Is the government colluding with GNPC to steal Ghana crude oil?

NPP UK and Ireland asks.

With the current happenings at the Jubilee Oil fields, the NPP UK and Ireland would like to take this opportunity to express our deepest concern about the reports on the dysfunctional ultrasonic export flow meters on the FPSO vessel which are meant to record the amount of oil exported and the seeming intransigence of GNPC, on behalf of the Government of Ghana and its oil lifting allies Vitol and Woodfields Energy Resources (formerly Cirrus Energy Services) to continue lifting crude oil irrespective of these defective flow meters.

The purport of our deepest concern has come from the fact that the Ghana News Agency has just announced that the Ghana National Petroleum Corporation (GNPC), has lifted a total of 994,691 barrels of Jubilee crude oil from the FPSO Kwame Nkrumah using a Belgian flagged vessel MT “FELICITY”.

According to the report the GNPC lifted the crude oil on behalf of the Ghana Group, comprising Government of Ghana (GoG) and GNPC. The 994,691 barrels of oil lifted is made up of accumulated government royalty of 275,346 barrels and accumulated GNPC’s 13.75 per cent revenue share entitlement of the remained 719,345 barrels. A statement issued in Accra, on Thursday 26th May 2011, said the vessel had since set sail to deliver the cargo to a Total Refinery, in the port of Fos, France.

GNPC with the assistance of Vitol and Woodfields Energy Resources (formerly Cirrus Energy Services) successfully marketed the cargo on the best available commercial terms. The GNPC report continued to reassure Ghanaians that the measurement/metering system onboard the FPSO Kwame Nkrumah was electronic, comprehensive, effective and accurate. “The system has been designed to automatically detect and compensate for any defects that occur in any of its parts.” We can only assume this statement to be accurate when the flow meters were not dysfunctional.

However, this is not what we have been told. We have been told by the Energy Minister that there are faults with the flow meters on FPSO Kwame Nkrumah, and that they have been removed for calibration. This has been confirmed by the Director of Exploration and Production of the GNPC, Mr. Thomas Manu. The question we would like to ask the Govt of Ghana and GNPC is - where are these figures coming from and how was our oil being measured in light of the export flow meters reported not working for more than a month now?

In a publication by Daily Graphic on 17th May 2011, “asking how much oil do we get”, it stated that “Ghana risks losing millions of dollars in oil revenue following the revelation that the Floating Production, Storage and Offloading (MV FPSO Kwame Nkrumah) platform at the Jubilee Field is operating without its exporting flow meter. It has also emerged that the Ghana National Petroleum Corporation (GNPC) and the Ministry of Energy, the two regulators in the industry, have been using a system called ullaging, in which a dip stick or ruler is used to manually calculate the amount of oil meant for export. Interestingly, officials from the two regulatory bodies have confirmed to the Daily Graphic that they were aware that the flow meter on the FPSO had not been functioning. Oil industry experts, however, say that there is nowhere in the world where the quantity of the bulky liquid commodity is determined or measured manually. Not only this unaccepted anywhere, it’s also a total breach of the very contract signed between Ghana govt and Kosmos in 2004, which agreed on the use of Ultrasonic Flow Meters as the only means to measure the quantity of oil flow at the jubilee oil field (both flow into the FPSO vessel and the quantity exported).

The Daily Graphic reported that “anytime a vessel arrived to lift oil for the world market, the issue always ended in a heated argument between officials of the Ghana Revenue Authority (GRA) and the buyers. The report further stated that, “officials of the GRA and other officials are not allowed on board the tankers and, therefore, the quantity of oil exported / off loaded are determined by officers representing the buyers.” [Source: Daily Graphic]

We have been reliably informed by the Director of Exploration and Production of the GNPC, Mr. Thomas Manu that the meters would not be refitted until the end of July 2011 when the calibration would have been completed.

On 16th May 2011 myjoyonline, carried the following news with the banner headline “Defective flow meters on FPSO could shortchange Ghana; Oil expert”. It’s stated; “The devices used to independently monitor how much crude oil is produced from the Jubilee Field are said to have become defective. The Coordinator of the Civil Society Platform on Oil and Gas announced this at an Editor’s workshop organized by Penplusbytes and the Ghana Journalists Association (GJA) at Koforidua in the Eastern Region.

Mohammed Amin Adam explained to Joy Business that the Ghana Revenue Authority (GRA) has cited the defective flow metres as one of the challenges it is facing in its mandate to ensure the country gets the revenue due it from crude oil. He added that the Ghana Standards Board (GBS) has also cited its own challenges.

“Since the measuring instruments were installed on the FPSO, they (GBS) have not been able to examine the calibration to see whether they are up to standards. The only reasons they have given is logistical constraints,” he stated. He said the difficulties being faced by such institutions clearly indicate that Ghana is not ready to wholly commence the sale of the crude oil.

