Meeting chiefs of the Nzema area this week, Ghanaian President, Akufo-Addo, pledged to amicably resolve the increasingly protracted impasse between one of the country’s local oil companies, Springfield, and a consortium made up of Italian oil major, ENI and its Swiss partner, Vitol.

Attempts by the Government of Ghana to force a “merger” of the separate petroleum discoveries of Springfield, on the one hand, and Eni and Vitol, on the other hand; split the equity of the merged “unit” anew among the companies; and have them jointly produce oil from the combined field is in stark contrast to the voluntary agreement that led to a similar “merger” (or technically, “unitization”) of the country’s most successful oil field to date, Jubilee.

In the case of Jubilee, the oil companies involved (Tullow, Kosmos, Anadarko and others) agreed that the discoveries they had separately made on the concessions separately leased from Ghana were indeed connected in such a manner that it would make sense for the discoveries to be unitized and produced as a single oil field.

In response to the Government’s attempt to impose a formula for a forced unitisation of the fields, Eni-Vitol have decided to trigger the dispute arbitration clause in their lease agreement with the Government. A showdown at the London Court of International Arbitration between Ghana and the Swiss-Italian investors is now imminent.

Usual Justifications for Unitisation

The benefits from unitization are usually spread among the producing oil companies/investors, the Government and the host country.

Because petroleum (oil, gas and other economically valuable derivatives) is often trapped underground or under the seabed (all of Ghana’s commercial discoveries so far are “offshore”, under the seabed) in fluid forms, the “accumulation” can shuffle around the rock formations in which it is trapped.

Concessions are often given out without a full picture of how the petroleum is distributed under the seabed, though with every seismic mapping done by investors the country knows better how to carve out the concession blocks for block lessees to minimize such “straddling” of petroleum reservoirs.

When investors enter into contracts with Ghana to lease a block under the sea (under international law, Ghana controls its coastal seabed, or continental shelf, up to an extent of 200 nautical miles or more into the high seas), they do so in the hope that any “pool” of petroleum they discover in any section of the block that they can drill profitably will be theirs to own and exploit. They will usually also have the right to invite investors to share the costs and profits (i.e. “to participate”) resulting from the eventual harvest of hydrocarbon riches (of course, by law and through negotiation, the Government is entitled to about 10% more or less of any such discovery, usually exercised through the Ghana National Petroleum Corporation – GNPC – or one of its even more commercial subsidiaries, such as Explorco or Gosco).

If it turns out that the pool of oil extends to adjacent blocks, then there is the possibility that the oil in one block can be “suctioned out” by the oil companies who own the adjacent blocks faster or in larger quantities, draining the pool or reservoir to the detriment of the slower or more cautious block owner. To prevent such a fate, each block owner is incentivized to drill as aggressively as they can (so-called “competitive drilling”) leading to suboptimal decisions in many ways.

Because effective drilling requires careful management of the pressure in the reservoir, one has to position production wells carefully in order to apply just the right amount of force on the right points in the overall “geological structure” or “stratigraphic trap” in which the petroleum has accumulated. A common reservoir thus require a central design.

Often, additional measures are needed to engineer the pressure dynamics, such as injection of water and gas at specific points to build up pressure for the petroleum fluids to flow up the production wells through “risers” into production facilities (such as so-called “FPSOs” or “submersible rigs”) on the sea surface. Siting these expensive but non-producing “injector wells” properly often requires that the field engineer takes into account where the production wells are also placed. Without a central field engineer, individual block owners would usually favour more production wells on their side than injector wells that optimizes pressure across the entire reservoir.

All of these suboptimal decisions – competitive drilling, poor siting of wells, underinvesting in secondary recovery infrastructure like injectors, etc – impact the long-term performance of the oil field. Investors, as a collective, may lose out because of duplicative spending on competing wells and injectors. Government loses out on revenue because most capex costs by investors are tax deductible. And the society loses out since in the medium term less oil and less oil revenue are generated for socioeconomic returns (jobs, social spending, contracts for value chain companies etc).

Unitisation is However Not Always the Only Option

It is important to bear in mind however that some of the problems that unitization usually sets out to solve can be addressed through other regulatory means. For example, every well that is sunk in a block usually needs prior regulatory approval. In fact, some operators in Ghanaian waters claim that the total number of approvals needed to get a new oil field going exceed two thousand. The regulator has a say in well spacing decisions through its ability to coordinate the outcomes of multiple “plans of development” for oil fields submitted by different companies in adjacent contract areas.

Companies can also embark on what is known as “pooling” whereby they co-invest in oil wells with regulatory approval in order to minimize the duplicative spending of drilling unnecessary adjacent wells. With horizontal drilling and sidetracking techniques getting more sophisticated by the day, such commercial solutions are even more viable today than they were in the past. The broad term for these other alternatives to unitization is “joint development”.

As a last resort, regulators can even cap production output to prevent excessive drainage of the reservoir. In the present case of Eni, the initial production forecast of 45,000 barrels of oil a day has been significantly exceeded (peak production is now at 57,300 barrels) because this is allowed.

The above caveats notwithstanding, unitization is usually a preferred mode for maximizing recovery when legal and regulatory certainty is required.

Why the Eni – Springfield Impasse then?

Given the potential benefits to investors and block owners/lessees of unitization and the usually voluntary nature of the practice (some jurisdictions like Texas don’t even have a statutory pooling or compulsory unitization regime), why has the Eni-Springfield matter become so acrimonious?

It is clear from the title of this explainer which way my sentiments turn. I think GNPC is the problem. But to make the case properly, it is important to trace the long genesis of the two oil discoveries that the Government of Ghana wants developed as a single unit.

The Eni – Vitol Sankofa Discovery

In March 2006, the Government of Ghana signed an agreement with Heliconia Energy, for the Offshore Cape Three Points block. As is customary in this space, Heliconia flipped the block to Vitol, the parent of its own Bermuda holding company, Atlantic.

 In 2009, Vitol struck gas in the area of the block which became the Sankofa oil field. As is customary in this industry, Vitol sold a piece of the block to Eni, in the process sharing the financial risk and enabling an injection of further capital to develop the block towards production. With further exploration, oil was also discovered in the area in 2012.

Three years later, the World Bank provided political risk guarantees totaling $700 million (believed to be the largest ever such commitment by the Bretton Woods institutions to a capital project). Further loans from the IFC and other parties to Vitol and Eni underwrote a program of investment leading to oil production in 2017 and gas production in 2018. The World Bank estimated total project costs at $7.7 billion (of which it was responsible for mobilising about $1.27 billion). Eni, on its part, has reported total expenditure to date of $6 billion, and a revised project life-cycle capital expenditure of $10 billion.

The Eni consortium companies see themselves as deserving credit for having brought the biggest single overseas investment to Ghana to develop a risky and highly complex asset.

The Springfield Afina Discovery

In the same 2015 that the Eni consortium began drilling operations following the earlier approval of the plan of development by the Government in 2014, the Springfield upstream story began in earnest.

Two years earlier, in December 2013, Kosmos Energy had to give up a part of the West Cape Three Points block because under Ghanaian law a company is time-bound to explore for oil and develop any quantity found, or it must relinquish parts of the block on which it has not hit commercially exploitable oil.

The 1.37 square kilometers of seabed given up by Kosmos in this fashion was split into two new blocks and companies invited to bid for both. About 12 companies expressed interest, Springfield being one. In April of 2014, Springfield was thus allowed access to the GNPC data room to evaluate the cumulated data on the two blocks gathered by previous lessees.

Springfield came to GNPC with the Taleveras Group, a company part-owned by Nigerian tycoon, Igho Sanomi. In June 2014, Taleveras was introduced as the technical partner that will operate any blocks awarded the consortium. Unfortunately, soon thereafter, Taleveras began to experience serious financial challenges, culminating in a string of legal actions around the world. Not surprisingly, the Evaluation Committee disqualified it as the Technical Operator for lack of relevant experience and financial capacity, and decided to limit Springfield’s bid to block 2 alone.

Hence, in October 2014, Springfield introduced a new Technical Operator, Vaalco Energy, a small, Houston-based, Gabon focused oil junior. Vaalco had some requisite experience (it was Hunt’s partner during a small seismic campaign in Ghana as far back as 1999) and was thus acceptable to the Committee. But just before the Committee could complete its evaluation, Vaalco also decided to pull out as the Technical Operator.

Here is where Springfield’s exceptional tenacity comes into the picture. They convinced the Committee and the Ministry of Energy to award them the block nonetheless pending the onboarding of a Technical Operator. The Committee agreed and in turn convinced Parliament to ratify Springfield’s Petroleum Agreement with the Government, but with a caveat. Springfield was asked to find a Technical Operator within a year. The Ghanaian model contract gives an oil company 7 years to find oil anyway, with room for extension under certain conditions.

Springfield succeeded in convincing the Ministry of Energy and the GNPC to allow it to continue to explore and operate the block without a formal Technical Operator on the basis that oilfield services contractors, like Schlumberger, will more or less play that role despite the lack of official designation. Furthermore, it had set up a technical services company itself called Fairfax and also intended to form a joint venture with Aker Solutions, the Norwegian equipment player, to explore capacity development for exploration and production.

After a 3D seismic mapping exercise involving the giant Ramfom Titan in 2017, it secured the necessary regulatory approvals for drilling. Now primed, Springfield secured a rig to drill two wells in August 2019. The initial plan was to mirror a discovery in the adjacent ENI block (discussed above) called Beech by targeting a well named Oak-1x before targeting the Afina-1x well. Somehow, the campaign was reduced to just one well, Afina, and after 64 days of drilling, the targeted depth was reached in November 2019.

False starts notwithstanding, just before Christmas 2019, Springfield announced with massive fanfare the discovery of 1.5 billion barrels of oil in its budding Afina field.

