GNPC Bounces Kosmos Energy

…For Breaches As It Seeks Consent to Seal Deal with ExxonMobil

By J. Ato Kobbie, Managing Editor

After many months of treating concerns of the Ghana National Petroleum Corporation (GNPC) over its breaches of the law governing their operations in Ghana with contempt, Kosmos Energy, came under the wrath of the national oil company when it kicked against a deal in which Kosmos is seeking to assign its interests in Ghana’s oil fields to ExxonMobil.

GNPC refused to give its consent to this sale and purchase agreement between the two following several previous protests to Kosmos Energy accusing them of breaching the laws governing their operations in the country, and which protests, according to sources, were treated with contempt.

Letters from Kosmos Energy seeking government and GNPC’s consent to assign its interest in the Jubilee Field as well as the other portions of the West Cape Three Points (WCTP) and Deepwater Water Tano blocks, to ExxonMobil, were hand-delivered to the seat of government, GNPC and the Ministry of Energy at the end of last month.

The Jubilee Field, is the unitized area of the two blocks, WCTP which has Kosmos Energy as Operator and DWT, operated by Tullow Oil.

GNPC has accused Kosmos Energy over the last one-and-a-half years of violating its data ownership rights, as it sought to sell its interest in the fields, insisting that their relations with international oil companies (IOCs) must be constructive, respectful and above all lawful.

The national oil company has maintained that relations with IOCs is a long-term partnership spanning 30 years that requires consent from both GNPC and the Government of Ghana, whether in signing a Petroleum Agreement or farming into one, insisting that it applies “strategic, financial and technical criteria for deciding who is eligible to work here”.

GNPC sources say although it has no questions about ExxonMobil’s technical or financial capability, it took strong reservation to the process leading to the deal, where Kosmos circulated the corporation’s data acquired at great corporate effort and cost, to over 26 oil companies, including ExxonMobil.

Several attempts by GNPC and the government over the last year to get Kosmos Energy or ExxonMobil to formally own up to their unlawful acts in the handling of the said data or to take steps to correct them did not yield any results, sources revealed.

A GNPC source told The Business Analyst, “Rather than backtracking from the dangerous road they were treading, the two companies, by their conduct of entering into a sales and purchase agreement, were asserting that their private contractual rights were more important than the sovereign rights of the people of Ghana and that they, rather than our government or national institutions like GNPC, must be allowed to determine what is best for us”.

According to the source, “GNPC has consistently advised Kosmos Energy that we will not give consent to their deal with ExxonMobil and that we would rather acquire the asset ourselves at a fair market price”. Whilst GNPC swiftly declined to give its blessing to the deal citing the parties’ breach of the confidentiality clause in the Petroleum Agreement governing Kosmos’ operations in Ghana, the Minister of Energy, at the time of going to press, was still working on government’s response.

Section 23 (2) of the Petroleum Exploration & Production Law, 1984 (PNDC Law 84), provides that data acquired by contractors or subcontractors in pursuit of their exploration activities as well as those released to them shall be the property of GNPC.

Section 23 (5) of the same law provides that such data could be given to third parties, only with permission from the Minister of Energy, whilst Section 31 (d) of the law defines failure to comply with this provision as an offence.

The national oil company, has consistently accused Kosmos of breaching the above provisions, through the setting up of data rooms and, for its own commercial purposes, disclosing data to the over twenty different companies without any prior notification to GNPC.

According to GNPC, the damage to its proprietary interest is not in doubt. Sources close to the Ministry of Energy indicate that when the illegal disclosure of GNPC data to potential buyers was detected and the Minister of Energy and the GNPC asked Kosmos whether they were selling, the latter indicated they were not engaged in any sale process.

None of the other parties to the Petroleum Agreements (Tullow, Anadarko, etc.) were told of the disclosure of the data in question, in which they too had commercial interests, to third parties. It was not until the GNPC raised the issue of breaches by Kosmos that the matter came to their attention.

LOSSES TO GNPC As a consequence of Kosmos’ unlawful conduct, GNPC is said to have suffered significant loss, including (but not limited to) Ghana being deprived of significant historic and future revenue from potentially more than 20 global oil companies (and indeed any third party to whom they transfer data without the knowledge of GNPC).

Again, GNPC asserts that it has been deprived of fees that each bidder would otherwise have paid in relation to the data accessed in respect of the Jubilee Field and the West Cape Three Points and Deepwater Tano blocks.

And should those bidders transfer this data outside their group, GNPC will be deprived of further fees, while Kosmos apparently had charged fees in giving access to the data it did not own!

GNPC has argued that it has been deprived of fees from companies who hold this data and who acquire (most likely encouraged by what Kosmos has shown them) an interest in any areas of the blocks that have either been relinquished, or are to be relinquished in the future, to the extent that such data covers these areas. GNPC has been deprived of fees from potential bidders for, and current interest holders in, neighbouring blocks to the West Cape Three Points and Deepwater Tano blocks who may wish to acquire the data to understand the neighbouring block but now have no need to. Furthermore, GNPC argues that considering that data from the Jubilee Field and the two blocks generally is also being used to develop geologic plays in other areas of West Africa and even beyond, GNPC has been deprived of the value that its data ownership should have provided within this context as well. Analysts are of the view that the release of the volume of data in question to such a large number of IOCs has materially undermined GNPC’s commercial and strategic position in respect of the future development of the blocks they cover. The effect of the above situation is a significant change to the balance of negotiating power between GNPC and the IOCs, which has irreversibly altered the investment landscape in respect of these assets in a way that constitutes a very substantial negative economic impact on Ghana, unless rectified. Additionally, the release of data to such a wide group of recipients reduces its inherent value, exposing it to increased risk of wider dissemination and unauthorised use, for example by enabling recipients to collaborate or pool data to form their own data library to exploit without involving GNPC. This has led to a loss of control of the data, a loss of value in the data itself, and loss of future revenues from the data. Kosmos’ conduct has therefore seriously impaired GNPC’s ability to perform its statutory role and has resulted in the dissemination of important information in a manner which is in breach of both the clear statutory and agreed contractual regime.

In doing so, Kosmos’ conduct has served to undermine both the laws of Ghana and, unjustly, GNPC’s reputation and standing in the international oil industry.

GNPC has argued that these unlawful activities of Kosmos and their refusal to take up the opportunities to regularize the situation that GNPC offered had served as a distraction from focusing on the collective effort of producing the first commercial oil in the last quarter of the year.

Again, whereas Kosmos, after selling its interest in Ghana, will have no continuing interest in the petroleum resources or in the data relating to them, GNPC will continue to have a very significant interest for the remainder of the 30-year term of the Petroleum Agreements and beyond.

GNPC has argued further that the proper management of those interests is a legitimate concern for the people of Ghana, which the GNPC has a duty to protect.

It avers further that in behaving the way they have, Kosmos have put their commercial interests in securing an attractive sale price above the sovereignty of Ghana as reflected in the laws of Ghana and above the long term interests of Ghana and its people, setting dangerous precedents, which if allowed to go without rectification, will do continuing damage to Ghana.