The report added that, Mr Amin Adam therefore called on the institutions to ensure that these meters function properly before the country is shortchanged. The Ministry of Energy in a response said it is aware that the flow metres are not working and that the Minister has directed that the problems be solved as soon as possible.” Source: Joy News/Myjoyonline.com/Ghana.16th May 2011.

The breaking of this story prompted Hon. K.T Hammond to argue that oil lifting should be suspended since crude is not a perishable commodity until such time as we have a credible and accurate metering and measuring systems in place.

Now, the GNPC, which under Article 11 of the agreement between Ghana Government and Kosmos signed in 2004, was to be the watch dog on the measurement and pricing of petroleum, have resorted to lying on behalf of the oil buying companies and the contractors (Kosmos/Tullow) that the measurement/metering system onboard the FPSO Kwame Nkrumah was electronic, comprehensive, effective and accurate as if the meters are still in place. “The system has been designed to automatically detect and compensate for any defects that occur in any of its parts,” according to GNPC.

We do not believe that those figures which we are being given by the GNPC and its allies are accurate and we suspect that there is some collusion going on to short change Ghana as a nation as has also been expressed by oil experts have suggested. Moreover we have been told that the officials of the Ghana Revenue Authority and customs officials are not allowed to accompany the tankers to take records of the quantity of oil exported. It is a legal requirement under Article 11 of the contract that a calibration and test of the flow meters on the FPSO shall be carried out at internationally recognized standards and also the measurement of any oil leaving the shores of Ghana shall be done at presence of GNPC or its authorised agent to observe it.

ARTICLE 11

MEASUREMENT AND PRICING OF PETROLEUM

11.1 Crude Oil shall be delivered by Contractor to storage tanks or other suitable holding facility constructed, maintained and operated in accordance with applicable laws and good international petroleum industry oilfield practice (e.g. American Petroleum Institute) under the same or similar circumstances. Crude Oil shall be metered or otherwise measured for quantity and tested for quality in such storage tanks or other facility for all purposes of this Agreement. Any Party may request that measurements and tests be done by an internationally recognized inspection company. Contractor shall arrange and pay for the conduct of any measurement, or test so requested, provided however, that in the case of (I) a test requested for quality purposes and (2) a test requested on metering (or measurement) devices where the test demonstrates that such devices are accurate within acceptable tolerances, the Party requesting the test shall reimburse Contractor for the costs associated with the test or tests.

11.2 GNPC or its authorized agent shall have the right:

a) To be present at and to observe such measurement of Crude Oil; and

b) To examine and test whatever appliances are used by Contractor.

11.3 In the event that GNPC considers Contractor’s methods of measurement to be inaccurate, GNPC shall notify Contractor to this effect and the Parties shall meet within ten (10) days of such notification to discuss the matter. If after thirty (30) days, the Parties cannot agree over the issue they shall refer for resolution under Article 24, the sole question of whether Contractor’s method of measuring Crude Oil is accurate. Retrospective adjustments to measurements shall be made where necessary to give effect to the decision rendered under Article 24.

11.4 If, upon the examination or testing of appliances provided for in Article 11.2, any such appliances shall be discovered to be defective:

a) Contractor shall take immediate steps to repair or replace such appliance; and

b) Subject to the establishment of the contrary, such error shall be deemed to have existed for three (3) months or since the date of the last examination and testing, whichever occurred more recently.

11.5 In the event that Contractor desires to adjust, repair or replace any measuring appliance, it shall give GNPC reasonable notice to enable GNPC or its authorized agent to be present.

11.6 Contractor shall keep full and accurate accounts concerning all Petroleum measured as aforesaid and provide GNPC with copies thereof on a monthly basis, not later than ten (10) days after the end of each month.

We also feel scandalized and shocked to learn that the officials of the Ghana Revenue Authority and customs officials are not allowed to accompany the tankers to take records of the quantity of oil exported” in light of the flow meters reported not working. It’s unacceptable for the representatives of the buyers to rather furnish the revenue agencies in Ghana with figures on the amount of oil exported. These lapses will never be tolerated in any disciplined and competent administration and the Energy Minister Dr Oteng Adjei and his Deputy Mr Emmanuel Buah must bow their heads in shame for their silence and refusal to even respond to this serious issue appropriately!

We therefore urge President Mills to instruct the GNPC and its agents or operators to suspend all oil exports from the Jubilee Field till the meters are calibrated and replaced by July 2011 as confirmed by the Director of Exploration and Production of the GNPC, Mr. Thomas Manu.

Hayford Atta-Krufi

Chairman - NPP UK and NPP UK & Ireland

“P.P.” – Communication and Research Committee