No doubt that Springfield sees itself as a highly tenacious, groundbreaking, visionary African oil pioneer that will stop at nothing to realise its dream to become the first African operator of a massive ultra deepwater block.

Legal & Engineering Best Practices

After a new oil find, Ghanaian law requires oil companies to “appraise” it. This is such a critical point in this story that it merits quoting the relevant portion of the law. Appraisal is defined as:

           “operations or activities carried out …following a Discovery of Petroleum for the purpose of delineating the accumulations of Petroleum to which that Discovery relates in terms of thickness and lateral extent and estimating the quantity of recoverable Petroleum therein, and all operations or activities to resolve uncertainties required for determination of a Commercial Discovery”.

It is worth noting the boldened portion of the definition above. A major part of the dispute arbitration commenced by Eni-Vitol may well turn on the meaning of this sentence.

More so because the famous Article 8 of the model Petroleum Agreement sets conditions for unitization hinged on this basic prerequisite (various relevant extracts):

           “As soon as possible after the analysis of the test results of such Discovery is complete, and in any event not later than one hundred (100) days from the date of such Discovery, Contractor shall by a further notice in writing to the Minister, the Petroleum Commission, and GNPC, indicate whether in the opinion of Contractor the Discovery merits Appraisal.

… Where the Contractor does not make the indication required by Article 8.2 within the period indicated or indicates that the Discovery does not merit Appraisal, Contractor shall, subject to Article 8.19, relinquish the Discovery Area associated with the Discovery.

…In the event a field extends beyond the boundaries of the Contract Area, the Minister may require the Contractor to exploit said field in association with the third party holding the rights and obligations under a petroleum agreement covering the said field (or GNPC as the case may be). The exploitation in association with said third party or GNPC shall be pursuant to good unitization and engineering principles and in accordance with International Best Oil Field Practice.

…Where Contractor indicates that the Discovery merits Appraisal, Contractor shall within one hundred and eighty (180) days from the date of such Discovery (or, in the case of the Existing Discoveries, within nine (9) months from the Effective Date) notify the Minister and submit to the Petroleum Commission for approval and to the Minister for information purposes a Proposed Appraisal Programme to be carried out by Contractor in respect of such Discovery.”

Model clauses from Ghana’s petroleum contracting regime

Here too, the boldened text – “good unitization principles & international Best Oil Field Practice” – is the fulcrum around which the arbitration about to commence in London will turn.

Is Afina a commercial discovery? Are the directives by the Minister for the ENI consortium and Springfield to compulsorily unitise their separate finds on grounds of “straddling” following International Best Oil Field Practice? Can a find that has not yet been established as commercial through appraisal be made part of any other arrangement, including field unitisation, considering the language of the provision?

Obviously, it would be imprudent to make categorical pronouncements now that the matter is in arbitration. But we can explore certain critical aspects to gauge whether things should even have been allowed to go this far.

The Fracas Begins

The complications arose a few months after Springfield’s announcement in December 2019 that it had made a massive find containing 1.5 billion barrels of oil. A field containing that amount of oil is, with virtual certainty, a commercial discovery.

Whilst the determination of whether an oil find is commercial is driven by multiple factors such as the prevailing oil price, the complexity of the reservoir (which will impact costs) and the distance to production facilities or need for totally new infrastructure, volumes and the certainty of recovering those volumes are by far the most commercially sensitive parameter.

Springfield’s initial estimate of 1.5 billion barrels was followed by a claim that the find it had made is in fact connected to the Sankofa East field in the ENI consortium’s block (Springfield would later reveal that it had suspected this from geophysical analysis since 2018).

Following a formal application by Springfield for unitization, the Minister of Energy, on 9th April 2020, issued a directive pursuant to Section 50 of the 2018 petroleum regulations requiring Eni and Springfield to unify their finds.

The interesting thing about Section 50 is that it does not elaborate on the preconditions of commerciality mentioned in the Model Petroleum Agreement nor does it touch on the role of appraisal in establishing the equity split (or “unit interests”). It primarily focuses on the Minister’s powers to issue model contracts specifically for unitisation.

Eni insisted that both appraisal and commerciality were critical factors in any unitization process and refused to budge. So, on 29th July 2020, the Chief Director of the Ministry of Energy wrote a second letter to the two companies lamenting their refusal to share data and the general lack of cooperation. Springfield says that it persistently pursued ENI for a meeting with scant results. Vitol, the other main half of the ENI Consortium, responded to the Ministry that Springfield had already proceeded to the High Court in an attempt to enforce the order to unitise.

On 19th August 2020, the Minister again wrote to the ENI consortium that it is engaging an independent third party to review the claims of the two parties and will impose the findings once they were ready.

Meanwhile, the parties had so far failed to sign a confidentiality agreement for data exchange to commence. Consequently, on 14th October 2020, the Minister imposed conditions for the unitization. Eni and Vitol continued to insist that as far as they were concerned the basis for unitization had not been established by sound engineering principles and data.

It is critical at this juncture to establish that whilst the Minister’s 14th October order imposing terms for the unitization was based on a 6th October technical report by the GNPC, his 9th April order appears to have been triggered primarily by the Springfield application without any comprehensive technical evaluation of the latter’s claims.

Readers would notice that the 14th October order was merely laying out terms, including crucial determinations about unit interest (how much equity two parties – ENI+Vitol and Springfield – stood to gain in the unitized field), for a directive that had already been made.

It will weigh heavily on the minds of the arbitrators that the substantive 9th April directive itself was made before an independent technical evaluation of the claims of Springfield in its application for unitization to the Ministry claiming that its Afina find was connected to ENI’s Sankofa East field. The Arbitrators are also likely to ponder if GNPC, an entity with commercial interest in the fields in contention (and therefore potential bias for one partner over the other) could be considered an “independent third party” to provide a technical assessment that could rewrite the commercial rights and entitlements of its partners.

With those important observations in the background, we can now turn to the 6th October technical report from the GNPC based on which Ghana decided to divvy up a future combined Sankofa-Afina field between Eni-Vitol and Springfield, with Springfield getting a majority stake of 54.5%.

Illustrative Chart of the Equity Split Imposed by Government on the Future Combined Field

Block Owner/LesseeOCTP Participation (%)WCTP-2 (New Discoveries)* Participation (%)Total Unit Interest (Sankofa-Afina Merged Unit)
ENI44.44 ~17.5%
Vitol35.56 ~14%
Springfield 8454.5%
*The fiscal regime for this block strangely differs for new and existing discoveries (a couple of undeveloped finds had been made before the latest owner, Springfield, was awarded the block)

The GNPC report asserts in its executive summary that the two finds – Eni-Vitol’s Sankofa East and Springfield’s Afina – are indeed connected (both emanate from a common reservoir straddling their separate blocks). It also states that based on analysis, the P90 case (the lower bound of estimates or the quantity that has at least a 90% probability of being produced or exceeded) for how much oil is in the Springfield side of the common reservoir is 290 million barrels, whilst the mean case puts the oil in place at 642 million barrels (revised upwards from the 506 million barrels estimated from earlier 3D seismic analysis).  

Extract from the fateful GNPC 6th October Report

The important matter here is the applicability of the International Good Oilfield Practice (IGOP) requirement in Ghana’s petroleum regime as indicated in earlier sections. The classification of reserves by probabilistic scenarios like P10, P50 and P90 is not an arbitrary process. It follows well laid down IGOP guidelines in the Society of Petroleum Engineers framework for classification. Such guidelines are of course the very types of doctrines and principles constituting the bedrock of Lex Petrolea, or international petroleum law, the domain of norms governing the ongoing Eni-Vitol – Government of Ghana dispute arbitration currently underway in London.

The key issue in reserves classification, as a matter of global practice, is the narrowing of uncertainties and unrisking. In this discussion, we have witnessed a progressive narrowing of Springfield’s initial communication of P50 reserves of 1.5 billion barrels of oil in place to GNPC’s estimate of 642 million barrels in place. Eni’s corresponding P50 number of 535 million barrels in place, on the other hand, has gone up from an earlier estimate of 450 million barrels of oil equivalent (BOE) in 2013 to 535 million BOE after 20 wells drilled and consistent production of more than 3 years.

The question that will weigh on the minds of the arbitrators is whether GNPC’s approach to P90 and P50 classifications is solidly grounded in international standards seeing the wide uncertainty ranges on display.

All this while, due to the disagreements over confidentiality, Eni had not actually received the information based on which these determinations by GNPC and the Ministry were being made. Finally, on 23rd March 2021, the Minister decided to instruct the Petroleum Commission to hand over the data on Springfield’s Afina to Eni under a confidentiality agreement signed with the Commission (as opposed to Springfield).

On 26th April 2021, Eni and Vitol (for simplicity sake, we shall sometimes refer to the Consortium simply as “Eni” going forward) concluded its analysis of the data and submitted a report containing a startling claim to the Ministry: in its view, Springfield’s Afina find is so small it may not even be commercial after all (i.e. it may not be economically profitable to be produced).

Because Ghanaian law does not require finds made in two adjacent blocks to be directly connected before a finding can be made that they are best produced as one field, the technical debate till then had focused on whether there was even any merit in the investigation into whether Afina and Sankofa were really linked geologically. The dimension of non-commerciality now took center-stage and shook up the premises of the debate.

Eni’s analytical posture in the 26th April report starts with a sketch of the geology of the border between the two adjacent blocks. Per this analysis, the closer one moves westward from the Sankofa East area to the Afina find area, the poorer the petrophysical properties become reducing to an extent the likelihood of the presence of a continuous geological structure. Accordingly, Afina, compared to Sankofa East, has much greater mud contamination in its hydrocarbon columns. Thus, whilst the rocks in both fields may be of similar origin and could have matured through time by means of similar geological processes, the evidence, says Eni, does not yet confirm that the two reservoirs are actually connected.

