The National Insurance Commission (NIC) has directed the four insurance companies that secured the deal to provide assets all risk insurance cover for the Ghana Gas Infrastructure project to share the business among all the 24 general insurance businesses through the Ghana Oil and Gas Insurance Pool (GOGIP) -- a consortium formed by the country’s general insurance companies as the main body to pool resources and underwrite oil and gas risks.
This follows a meeting last week with the four insurers -- SIC, Phoenix Insurance, Vanguard Assurance and GLICO -- and the Petroleum Commission.
The US$80 million insurance cover for the Ghana Gas Infrastructure project is touted to be the biggest ever underwritten in the country and makes it a major milestone for ensuring local content participation in the emerging oil and gas sector.
B&FT has gathered that the move by the NIC – the insurance industry regulator -- is to enforce a Memorandum of Understanding signed earlier this year by all the insurance companies to bring any insurance business secured in the oil and gas sector into the pool to benefit the 24 non-life insurers in the country.
Under the new agreement reached by the four insurers and NIC, SIC -- which had secured 50 percent of the risks cover and GLICO 30 percent, as well as Phoenix Insurance and Vanguard Assurance with 10 percent each -- will relinquish its share of the Ghana Gas insurance business.
It is understood all 24 insurance companies do not have the capacity to provide insurance cover for the production phase of the biggest gas project in the country -- expected to start early next year -- and will thus cede the business outside the country.
“What the insurers will benefit from is the reinsurance commission, which will now be shared through GIGOP instead of among the four insurance companies,” persons close to the deal explained to the B&FT.
The local risk cover for the Ghana Gas project is seen as a way to ensure that activities of the burgeoning oil and sector are consistent with provisions in the local content and insurance laws.
Ghana currently has a gas deposit of about 200 billion standard cubic feet offshore Jubilee Field, which the country wants to utilise as a source of cheap fuel to power its thermal plants and generate electricity.
The Energy and Petroleum Minister, Emmanuel Kofi Buah, argues that when in full production the Atuabo Gas Processing Plant is expected to save the nation over US$500million a year from importing light crude to power the thermal plants, as gas costs barely half the price of light crude oil.
Officials say intake of raw gas from the Jubilee Field will be done in a gradual process, starting from 30 million standard cubic feet per day for the first month, 60 million standard cubic feet for the second month, 90 million standard cubic feet for the third month, and finally 120 million standard cubic feet for the fourth month.
The processing plant can handle all the 150 million standard cubic feet of gas per day capacity of the Jubilee Field partners.
Ghana started commercial production of oil almost four years ago, opening up a several billion dollars industry. The government last year enacted the Petroleum (Local Content and Local Participation) Regulations, 2013, in a bid to ensure that the country benefits from more than just fiscal receipts of oil revenue by enhancing participation for local firms in the sector.
According to the Petroleum Local Content and Local Participation Regulations, the provisions are meant to among other things promote the maximisation of value-addition and job-creation in the petroleum sector through the use of local expertise, goods and services.
The regulations also provide that entities in the petroleum sector must submit their local content plans regarding the use of local goods and services, and the transfer of advanced technology and skills, to the Ghana National Petroleum Corporation (GNPC) or the Petroleum Commission.
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