Saltpond leaves bitter taste

Ghana?s divided cabinet has failed to approve a renegotiated agreement between Houston-based Lushann-Eternit and the Ghana National Petroleum (GNPC) governing the operation of the Saltpond oil and gas field redevelopment.

Though a provisional settlement had been reached by which Lushann's development licence would be rejigged as a conventional E&P concession, the energy ministry decided it would prefer to force closure of the field pending a resolution.

Lushann CEO Quincy Sintim-Aboagye, chairman of the local joint venture Saltpond Offshore Producing, said a senior minister had offered a temporary licence to operate the field pending further investigations into Lushann's equity breakdown. However, Energy Minister Albert Kan-Dapaah pressed for a straight repudiation of the deal, signed under the previous regime of President Jerry John Rawlings, since key government figures still suspect equity participation by ex-GNPC boss Tsatsu Tsikata.

Dapaah's office instructed GNPC CEO Stephen Boateng to issue a letter insisting that wells be shut down and operations cease, said Sintim.

"Our Houston lawyers explained that shutting down the wells together with demobilisation costs as wells as paying Nigerian contractors would cost at least $1.7 million," he said.

Sintim said Lushann would need to recoup its $15 million investment plus loss of earnings. Lushann is preparing a lawsuit in case government factions opposed to the deal insist on closure, which Sintim said is most unlikely.

Although the initial deal stands, government officials want to write in a 3% royalty fee and charge acreage rental with corporation tax pegged at 30% less expenses.

"The first concession never addressed the fiscal elements, leaving this open to negotiation for inclusion later as an addendum, whereas taxation lies at the heart of the new deal under which we have agreed a 10% GNPC-held stake would be carried by Lushann," said Sintim.

Well-6 is producing while samples from wells-1, 2, 5 are undergoing analysis in Port Harcourt after waxy restrictions were encountered. Drill floor technicians found well-5 so tight that gas could not escape, while well-2 released so much that the fluids could not be flowed, said Sintim.

"We need to look quickly at what kind of solvent to apply to ease the restrictions, then re-perforate the remaining oil producers and seal off the gas zones," he said.

Lushann has a Power Purchase Agreement in place with the national power utility Volta River Authority offering a capacity charge on gas-fuelled baseload of 1.5 cents per kilowatt hour. Meetings took place in Houston this week with a group of investors interested in the gas-to-wire potential of Saltpond.

"Shutting down now would do serious damage to the reservoir, not to mention business confidence in Ghana's energy sector," he said.

Lushann is legally represented locally by Akuffo-Addo Chambers, eponymously named after its founder Nana Akuffo-Addo, the ruling party's serving minister of justice and attorney general. Both Akuffo-Addo and Sintim-Aboagye are ethnic Akyem whereas the cabinet power bloc opposing the deal, like Kan-Dapaah, is predominantly Ashanti -- reflecting the growing schism at the heart of government.

Ghana?s divided cabinet has failed to approve a renegotiated agreement between Houston-based Lushann-Eternit and the Ghana National Petroleum (GNPC) governing the operation of the Saltpond oil and gas field redevelopment.

Though a provisional settlement had been reached by which Lushann's development licence would be rejigged as a conventional E&P concession, the energy ministry decided it would prefer to force closure of the field pending a resolution.

Lushann CEO Quincy Sintim-Aboagye, chairman of the local joint venture Saltpond Offshore Producing, said a senior minister had offered a temporary licence to operate the field pending further investigations into Lushann's equity breakdown. However, Energy Minister Albert Kan-Dapaah pressed for a straight repudiation of the deal, signed under the previous regime of President Jerry John Rawlings, since key government figures still suspect equity participation by ex-GNPC boss Tsatsu Tsikata.

Dapaah's office instructed GNPC CEO Stephen Boateng to issue a letter insisting that wells be shut down and operations cease, said Sintim.

"Our Houston lawyers explained that shutting down the wells together with demobilisation costs as wells as paying Nigerian contractors would cost at least $1.7 million," he said.

Sintim said Lushann would need to recoup its $15 million investment plus loss of earnings. Lushann is preparing a lawsuit in case government factions opposed to the deal insist on closure, which Sintim said is most unlikely.

Although the initial deal stands, government officials want to write in a 3% royalty fee and charge acreage rental with corporation tax pegged at 30% less expenses.

"The first concession never addressed the fiscal elements, leaving this open to negotiation for inclusion later as an addendum, whereas taxation lies at the heart of the new deal under which we have agreed a 10% GNPC-held stake would be carried by Lushann," said Sintim.

Well-6 is producing while samples from wells-1, 2, 5 are undergoing analysis in Port Harcourt after waxy restrictions were encountered. Drill floor technicians found well-5 so tight that gas could not escape, while well-2 released so much that the fluids could not be flowed, said Sintim.

"We need to look quickly at what kind of solvent to apply to ease the restrictions, then re-perforate the remaining oil producers and seal off the gas zones," he said.

Lushann has a Power Purchase Agreement in place with the national power utility Volta River Authority offering a capacity charge on gas-fuelled baseload of 1.5 cents per kilowatt hour. Meetings took place in Houston this week with a group of investors interested in the gas-to-wire potential of Saltpond.

"Shutting down now would do serious damage to the reservoir, not to mention business confidence in Ghana's energy sector," he said.

Lushann is legally represented locally by Akuffo-Addo Chambers, eponymously named after its founder Nana Akuffo-Addo, the ruling party's serving minister of justice and attorney general. Both Akuffo-Addo and Sintim-Aboagye are ethnic Akyem whereas the cabinet power bloc opposing the deal, like Kan-Dapaah, is predominantly Ashanti -- reflecting the growing schism at the heart of government.