In line with these arguments, Eni then brought up the issue of why the Afina well has so far not been tested. After all, the flow rate would have helped further reduce the uncertainties involved. Bearing in mind that on average 5 wells are drilled to establish commerciality in many similar contexts, to use one untested well as the basis for firm estimates is pushing the envelope.

A more technical argument related to why certain production activities on the Eni side were not impacting on pressure observations on the Afina side. But by far the most aggressive claim in Eni’s 26th April report was the assertion that rather than the GNPC estimate of 642 million barrels of oil in place in the P50 case, a more reliable estimate would be 94 million barrels, which under present conditions may not even be worth developing for production.

If Eni really believes this, it is completely ridiculous for anyone to have assumed on the Government of Ghana side that any amicable solution could be found whilst compulsory unitization was still on the table. Below is a very crude calculation that nevertheless illustrates the commercial impracticality of expecting either Springfield or Eni to play ball along conventional unitization lines. For reasons of simplicity, the calculation looks at the nominal value (without accounting for inflation or the time value of money) of the oil in the two adjacent fields. It also ignores production costs in both the status quo scenario and the scenario in which the unitization proceeds. Whilst it far from an NPV+ calculation, it still serves the purposes of illustration fairly well because it is strictly from Eni’s view, and thus assumes no savings from unitization.

Eni’s Oil-in-Place Nominal Valuation Scenario

Block Owner/LesseeTotal Unit Interest (Sankofa-Afina Merged Unit)Nominal Economic Value of Interest Post-UnitisationEconomic Value of Interest Pre-UnitisationEconomic Impact of Unitisation
Eni~17.5%$5.162 Billion$11.11 Billion-$5.948 Billion
Vitol~14%$4.13 Billion$8.89 Billion-$4.76 Billion
GNPC10%$2.95 Billion$2.95 Billion0
Explorco4%$1.18 Billion$2.43 Billion-1.25 Billion
Springfield54.4%$16.07 Billion$3.78 Billion+12.29 Billion

From Eni’s standpoint the unitization is heavily tilted towards Springfield and offers it nothing besides nearly $6 billion in asset losses. Together with Vitol, it stands to lose more than $10 billion should the unitization proceeds. While Ghana would like to couch the forced unitisation as a technical regulatory matter, the prospect of large financial losses invokes some comparisons with expropriation, a well travelled area in the growing body of Lex Petrolea. In short, in Eni’s eyes, the unitisation is tantamount to Ghana taking half of its find and giving it to another company.

In the same vein, Springfield stands to gain more than $12 billion in this scenario. Since none of the current unitisation models on the table contain a scenario in which Springfield is worse off, it stands to reason that Springfield will stand its ground. Its position is perfectly logical and, in fact, is to be expected.

GNPC, the House of Supreme Incompetence

The conduct of the private companies is completely understandable from a cursory review of the scenarios above.

If GNPC’s view is correct and Springfield’s Afina has 642 million barrels, Springfield gets its just share from the initial tract participation (i.e. the equity split of 54.5% – 44.5% in its favour) but if Eni’s more pessimistic view turns out to be right, Springfield gets a $12 billion windfall.

Whilst the Minister’s terms include the standard “redetermination” provision, whereby these equity splits/unit interests could be revised in light of new data, within an 18-month timeline, the order falls far short of international best practice in how redetermination of international tract participation is to be managed.

First, a Preliminary Unitisation Agreement would normally be constructed very differently from the outright Unit and Unit Operating Agreement the Minister sought to impose through his order. Such an agreement will seek to establish the full extent of the common reservoir in order to determine the Initial Tract Participation (ITP). The ITP would not be imposed as a fait accompli prior to any Preliminary Agreements on the approach to embarking on the road to unitisation.

Second, a cost sharing provision would be necessary at the preliminary level to cover the additional costs of reservoir modeling. Under no circumstances, judging from the picture that emerges from a scan of dozens of relevant case studies in IHS’ commercial PEPS databases, can a pre-unitisation agreement (PUA) even be entered into without preliminary agreements on joint data collection, which in this case would include some appraisal work. It is the PUA that sketches both the “unit interval” and the initial unit interests for subsequent confirmation. Not arbitrary reports by National Oil Companies aiming to short-circuit the path to a Unit & Unit Operating Agreement (UUOA).

It is also the PUA that establishes the working groups within an atmosphere of mutual trust and confidence to enter serious discussions for final unitization. One of the key tasks facing such a working group (for example, a Pre-Unitisation Operating Committee) is the thorny issue of historic capex that would have contributed to the overall commerciality of the combined field. In this case, we have one field that has already incurred costs in excess of $6 billion. The Minister’s directive by focusing purely on historic production numbers without addressing historic capital expenditure showed considerable misunderstanding of the issues at stake.

Another source of confusion is the lack of clarity on the role of truly independent experts in the redetermination process. We can dismiss out of hand the notion of a National Oil Company serving as both participating interest holder and an independent expert offering mediation services in a fraught matter such as this.

In a situation, such as this one, where the Joint Database of production and appraisal data reflects activities to prove reserves by one party and almost none by the other party, one wonders why a uniform redetermination provision makes sense. And what if a redetermination in 18 months results in a drastic reallocation of historic production numbers from the deemed majority holder to the minority holder? Are both parties equally placed to take the financial hits? The degree of complexity introduced by trying to unitise an already producing field with one that has not even been appraised requires a level of sophistication in designing preliminary frameworks that was wholly absent in the Minister’s proposed terms.

 Ghana’s refusal to stick to these common global practices, egged on by the GNPC, was bound to lead all parties to the current impasse.

But why heap most of the blame on GNPC?

Much of the justification for blaming GNPC is best illustrated by its 24th May 2021 response to Eni’s assessment of Springfield’s Afina data. The tone of this rather shoddy piece of work was not merely cavalier and perfunctory, but also unanalytical.

Confronting the issue of why a well test has not been conducted at Afina, GNPC airily dismisses the point by citing “value for money”. In what world does testing a well in a field declared as suitable to be combined with another field for joint production not “value for money” when any data so collected would go to improve the eventual common reservoir model?

On the extremely critical issue of how much oil is in the Afina find, GNPC beat about the bush with speculations about possible differences in areas used in computation. No effort is made to actually address any discrepancies that could have resulted from such speculated geometric causes. They then quickly retreat to the ridiculous mantra that producing best estimates of oil in place is a “post-unitisation” matter. That is to say, the parties should just give up their rights on the say-so of the GNPC and the Minister and the calculations can come later.

Having been blatantly caught out for discrepancies in their use of inferences about the oil and water contact dynamics and compositions in the hydrocarbon column, GNPC barefacedly mumbles something about using data from other nearby structures to approximate the drivers of the volumetric figures. It is absolutely elementary in reservoir estimation to be confident about “fluid contacts” data. The dismissive approach GNPC took to this issue alone would absolutely have strongly reinforced perceptions of unprofessionalism and bias.

As a further sign of incompetence, GNPC does not include in any of its technical evaluations to the Minister the actual implication of unitization for Ghana’s own fiscal situation. As the crude nominal valuation analysis above shows, it is entirely possible for Ghana to lose money (due to the relative differences in participating interest in the pre-unitisation tracts) – maybe up to 25% – if Eni’s numbers turn out to be correct. In these circumstances, why would a National Oil Company breezily argue that sound estimation of commerciality is irrelevant in an assessment of unitization?

The only sound and professional thing for GNPC to have done when the Minister referred the matter for advice was to lay out the requisite preparatory work needed ahead of a pre-unitisation agreement. As the organization relied upon by the government for technical insight into the petroleum business, it was GNPC’s duty to know and to advise that a rush towards a Unit and Unit Operating Agreement was completely immature when the global best practice is to establish a preliminary framework within which issues of commerciality and optimal recovery can be thrashed out in an atmosphere of mutual trust and confidence.

GNPC encouraged the Ministry to jump the boat in the unitisation fiasco

By persistently pushing the thesis that all commercial determinations must happen “post-unitisation”, GNPC proves itself to be a wholly provincial, unsophisticated, and even oafish National Oil Company that cannot be relied upon to guide our political leaders to make the right decisions for harnessing our national energy resource endowment.

The conduct of GNPC invokes comparison with that of Pemex, Mexico’s National Oil Company, which has led to a similar international dispute about the operatorship of the Zama field. A general approach of disregarding international best practices has led to a Pemex that has been ranked as the world’s most indebted oil company, perpetually struggling to fund its capital expenditures.

It is clear that Ghana must follow the footsteps of Brazil and India and establish a technical agency for hydrocarbons (like Brazil’s ANP) that is focused on providing technical policy leadership in the petroleum sector (not merely exercising regulatory oversight like the Petroleum Commission) instead of one suffering from the schizophrenia of combining commercial hubris with technical policy savvy.

Of course, the culture and mandate of the Petroleum Commission can also be transformed for it to take over from the GNPC the role of providing technically sound, professional unbiased, purely national interest driven, policy advice to the Government.

If this does not happen soon, GNPC’s reckless conduct will not only end up embarrassing the country, it will one day cost all of us billions of dollars we can ill afford.

Finally, the elusive Chief Executive of the Ghana National Petroleum Corporation (GNPC) has found time in his packed diary to engage the public about the controversy surrounding the biggest single transaction in the GNPC’s history.

Alerted by friends, who know of my deep interest in the subject, I went online to watch the GNPC Boss’ interview on Ghana’s most popular local language radio station this morning myself.

Any thoughts I had about the purpose of the public engagement being about making up for the failure of the GNPC to conduct extensive consultations ahead of such a momentous decision, as indeed is required under the EITI framework to which Ghana subscribes, dissipated quickly as the interview progressed.

