GNPC must raise its own cash

A new report by the Africa Centre for Energy Policy (ACEP) says the Ghana National Petroleum Corporation (GNPC) has not demonstrated a capacity to efficiently invest revenues it has been allocated.

The corporation must therefore not be capitalised beyond five years; it must be made to go to the international money market to raise funds for its equity financing and investment costs, instead of relying on oil monies needed to undertake much-needed development projects, Mohammed Amin Adam, Executive Director of ACEP, said at the launch of the report in Accra.

Total spending of oil revenues by government in 2011 and 2012 amounted to US$374.9million and US$517.5million respectively. This included US$207million allocated to the GNPC in 2011, comprising an equity financing cost of US$132.5million and an additional US$75.5million for investments. In 2012, a further US$230.9million was allocated to the corporation.

The report, which assesses the efficiency of oil revenue spending since 2011, faulted the GNPC for paying too much interest on its indebtedness to the Jubilee partners -- and not having much to show for its high staff cost, which is comparable to that of Tullow Oil and PetroSA.

“We are saying that some of the investments they are making need to be looked at again; for instance, their indebtedness to the Jubilee Partners. In 2011, they paid US$132million of oil revenue to the Jubilee partners at an interest of 10%, which we think is not a good investment because around the time interest rates on sovereign bonds globally were around 6 to 7%,” Mohammed Amin said.

“Their staff costs have increased substantially: US$7million in 2011, US$9million in 2012, with a staff-strength of 175, and that gives you an average annual staff cost of about US$51,000, which is too high relative to the economic circumstances of our country. If you compare that to PetroSA, which acquired Sabre’s block, they are also around US$51,000 and so it may seem consistent with national oil companies in Africa. But we are talking about the output here.

“Is it true that the GNPC has a 175-workforce? And if it is true, what is the output? What have they done that we can cite apart from the Jubilee finding, which they actually did not contribute much to, in our view. What are 175 people doing that we cannot see [and] for which reason they should be paid so much? So we need to demand output for the money we are giving them, because the variation between their staff cost and the cost of all other agencies in the country is so wide,” Mohammed Amin stressed.

Asked what he expected of the GNPC in terms of output, Mohammed Amin said: “We need more exploration; we want them to tell us that they have found oil on their own; that they have done exploration here and there and these are the results. Even if they are partnering with another company, we want results.”

ACEP also said it is unacceptable that GNPC awarded a legal services contract of US$147,000 to one of its board-members.

The CEO of the corporation, Nana Asafu-Adjaye, is said to have defended the action. He is quoted in the report as saying: “There is a provision, even in the service code, which provides for members of the board to decide, through a resolution, for a director to act in his/her professional capacity on behalf of the corporation.”

This, Mohammed Amin said, is wrong; adding that if a board-member of the corporation wants to render professional services, the person must resign and apply to take up such a contract.