonMobil, GNPC had also shown the same data with the Chinese without informing Kosmos and the other partners. So here is the picture: Kosmos spends over $30 million to acquire, process, and interpret 3D seismic data that leads to commercial discovery of oil in Ghana. As per the Petroleum Agreement, GNPC becomes co-owners of that data. GNPC goes on to share that data with the Chinese without informing Kosmos and the other partners, which is a breach of the PA, but Kosmos has broken the law when it does the same thing?

Ever since this disagreement emerged, some behind the scenes players at GNPC have traveled around the world looking for funding to buy the Kosmos stake. At nearly every stop, these people have revealed the same data to prospective investors in India, China, South Korea, United States, France, Norway, and so on. Never was Kosmos, who actually paid to acquire the said data, consulted about this data sharing with third parties.

This behavior of GNPC has raised an issue that the Ghanaian authorities must address. GNPC is clearly caught in a case of conflict of interest. How can one body be a party to a business arrangement that it also regulates? Given GNPC;s dual status as owner and regulator, it is not surprising that some of its elements are emboldened enough to not only directly and publicly oppose the president’s decisions, but are willing to undermine those decisions to the embarrassment of the president and the Energy Ministry.

It has been argued that GNPC’s behavior could adversely impact Ghana’s standing with international investors. While GET agrees with this argument, we also want Ghanaian authorities to protect Ghana’s interest when there is the need to do so. Indeed if our investigations had revealed that Kosmos is attempting to bully Ghana, we would not hesitate to tell it like it is. This, however, is not the case. Ghana Energy Transparency can state that for reasons yet unknown, GNPC is not only unnecessarily impeding Kosmos’ sale of its stake in the Jubilee Field, it is putting out false information apparently to solicit the aid of the Ghanaian public. That is not honest.