When asked to comment on the campaign of Ghanaian Civil Society Organisations (CSOs) against the GNPC’s recommendations to Government to invest over a billion dollars in the two Aker-AGM blocks (Pecan and Nyankom), he dismissed every argument the CSOs have ever made out of hand, putting everything down to mischief or ignorance. As far as he was concerned, nothing said so far by the CSOs has any merit, nor can the activists be said to be motivated by even the tiniest shred of genuine concern.

His way of dramatically illustrating his attitudes towards the CSO movement was to suggest that the analysis its members have so far been producing must likely be the result of “indigestion caused by fufu”. Now, the CSO movement in Ghana has been accused of many things in the past, but excessive binging on fufu takes the prize for sheer imagination and vividity. It had to be fufu. What, with all the fears about cyanide in cassava and the well known effects of starchy calories bloating the guts with mind-numbing gases, the image of CSO activists loading themselves full of the stuff before retiring to their rocking chairs to type nonsense is just the painting of alarm one expects the head honcho of a major parastatal to draw at this juncture.

Apart from the colourful fufu metaphors, however, there were few insights to filter from the interview on Peace FM and the subsequent ones on Joy FM, both major radio stations based in Accra.

Having conceded that he finds Aker-AGM’s willingness to reduce their stakes to such low levels (10% for Nyankom and about 13% for Pecan) somewhat strange, the GNPC Boss’ only explanation for why Ghana conceded in the first place to hand over such massive rights, worth hundreds of millions of dollars, to Aker in June and December 2019 only to now buy them back at a premium was “desperation”. Ghana, according to him, was so desperate to have Aker-AGM develop the blocks that it signed away precious concessions over only then to discover that Aker-AGM’s owners had set up three renewable energy companies, suggesting a disinterest in moving forward with the development and production of oil on the two oil blocks. But he still trusts them.

A much simpler explanation of course is that Aker-AGM knew where to find suckers: Ghana. They knew that it would be easier to offset all their risks upfront if they engineered this very state of affairs. Buy into two offshore blocks in Ghana for $135 million, convince the country’s pliant leaders to raise your stake for free, have laws changed to remove checks on you, and then return after you have failed to make the investments you promised to warrant all these candies to collect a cool billion dollars before handing back the country’s own assets back to them to hold the bulk of the risk for further development. All the while retaining enough control of decision-making to ensure you are still in pole position to squeeze any margins from operations because your “joint operator” status remains intact. And should the poor, benighted, country still bumble its way into producing oil, well, your share is guaranteed. Only upside, never downside!

Ghana is not a country where leaders get asked hard questions. It was cringeworthy listening to the GNPC Boss make one implausible claim after another without a single rebuttal. In accounting for the shocking about face in 2019 which saw hundreds of millions of dollars of rights handed over to Aker only for the country to buy them back in just a year and half, he returned to the hapless theme of “energy transition”. In his world, no one knew of the energy transition in December 2019 when Parliament of Ghana was signing bonanza after bonanza off to Aker, based on the GNPC’s advice.

His esteemed team, one must assume, missed the commitments made by the energy majors in 2017. Though excessive fufu eating is unlikely to be the cause, something else must have plugged their ears and covered their eyes. They never heard about the Oil & Gas Climate Initiative and the strong endorsement of Net Zero (carbon emissions neutral) oil operations by the oil majors in 2016 either. Begs the question: can Ghanaians trust a GNPC leadership so cut off from the strategic trends in the industry they operate? Anytime a GNPC executive talks about the energy transition as being a sudden development warranting kneejerk remedies to long-term strategic problems they have created, they worsen fears about their current actions.

Nor was the head honcho of the GNPC averse to abject disinformation. His claim is that before Hess sold the Pecan block, the largest of the two blocks in controversy, to Aker for $100 million, they had spent a whopping $1.2 billion developing it. Very dangerous stuff. If Hess had spent that much and exited at $100 million, they would have recorded massive write-offs. But we know from their annual report covering 2018 (pages 10, 21, and 32 especially), the year they sold out to Aker, that they wrote off less than $300 million. GNPC’s continued efforts to inflate these “inherited costs” have massive implications down the line since our petroleum tax laws allow investors to recover some of the money they spend finding oil from the State through tax credits.

In a similar vein, he brazenly claimed that Aker’s discoveries since they bought Pecan exceeds 100 million in additional net oil resources. Yet in a presentation he made to the Cabinet and the Economic Management Team, it is clear that the only discovery made on Pecan by Aker is Pecan South East.

Chart extracted from page 12 of GNPC’s Presentation on the Aker-AGM blocks’ Acquisition to the EMT

The true picture, badly distorted in the interviews with Peace and Joy radio stations, is that Aker itself at the end of the entire appraisal campaign, which included all the 3 wells they drilled following their 2018 purchase of the Pecan block from Hess, which you might remember had already drilled seven successful wells before selling out to Aker, concluded that the total estimated new oil resources discovered were between 5 and 15 million barrels of oil. To have a situation where the Head of a National Oil Company is inflating the resources added by a foreign company in order to justify paying them more than they deserve is beyond frightening.

For those not too familiar with the subject, it bears emphasising the point: when Aker bought Pecan from Hess in 2018, the latter company had already drilled seven wells and made a firm estimate of discovered oil volumes of 340 million barrels. It had also found evidence suggesting additional volumes to the tune of 110 and 210 million barrels of oil could be recovered from under the ocean floor. Most of this work was done by 2013. Aker comes into the picture in 2018, drills three wells and conclude that an additional amount of between 5 and 15 million barrels of oil could be extracted. The CSOs consequently make the argument that since buying into the block for $100 million, Aker has not changed the commercial picture significantly for GNPC to want to pay the billion dollar figures they have been bandying around. To discredit the CSOs, the Chief Executive of GNPC concocts a mysterious figure of 100 million barrels as the additional discoveries made in Pecan.

Following the same pattern, he proceeds to accuse CSOs of lying about the potential of competing assets in Ghana’s oil basin to undermine the arguments his organisation has made for the commercial uniqueness of the Aker-AGM blocks, for which reason Ghana must pay so much just for the right to take the larger share of risks in developing them.

What did the CSOs say? We argued that if GNPC did not have an underhand interest in the Aker-AGM deals, they would have benchmarked the attractiveness of the Aker-AGM blocks with other “stranded” assets (commercial and sub-commercial discoveries that have not been developed by their lease owners in Ghanaian waters).

We deliberately highlighted discoveries that the IHS Markit Resource Ranking databases suggest have more contingent resources (loose estimates of oil volumes) or reserves (firm estimates of oil volumes) than Nyankom, the second and smaller of the two Aker-AGM blocks that GNPC believes is worth over $800 million and is aiming to acquire for nearly $400 million. These include the likes of Kosmos’ Wawa and Akasa and the abandoned Dzata block.

We also pointed out a particular block, which we would call the “Erin Block”, after its now bankrupt former operator, where far more work has been done than Nyankom. So far, only two wells have been drilled on Nyankom, and one was a hopeless disappointment. The Erin block on the other hand has seen as much as 14 wells drilled since the 70s, with considerable test production. The GNPC head honcho takes issue with our suggestion that Erin has contingent resources of 500 million barrels of oil equivalent compared with Nyankom’s highly speculative 127 million barrels (according to data provided by GNPC and Aker to Lambert). “Highly speculative” because Aker has not been able to come up with an official volume analysis estimate to its shareholders since promising to do so in its 2019 letter to shareholders, and also because only one successful (slim-bore) exploratory well has been drilled in Nyankom, and that unappraised. The GNPC Boss insists that Erin has sub-commercial volumes in the region of 50 million barrels.

In essence, the Head of the country’s National Oil Company (NOC) is bastardising blocks in the country’s oil basin that are still on the market looking for investors. Even after an independent reserves auditor has established contingent resources of 500 million barrels, the NOC Chief, because of his parochial interest in another deal, is broadcasting to the whole world not to come for this stranded block. Unbelievable! Of all the dangerous things the GNPC Boss said in his hurriedly arranged interviews, designed to ensure that no serious questions would be asked, this one takes the biscuit!

As if all the preceding was not enough, he started serving the Ghanaian public different numbers from what they had communicated to the Economic Management Team, Cabinet and television.

On page/slide 49 of the now legendary presentation by the GNPC to Government, the numbers indicated as capital costs on Pecan and Nyankom by Aker-AGM totalled $965 million (see below). This number is of course in conflict with the $1.2 billion that the GNPC boss now claims Hess spent on Pecan (which we dispute above), plus as yet unconfirmed amounts spent by the previous holders of the Nyankom block. The over $1 billion in costs are to be offset in the future by GNPC, Aker and a string of as yet unnamed “indigenous oil companies” against tax liabilities, without regard to depreciation and tax statutes of limitations, meaning simply that taxes owed the state will not be paid.

Extract from page/slide 49 of the GNPC Presentation to the EMT/Cabinet

Yet, during his interview, the numbers metamorphosed to $1.2 billion spent by Hess and $712 million spent by Aker and a host of finance charges he claims the foreign oil companies are right to saddle Ghana with.

As I have explained clearly and simply above, the foreign oil companies are owned by entities registered in their home countries. They file returns and taxes in those places. Their costs are duly recorded in compliance books. Hess disclosed spending of $280 million. Aker has disclosed spending in the region of $200 million. Adding a dime here and a nickel there, and making provisions for spending by passive partners, take us to roughly $600 million as eligible investments in the field so far.

Their willingness to inflate the amounts that these companies have spent in Ghana so far merely goes to reinforce our suspicions of GNPC’s motives. Especially also when such number gaming is used to justify crazy valuations and lay the grounds for future tax heists.

One of those suspicions relate to the role of as yet unnamed “indigenous oil companies” that are supposed to be introduced into the joint venture entity GNPC is proposing to integrate their operations with Aker’s after the acquisitions.

There have been serious controversies over the involvement of Fueltrade in Aker-AGM matters because the son of the GNPC head honcho is the CFO there. So when Lambert in its valuation presentations (see below) suggests a quiet sale of Quad’s stake in Nyankom (SWDT) to Fueltrade, one’s unease about the real dynamics at play here grows. Especially when CSOs had previously accused Quad of being a mere placeholder for others during the early campaign against the Government’s plans to downgrade Ghana’s stake in the Aker-AGM blocks (the same stakes that are now being repurchased at a premium).

Extract from page 8 of the Lambert Advisory Presentation on the Aker-AGM Blocks’ Valuation Exercise

No matter how anyone dices or minces it, the position of the CSOs remains robust so far: Aker-AGM has not done enough to de-risk the two oil blocks since paying $135 million for both. To the extent that the commercial picture has remained stagnant since they last bought them, and the external environment for fossil fuels worsened, leading to likely higher breakeven costs of production (decarbonisation pressures, equipment scarcity and lower investments in extraction technologies) and lower prices (major analysts now projecting a long-term oil price of $50) in the future, GNPC should not pay more than $400 million (or $2 per pro rata proven reserve barrel) to acquire the majority rights to participate in this highly risky venture.

A cue can be taken from Total’s acquisition of Tullow’s 33.3% stake in the much more prolific Lake Albert basin in Uganda for $575 million, where the French major updated the market with pride about paying less than $2 per barrel.

With only 340 million estimated reserves (repeat: Nyankom has not been properly audited, much less appraised) and the production horizon much farther into the future, GNPC’s willingness to pay roughly $7 per barrel is completely ridiculous.

If such counsel requires eating bowlfuls of fufu to arrive at, can we recommend that the GNPC Boss tries same, but with prekese-infused soup?

For more context, see:



We have a ritual in Ghana. Every once in a while, the country’s Auditor General compiles the highlights of what she found when her battalion of public auditors went through the books of various public sector institutions in line with the Constitution and various laws requiring this undertaking on a periodic (usually annual) basis.

Because all these institutions – spanning a wide spectrum from those that are part of the “core Government”, like Ministries, all the way to those organised on commercial lines, like Ghana Post Company -also retain some internal auditing capacity, which is regulated by the Internal Audit Agency, and in some cases also engage private auditing firms (about 25 of such firms get authorial credit in some of the public audit reports), the actual preparation of these highlights is a logistical nightmare involving a number of steps and hoops. But, eventually, the dossiers for different clusters of public institutions get compiled into different audit reports and all of them are presented to the Public Accounts Committee of Parliament through the Speaker for deliberations and to aid in the oversight of the Executive arm of Government by the Legislature.

Journalists get copies of these reports too. In blazing neon headlines, media houses compete with each other to present to Ghanaians the most lurid spectacles of waste, rapine, plunder and catastrophe. Then the news cycle shifts to something else. Until next time. Wash, rinse, repeat.

Having been an attentive observer, and sometimes participant, for quite a while now, in these shows, I think I have a few simple observations that can help explain at least a part of the reason why this fiasco persists.

On the face of it, the public financial management situation in Ghana is alarming. In the so-called “Ministries, Departments & Agencies” (MDAs) – what you might call “the core Government” – category, the irregularities have moved from $64 million in 2011 to $366 million in 2020. More than a five-fold increase. Depending on how you tally the numbers, the total “waste” in the Ghanaian public sector suggested by the reports exceeds either $1.5 billion or $3 billion per audit cycle.

Yet, certain features of the reports, and of the auditing process itself, urge caution in running with the headlines and chanting for public sector chiefs to be marched through the principal streets on oxen-carts to the guillotine. I will describe just four of these features for now and makes some modest suggestions about how to change things.

  1. Auditor General Reports in Ghana Routinely Confuses the Picture

If you are a regular reader of the reports like those of us in the civil society movement, you would soon learn that they are often riddled with fundamental errors, quite a number of which are as a result of public auditors not always knowing and understanding the organisations they are auditing well enough.

Thus, you will notice highly uneven coverage. Some public sector organisations get merely perfunctory coverage whilst others have the misfortune of being assigned diligent auditors who succeed in getting many pages of highlights about their auditees into the final report. In one fascinating example of this phenomenon, whoever handled the BOST assignment in the 2020 audit round went as far as digging into the organisation’s perimeter control installations, including CCTV configurations (with colourful pictorial illustrations to boot). Yet, in the same audit round, the Ghana School Feeding Secretariat entry in the final report is a grand total of 50 words.

The lack of standardization and the vast divergence in rigour due to widely varying capacity and experience with their assigned organisations among auditors can spill over into some comical outcomes. For example, in 2016, the Tema Oil Refinery (TOR) came under massive attack for having unlawfully debited $370 million from the country’s petroleum accounts. Considering that this amount was 75% of the total irregularities ($550 million) for that cluster audit, TOR found itself on the frontpages, with everyone calling for the executives to be hanged from the nearest lamppost.

It turned out the whole matter was the result of an overzealous but inexperienced auditor confusing the Customs outpost on TOR’s premises with the organization itself and therefore reviewing the wrong records. A detailed rectification was never made.

In one of this year’s reports, the famous Noguchi Memorial Institute of Medical Research was seriously excoriated for lacking the standards to conduct tests because all its laboratories lack ISO certification. Noguchi does have serious resource challenges. But it is not a single lab. Some departments, such as the Department of Parasitology, do have elaborate Quality Management Systems that have been audited to ISO standards.

Even in instances where the situation is one of competing opinions, one gets the impression that the Auditor General is not exercising complete diligence. The current squabble with the Ghana National Petroleum Corporation about the lack of parliamentary ratification for the national oil company’s “international business transactions” clearly calls for a legal opinion. The Supreme Court in a series of decisions from Balkan Energy, through Faroe Atlantic and Klomegah, to Assibey-Yeboah, has clarified the law in a manner that would suggest that unless a public corporation was acting as the “alter ego” of the central government, parliamentary approval of its international business transactions is not required.

The public squabble between the Auditor General and the GNPC about the latter having caused irregularities to the tune of $34 million confuses the picture precisely because the focus on parliamentary ratification detracts from the more worrying issues of procurement defects.

2. A Better Classification Scheme for “Irregularities” is Needed

The very notion of “irregularity” can be subjected to further analysis and better illuminated to protect the public purse. The current Auditor General Department’s classification scheme for irregularities focuses on the source of the irregularities but not really on the impact and degree of concern. The seven categories in the said scheme have been selected to identify the types of actions of the audited institutions that typically give rise to irregularities. So, for example, functional areas like: “payroll”, “procurement”, “debts/loans”, and “cash management”, among others.

However, a focus on impact and degree should lead to a sub-classification system, such as class 1 irregularities covering acts that have led to direct financial loss as a result of the clear abuse of process by a principal spending officer versus, say, class 2 irregularities relating to breaches of standards that cannot clearly be linked to direct losses and which may, in fact, emanate from environmental conditions beyond the capacity of the auditee (the institution or its senior management). Such an approach should also help bring better meaning to the quantification of these irregularities.

For example, when a public sector institution does not receive its budgetary allocation and therefore fails to pay the social security entitlements of its employees for a particular year, we cannot in good conscience sum up all the liabilities and call the final number a “loss to the state” or a “failure to make savings”, which are the two primary components of the current definition of “irregularities”. Such lapses cannot be quantified as losses to the state in the same way that they can if the situation had been one of embezzlement of the funds allocated for social security payments.

As a more concrete example, take the debt/loans irregularities category in the public boards and statutory corporations audit round of 2020. The number is a mindboggling $1.8 billion. But a full half of this amount emanates from debts that state-owned companies in the electricity and fuel value chains owe to each other. A good chunk of these debts has arisen because government price-setting does not always accommodate the full cost of delivering the service. There are sometimes implicit subsidies to citizens in the final pricing of energy.

Whilst the auditor does well in highlighting these policy dysfunction issues, should such “irregularities” and especially the monetary value placed on them, be bundled up with losses occasioned by embezzlement, inflated contracts in procurement scams and poor credit management?

In the 2020 MDAs’ round of audits, the “loans and debts” irregularities category – apparently leading to losses of $200 million – constituted a full half of all irregularities.  But look more closely and you will find that a striking 91% of the amount ($181 million) results from debts owed by public health facilities to medical suppliers.

These facilities owe the reported amount of money because Government policy does not allow them to fully recover the costs of delivering the services, or delays in reimbursement by the National Health Insurance Authority (NHIA) make servicing of debt owed to medical suppliers impractical. Does such a situation constitute a “loss” to government in a strictly audit sense? How is the Head of a Hospital supposed to respond or react to such a finding? If the idea is to shine the spotlight on general policy dysfunction or poor central government fiscal practices, is the auditing process the right lens and framework? What about the fact that for most people seeing the $200 million figure flashed about under the caption of “losses to the state from irregularities” their first instinct is to immediately conjure up notions of embezzlement and corruption? Should we continue to encourage this perception?

I am convinced that throwing up all these different types of “undesirable situations” into one pot confuses the picture and makes it harder to take the Auditor General’s report and apply it as a sanitising agent in the public sector. Loading the report with lamentable situations that are nonetheless not the direct responsibility of the principal auditees to fix leads to confusion about enforcement.

3. Not Everything is Material Enough to Dump into the Reports

Another, similar, feature of the reports that dilutes their effectiveness is the lack of enforcement of the materiality thresholds when presenting matters for Parliament to act on. Many of the pages in the reports can be cut out with no loss of value if materiality thresholds are properly observed. By this I mean that trivial matters should not be escalated to the attention of Parliament. The bulky reports give the impression of thorough work but careful reading reveals many details that can be left out to ensure that the reports are of a size that more people will read.

For example, when a report to Parliament identifies a Cocobod employee, Patricia Amankwa, as having failed to retire imprest of 190 Ghana Cedis, or calls out Coca Cola Bottling Company for owing 44 Ghana Cedis to Cocoa Clinic in Kumasi, one begins to get the impression of “padding”. Why should Parliament be asked to look into why Exim Guaranty owes Cocoa Clinic 76 Ghana Pesewas?

4. The Auditor General Should Not Steer Away from Politically Sensitive Matters

At the same time that the Auditor General was berating Ms. Patricia Amankwa for failing to return 190 Ghana Cedis out of an amount Cocobod advanced to her to cover costs incurred in their service, it was busy ignoring the much more egregious issues in the Frontiers Healthcare contract signed by the Ghana Airport Company Limited. Its auditor sent there somehow succeeded in not observing all the procurement and operational lapses that have surfaced in various investigations, including the lost potential gains and failure to secure regulatory approval for the overall setup.

At the same time that Exim Guaranty was being named and shamed for owing Cocoa Clinic 76 pesewas, the alarming waste of public funds arising out of the National Lottery Authority’s deal with Chinese vendors, brokered through TekStark, for Nexgo N5 lotto devices, leading to a potential loss of $3 million due to poor procurement and operational design, was being carefully avoided.

The Electoral Commission’s perennial abuse of public funds by failing to properly account for millions of dollars’ worth of electoral equipment that it bought between 2016 and 2019 (despite claims of not having bought any such equipment since 2011) failed to register even a whiff of concern in the published audit reports.

In this context, the former Auditor General, Daniel Domelovo, who was removed from office to howls of protests from Civil Society Organisations (CSOs) represented the only hope, so far, for serious transformation of the Auditor General’s Department into a fearless check on abuse of public funds regardless of which political heavyweight is involved. His bold decision to disallow spending authorized by the powerful ex-Senior Minister to Kroll in the UK sent powerful signals to the entire establishment that a new era had arrived. The surcharge may have been set aside by the Supreme Court on a technicality, but the principle was established. It would seem that the course for change he set has been prematurely terminated. That would be very unfortunate.

The sense that powerful people, especially those at the apex of the political system, are not exempt from the reach of public audits is the only way to restore confidence in the usefulness of these exercises.

Until the auditing process can get to a state where the public as a whole, but more specifically the civil servants on the frontline, are confident in its fair and impartial use to restore sanity to public financial management, regardless of the interests at play, findings shall continue to serve as little more than fodder for periodic circus shows.

Our onetime friend in the Ghanaian Civil Society Movement, the Founder of the Danquah Institute and strategist behind a dozen activist fronts, from Let My Vote Count Alliance to Alliance for Accountable Governance, has some advice for those of us still on the frontlines: keep your shirts on!

He says we are making too much of a fuss about a derailed train that is yet to crash. The government only has a mandate from Parliament to raise “up to $1.45 billion” to on-lend to GNPC for investment in the two oil fields steeped in controversy, Pecan and Nyankom, but it hasn’t spent the money yet so what is our problem?

First, Mr. Otchere-Darko ignores the genesis of this whole affair to make his position feel obvious and reasonable. Civil Society Organisations (CSOs) have won a hard fight globally to be at the table when natural resource deals are being discussed. They are not supposed to be on the sidelines watching the deals get cooked and only start agitating when the mess has been served and the public is being forced to eat.

The Government of Ghana decided to subscribe to something called the Extractive Industries Transparency Initiative (EITI), which enjoins it to sit with business on one side and civil society on the other side when crafting natural resource transactions and policies. No one forced this norm down Ghana’s throat. It recognized from the natural resource-fueled conflicts all over the world that prior and extensive consultations are critical in avoiding the dangerous waters some societies found themselves when they ignored the need to get citizen groups actively involved in shaping natural resource policies and transactions.

Barely a year after a bruising tussle with CSOs over the Agyapa deal, the Government jumps into a similar transaction, and gives Parliament barely two hours to review the merits (again, reminiscent of Agyapa). Parliament, in turn, solicits no input from any segment of society, yielding an outcome complete with the same features of valuation-confusion, passive beneficiaries, and historical amnesia, and yet one of its leading strategists is feigning surprise that activists are up in arms? This beggars belief.

The second piece of context that Mr. Otchere-Darko ignores is the unique history of these two oil assets. The “how we got here” narrative is worsened by the sheer fact that CSOs have long been on a collision path with the GNPC and Aker about what we believe are serious collusive practices to rip Ghana off.

In June 2019 and December 2019, Government of Ghana went to Parliament to make shocking changes to Agreements governing our relationship with Aker’s key actors. The combined effect of these changes led to Ghana sacrificing shares it owned in the two oil assets and drastically reducing the say it has in how they are managed.

These actions by Government were at the behest of the GNPC. When the same GNPC comes back to advise the country of a need to spend hundreds of millions of dollars buying back the same shares and management involvement that Ghana barely a year and half ago relinquished, we have a right to be outraged. Especially when the country is losing hundreds of millions of dollars due to the earlier climbdowns. Shockingly, Otchere-Darko doesn’t even recognize this aspect of the CSO’s angst.

Third, the CSOs are not aligned with the substance of the GNPC’s fundamental posture as he portrays. The majority of us do not believe that Government should take a majority in Nyankom yet. This is a highly risky asset because it has not been de-risked through sufficient exploratory and confirmatory drilling. Only two wells have been sunk there, but one was a disappointment.

The engineering required to get oil out of Nyankom is highly complex, suggesting likely recovery issues down the line. On this score, there is a fundamental policy disagreement with GNPC. Rather than an outright majority, we favour an options-based contracting approach with very little financial commitment upfront. Especially when the current owner has an obligation to keep developing the field to de-risk it or relinquish same back to Ghana. Even if GNPC was to buy more of the field today, as it wants to do, oil production is not expected until 2026. If the field is indeed as lucrative as some suggest, then the current majority owners will de-risk it further. If it is as risky as we believe it is, then it will be relinquished to Ghana anyway and the country won’t need to pay ridiculous amounts of money just to incur the high risk of developing the asset on top.

Another reason why Government doesn’t have to do the deal in a rush as far as Nyankom is concerned is the fact of the availability of other compelling options. GNPC has tried to paint a picture in which only Nyankom and Pecan can be developed as standalone operations. They have also consistently pushed this view where only Aker can offer so-called “apprenticeship” that GNPC apparently sorely needs. Both arguments are tenuous.

There are “free” fields lying around in our waters that with a little ingenuity can be developed as “marginal fields”. The rewards for these fields may not be as great as the Jubilees, TENs and Sankofas (the three main producing assets in Ghana today), but if GNPC wants to “learn by doing”, it can easily start with those. Dzata, relinquished by Vanco/Lukoil quite a while ago, is one such example. Other prospects that won’t be free but will certainly be cheaper are Wawa and Akasa owned by Kosmos, all of which have been “stranded” now for almost a decade. Some of these fields, even the marginal ones, are close to production infrastructure, allowing for infrastructure-sharing to overcome the “standalone operation” worries of the GNPC.

The juiciest of all these prospects is Erin/Camac’s block where as many as 14 wells have already been drilled, several of them tested for production, and evidence of contingent resources established to the tune of 500 million barrels of oil. This is a field where discoveries have been made since the 70s. Compare its pedigree with Nyankom’s one well drilled and volume estimates that may well amount to only about 10% to 20% of Erin’s (by the way, Nyankom’s 127 million barrels of oil estimate being bandied around after just one well sunk is viewed with suspicion in the industry). Best of all, Erin is reportedly bankrupt and may relinquish this field with some prompting. If GNPC wants to “learn by doing”, this is very likely to be a cheaper play in terms of the initial rights.

About apprenticeship, it is evident that GNPC is not being sincere. It has had a decade to turn its joint venture with Technip, one of the world’s most sophisticated oil field engineering services companies, into a robust technology capacity play, and chosen to underinvest. We understand that it is even yet to pay for its rights to take up 51% of its stake in the joint venture. Its Gosco subsidiary has had the status of an operator in a block for half a decade now and refused to invest to develop the technical partnerships needed to work the block. From all the facts available, GNPC is clearly not a company actively looking for apprenticeship.

Apprenticeship, at any rate, shouldn’t be used as a cover to blow hundreds of millions of dollars on assets when the intended “master” in the apprenticeship relationship – Aker – is itself reliant on these same oil field engineering contractors that GNPC has ample access to. For example, in order to find out how much oil is in the fields under discussion, Aker recently gave contracts to Haliburton to do some probing. Ghana is courting Haliburton to set up an oil services hub in Ghana. Why precisely does Ghana need Aker as an intermediary in building the same relationships?

If Ghana simply needs technical apprenticeship, it is just a matter of refocusing the resources GNPC has been spending to increase its clout in the Ghanaian corporate sector, such as giving loans to commercial banks, buying game reserve lodges, and wasting cash on distressed gold mines. Whilst such activities clearly increase the leverage of GNPC’s top brass in Ghana’s clientelist political economy, they do nothing for building technical operatorship capabilities. Not surprising then that after inserting a clause in the Nyankom block’s 2014 agreement for GNPC to become an operator in 7 years, the organization instead chose to reduce both its stake and say in the block.

The above discussion was about Nyankom. Now to Pecan, where the business case for Government increasing its stake is admittedly more robust. We, nevertheless, still have fundamental disagreements with the Government, and the GNPC advice it is relying on, about strategy. We insist that the valuation be guided by factors of analysis currently missing. One such factor is our leverage with Aker.

Aker managed to arm-twist Ghana to rewrite the Pecan agreement on the basis that Ghana having less stake and less say in how the field is developed is how the fields will be made more attractive for investment. Against better advice from the CSOs, GNPC goaded the Government into conceding. Now, after struggling to raise the money to invest despite doing everything, including cutting back on developing the three commercial finds to focus on just one etc, Aker has now returned seeking to front-load some gains, cut its risk massively and leave Ghana holding the can. What should a patriotic Ghanaian negotiator do in such circumstances if there were indeed no undertones of collusion? If the GNPC wasn’t motivated by the use of “operatorship” and “energy transition” talk to just get its hand on loads of money to spend on increasing its commercial clout?

Let us remember that it was this same GNPC that took $47 million of Government money in 2015 specifically to buy 10% of this same Pecan field and then spent the money on something else. Today it wants to buy 27% more for nearly a billion dollars claiming that the stake is actually worth more than $1.5 billion.

CSOs cannot be chill about this as Otchere-Darko advises because we have history to guide our thinking. GNPC has shown itself to be a two-facing, forked-tongue, operator. We cannot assume that it is operating in Ghana’s best interests. It is up to GNPC to convince the public despite their historical misbehavior. Through their advocacy, CSOs wants GNPC to keep looking over their shoulder as they go about this transaction.

Particularly also when the GNPC has already contrived a valuation of $1.583 billion for Pecan and thus set a high bar for the negotiations. The collusive nature of this whole enterprise was not even hidden: GNPC teamed up with Aker to hire Lambert Advisory, gave the London-based consultants a set of assumptions together with selective data, and told them to come up with a valuation in two weeks. In these circumstances, CSOs must aggressively push their own narrative based on the data available to them. They must question the assumptions driving the process as a whole, and seek to influence the final shape of the transaction.

It is completely befuddling that Mr. Otchere-Darko who spent a decade and half contending with state institutions like the Electoral Commission about the integrity of their data and the propriety of their actions now thinks that the best course of action open to CSOs is to quietly wait on the platform as the derailed train hurtles down the track to wreckage ahead. Is that how CSOs, when Otchere-Darko was in the fold, tackled STX?

Given what CSOs know about how the $1.583 billion valuation for Pecan and $804 million valuation for Nyankom came about, why should they, all of a sudden, be inclined to believe that Bank of America Securities (an entity affiliated to some of the some advisors that worked on Agyapa) will help get Ghana a fair deal when its terms of reference are as opaque as all the previous advisory enterprises that got us here in the first place? Would a dedicated CSO movement not seek to influence the process before some other rabbit is suddenly pulled out of the hat?

The position of the CSOs on Pecan’s fair valuation is straightforward. The engineering dynamics so far favour a breakeven cost of producing oil on the field of $35. This is what the extensive record of studies from Hess to Aker shows. The sudden, unproven, claim that Aker has found some new innovative concept that can do the production at $30 breakeven is dubious.

Further, we have the guidance of the former Minister of Energy that recovery rates in Ghana’s waters are in the region of 25% (this, by the way, was when he was highly motivated to convince Ghanaians that the Aker blocks are not all that valuable hence the need to give away our rights in them to appease Aker so that they will raise the investment needed for their development).

Since Aker bought the Pecan block in 2018 from Hess, it has only drilled two truly successful wells and the best net pay analysis we have seen suggests that resources added were as low as 5 million barrels and capped at 15 million barrels. In essence, the commerciality of the field is unchanged from what Hess left behind (recall that Hess sold its rights for $100 million). Since the time when Aker thought that the outstanding work and risk warranted paying only $100 million for the right to bear the additional risk of commercialising the asset, nothing much has happened to suddenly transform those same rights into billions of dollars. Whatever contingent resources have been added to the marketing deck are flimsy at best.

We are therefore inclined to use the 246 million barrels of proven/probable (2P) volumes estimate and the $50 long-term price of oil favoured by analysts such as Wood Mackenzie who believe in any “energy-transition” effects impacting demand as much as supply (unlike Lambert, who think the impact will be on the supply side alone). In that posture, we are fortified by corroborating forecasts by the likes of BP and the World Bank. We will accept the 10% discount rate used by Lambert (though we are more bearish than they are).

When the numbers are reworked this way and the cashflow from Ghana’s planned stake of 37% discounted to the present, the fair value of the field ranges between $202 million and $400 million depending on how one tweaks the variables. CSOs therefore have a fundamentally different perspective from GNPC, the government’s primary advisor on this matter. CSOs have other quarrels with GNPC, such as the expenses it claims the Aker companies have made so far, which contradict filings the companies have made in their home countries, and which have grave revenue implications for Ghana down the line. There is a fear that GNPC’s posture in that regard could lose the country $600 million. One cannot therefore in good conscience tell CSOs to just relax.

By making our case forcefully for the assumptions driving the deal, and its secondary effects, to be made transparent and interrogated aggressively, CSOs are setting the stage for a showdown over any strange and fantabulous buy price recommendations that Bank of America Securities may come up with. In essence, this time, CSOs are working to prevent any situation that might make it easier for GNPC to use another Lambert Advisory type opinion to shore up a weak, and quite frankly sham, negotiation strategy.

Whilst CSOs are absolutely open to serious engagement with the GNPC and other public sector actors working on this situation, the starting premise is to influence the outcomes in light of public interest. Hopefully Mr. Otchere-Darko can facilitate that engagement without first seeking to preset the terms of engagement.

CSOs thank Mr. Otchere-Darko for his generous offer of strategy lessons on how they should engage in this quest to defend the public interest of Ghana. For now though, we are passing.

In between management meetings this morning, my notifications bell continued to buzz. So, I paused to check. Messages were dropping fast: Bob Hinson says you’re “smearing” GNPC. What’s going on?

There was a link, so I clicked. And there it was, a curious 9-point article by Professor Hinson of the University of Ghana Business School announcing “the true facts” about the GNPC-Aker saga, and gently chiding “a civil society actor by name of Bright Simons” for “misrepresentations”.

“Curious article” because in all the decade and some that I have been involved in energy policy activism in Ghana, Professor Hinson has rarely shown up on the subject. I don’t recall him expressing much interest in any of the raging issues cropping up all the time in the industry.

And curious also because the article comes across as a rejoinder to a bunch of stuff I have written, yet it was published in the Daily Graphic, which has studiously refused to publish any of the work I have done so far on behalf of the CSO movement campaigning against the deal.

Still, Professor Hinson is in the business of helping folks simplify complex ideas for large audiences, so we welcome his late intervention in energy policy matters. It should advance my personal philosophy in policy activism: ripping apart the jargon that so-called technocrats like to hide behind to rip off the country. And, let’s face it, this is a dry subject so the more famous academics we have chiming in, the better our chances for rousing a sleepy national audience.

Now to his 9-point agenda to kill falsehoods and lift the banner of truth. Hopefully, this time around, the Daily Graphic finds it in them to publish this “counter-rejoinder”.

Professor Hinson’s unfamiliarity with the issues showed early on in his nicely formatted but weakly argued piece.

He preambles his 9 points with a sweeping assertion that the Natural Resources Governance Institute (NRGI) has “voted” GNPC as the “best governed National Oil Company (NOC)” in sub-Saharan Africa. He does not provide a year or program/award name. Are we to take it that GNPC was awarded this tribute by the NRGI in respect of all their measurements for all eternity?

The NRGI’s approach to recognizing state performance in this area is via the Resource Governance Index. Everyone can find out what the NRGI thinks of a country and their core institutions by visiting:

NGRI does not cover all of sub-Saharan Africa in depth. But in respect of oil and gas governance, it rates Senegal, for instance, higher than Ghana (you can verify on the website above):

NRGI’s Resource Governance Inter-Country Ranker Chart

It is very doubtful that the NRGI, considering its standard methodological approach, will coronate GNPC with such an expansive crown as portrayed by Hinson.

Did GNPC Overestimate Long-term Price of Oil to Inflate the Valuation of Pecan-Nyankom?

  1. Hinson takes issue with my use of $50 per barrel as a long-term price forecast for oil asset valuation. He insists that “not a single” analyst uses this figure. A price assumption in a forecasting model is on a per scenario basis. There is no such thing as a permanent figure that binds entire institutions for all scenarios. It also depends on the time horizon, which in this case is bound by contract tenures in our petroleum regime. It is not CSOs who decided to give the “global energy transition” primacy in this discussion. It is GNPC. Any price forecast worth its salt in this debate must accommodate it wholeheartedly.

A price forecast that takes that phenomenon into account and stretches for as much as 30 years into the future to align with the transaction parameters would differ remarkably from some Morgan Stanley analysis that focuses on short-term dynamics, for example.

We can cut Hinson some slack though, given his historic lack of interest in the subject. Since he seems genuinely unaware of recent long-term forecasts that incorporate parameters relevant to the GNPC-Aker deal, I will point him to this recent one by Wood Mackenzie, which does happily use the $50 per barrel figure –

For a short-term comparator, he can try the United States Energy Information Administration (which also uses $50):

Of course, one of the important parameters in the transaction under discussion is finding a benchmark blend that proxies the liquids expected from Nyankom and Pecan. WTI and Brent are as good as any for our current purpose, so I will also point Hinson to Fitch:

McKinsey prefers to hedge “between $50 and $60”:

Then there is the issue of whether to use nominal or real analysis, considering that the Lambert Advisory valuation matrix already uses a Present Value computation.

A small piece of advice for the eminent Professor Hinson: next time he wants to use “never” in a quasi-academic monograph, he would do well to, at least, consult a few databases, or as they say in his line of work, conduct some basic literature review, before being so categorical.

Are the Norwegian Billionaires Due for a Potential $1 Billion Windfall?

  • 2. Professor Hinson also disputes the $1 billion windfall number. I had in various commentaries argued that should GNPC have its way, the Norwegian billionaire (Kjell Inge Rokke) who controls Aker and his family would be making a billion dollar windfall in their decade-plus dealings with Ghana.

In disputing this, Hinson limits himself to the farm-out price of $1.1 billion that Rokke wants to flip pieces of both assets to Ghana for and the costs he has incurred so far. But even here Hinson gets the arithmetic hopelessly wrong. Rokke is not selling the entire stake he picked up for approximately $200 million three years ago. He is retaining nearly 30% (crude composite residual) and also waiting quietly to offset the proportion of costs linked to that residual equity against future taxes. Not to talk of the displacement of costs to GNPC through the proposed arrangement of Aker buying the FPSO and renting it at inflated prices to the proposed consortium.

Professor Hinson seems so unfamiliar with petroleum accounting fundamentals that he ruins a good debate with such weak framing.

Has GNPC been helping Aker-AGM to Misrepresent their Costs in Ghana?

  • 3. Hinson’s strange response to our argument that Hess, Aker and TRG discloses their costs through filings in more stringent jurisdictions and as such we are better served in using those filings as our best source of truth is to airily wave his hands away.

He insists that those filings do not include a bunch of costs the international oil companies (IOC) incur in Ghana, and which they choose to disclose only to their friends in the GNPC. GNPC has in fact recently talked about a “data room” set up specifically for them to “audit” those costs.

In case Professor Hinson doesn’t know, GNPC is not a regulator in the petroleum industry. It is not the Ghana Revenue Authority. And it is neither an auditing entity nor an audit standards regulator of any kind. Whatever sweetheart arrangement it has with Aker and Inge Rokke for the latter to selectively disclose data about costs to it but not to their own regulators in their home countries has no real import in this analysis. We prefer to use data disclosed in stringently regulated jurisdictions where such sweetheart arrangements are not trumpeted as evidence of rigour.

Does Professor Hinson Even Know Which Aker We Are Talking About?

  • 4. Prof Hinson is not happy that we will highlight the irony of a GNPC founded in 1983 seeking to pay large amounts of money it can’t spare for the privilege of understudying an Aker founded in 2004. He insists therefore that Aker has been in operation for more than 175 years.

Given Hinson’s sudden interest in the issue, it is not too surprising that he would not know that the Aker that was founded in the 19th century is not the one this debate is about. That despite the complex historical evolution of the Aker brand, the Aker under discussion is the one incorporated in 2004 in Norway, as can easily be established by a reference to the Oslo registry of companies (

Professor Hinson’s eminence notwithstanding, his latest essay does not, respectfully, vindicate his research prowess. At least, he could have referred to Aker’s own press releases for a simplified narrative of the matter (example:

Did the Lambert Advisory Valuation Rely on Anything More than GNPC and Aker’s Self-Serving Numbers?

  • 5. I was on the call with Rajeev Madhavan of Lambert Advisory, the firm’s whose valuation is being currently relied upon by the Government to raise the $1.45 billion for the deal, when he candidly informed his CSO audience and, in specific responses to questions from Dr. Theo Acheampong, reaffirmed that he did not have the opportunity to interview the qualified reserves auditors (QRAs). He also openly admitted the fact of his not having been given access to the actual audit reports. The entire valuation exercise had a timeline of two weeks after all. In fact, considering that Nyankom hasn’t even been audited, the only field where “third party reservoir data” can even be referenced in this discussion is Pecan. Rajeev stressed that his analysis was strictly based on the “operator’s case”, meaning information he has been supplied by GNPC and Aker-AGM, who commissioned his employers, Lambert.

Hinson mentions anonymous sources in the “civil society space” who have told him otherwise. We advise him to contact Lambert Advisory or his friends at the GNPC for the zoom recordings.

What is Hinson Going on About Regarding “Physical Merger”?

  • 6. The most bizarre of all the lacklustre arguments served up by Professor Hinson is a “rebuttal” to a claim I had purportedly made about Nyankom and Pecan being “physically merged”. I have been around the energy policy space for more than a decade. I have never experienced an argument about the “physical merger” of two license areas being developed as a joint asset. The concept makes no sense.

Everyone knows that a “merger”, using the term loosely, of two fields in the petroleum sector invariably involves a range of scenarios: merger of the leases (which Hinson, ever the guru on Ghanaian petroleum affairs, assures us is impossible despite the plenary powers of Parliament), unitization for optimal recovery (which strictly speaking does not require reservoir straddling under Ghanaian law), or tie-backs and other mechanisms to enable the sharing of production platforms and associated infrastructure. The merger of Nyankom and Pecan in the context of this conversation can only refer to the plans shared on slide 26 of the GNPC’s presentation to the Economic Management Team about “merging” the operatorship of the two fields.

Therefore, that whole line about someone talking about the oil fields being physically blended together with giant shovels is a waste of everyone’s time.

Are there Stranded Assets in Ghana that Offer Better Value than Nyankom?

  • 7. For an article that sets out to address “misrepresentations”, it takes the biscuit for the author to blatantly resort to the same thing complained of in an attempt to win a debate. I have never said that there are stranded oil discoveries in Ghana that have more oil than “both” the Nyankom and Pecan fields.

The reference I made was specifically to Nyankom, a risky, unappraised, field that may well not even be commercial. I said that Wawa, the Erin find and Akasa all have more estimated resources than Nyankom. We used the IHS Resource Ranking database in conducting our assessment and it underlies our assertion. This is the same database relied upon by Lambert, the GNPC and Aker’s preferred valuer. On this one, Professor Hinson is thus out on a limb and, dare I add, out of his league.

Has Aker Added Enough Value to the Blocks it Bought to Deserve the Windfall?

Just before Aker started to look for a buyer for 50% of the Pecan asset in June 2021 because of the funding challenges it was facing (see:, and around the time it suspended its Final Investment Decision on the field, its prospectuses were still bandying around the same resource levels (see, for instance: and, earlier:

Nyankom, on the other hand, is yet to be appraised. A single discovery well does not a commercial oil field make. So, at this point, the true value created remains speculative.

  • 9. The last point in Professor Hinson’s 9-point thesis is totally incoherent. He says that Aker/Rokke have not changed their mind about spending $4.5 billion nor have they decided to lower their risk by spending $2.5 billion instead. But this is not a secret at all. Aker has publicly stated that the initial Plan of Development capital expenditure has been revised lower by 50%, meaning $2.2 billion. Adding contingency takes the number to roughly $2.5 billion (see, for instance:

That difficulties in fund-raising have led to radical revisions to Aker’s plans in Ghana is so widely known that had Professor Hinson been even half-attentive in this space he would not be picking a fight on this point.

As I said in the beginning, the CSOs active in the energy activism and advocacy space strongly welcome the interventions of Ghanaian academics in this debate, particularly those like Professor Hinson who have expertise in simplifying the issues to attract broader interest. Let’s admit it, this debate could do with much more public interest.

We only ask that they take a bit of time to understand the issues, do the research and then engage so that they can be fair to those of us with perspectives opposed to the stance of their friends at the GNPC. Not too much to ask for, I hope.

Further Reading

Bob Hinson’s 9-Point Agenda:


Ghana wants to borrow $1.45 billion to invest in two seemingly “stranded” oil assets – Pecan and Nyankom – off its coast.

 $1.1 billion will go directly to the current Norwegian controllers of the two fields – mainly Kjell Inge Rokke of Aker ASA, his family fund and spouse – and the rest will underwrite some of the estimated $2.5 billion the Norwegians claim is still needed to get the first drops of commercial oil out of the bigger of the two fields – Pecan – in 2024.

Why are Ghanaian activists up in arms? Getting the full picture will require trawling through thousands of pages of dense documents. But the simplified summary of some of their key concerns below is a good start.

1. GNPC – Ghana’s national oil company – took $47 million from the government to buy 10% of the *Pecan field* (then operated by a company called Hess) in 2015. They took the money and didn’t buy the stake. Now they want to spend more than $750 million for 27% more stake in the same field, thus valuing the foregone 10% stake at over $250m. In fact, four years later, they would even have their entitlement to ~49% of the field whittled down to 10%. An organisation prone to such strategic mistakes should have all their spending plans scrutinised very carefully. Yet, the Ghanaian Parliament spent just two hours evaluating their latest request before giving them a mandate on August 5th, 2021, to spend up to $1.45 billion on this new frolic.

2. The block that the Nyankom field – the smaller of the two fields – is on was actually operated by the GNPC in 2013, when it held 79% of the stake. They kept renegotiating their stake downwards until by 2019 they only owned 15%. They now want to spend precious public money on buying 55% more of the block to take their stake back up to ~75% so they can become a “co-operator”. This means paying nearly $400 million for something they once had for almost nothing. Again, clearly an organisation suffering from serious strategic myopia that needs independent babysitting.

3. At any rate, a company doesn’t really need to own a large piece of an oil block at inflated prices to become a field operator. After the proposed $1.1 billion deals are through, the Norwegian billionaires will own just about 13% of Pecan and 15% of Nyankom but they will still become the de facto operator of the merged field. GNPC actually justifies the deal on grounds of an opportunity to understudy Aker after the deal. Clear evidence that oil field “operatorship” is about technology, human resources and reputation. What has GNPC done to acquire these virtues with all the money it has been receiving from the state – roughly $200m a year – so far? It is quite depressing that an organisation founded in 1983 to produce oil, with many opportunities to do so in the past, would want to pay so much to undergo pupillage with Aker, which was only founded in 2004, just four years before they first entered Ghana.

4. If it is merely having high stakes in a block and the title of “Operator”, then GNPC is already an operator. It currently operates the Offshore South West Tano (OSWT) block through its subsidiary GOSCO. Why has it failed to invest in that field since 2016 and why hasn’t it used this opportunity as an operator to acquire capabilities? Why hasn’t it done any drilling and serious exploration on OSWT? How then can it justify paying inflated sums on stranded assets as a path to operatorship?

5. It cannot be just about money because in 2018 and 2019 GNPC offered guarantees for other state owned entities to raise $1bn for mostly consumption rather than investment. It costs about $50 million on average to drill in the various blocks in which GNPC has a stake in Ghana, including those on which it is the operator. If operatorship was indeed the goal here, why has GNPC never bothered to drill?

6. Instead, GNPC has been spending its money making shoddy investments like the troubled Sankofa Prestea gold mine and an underperforming motel in remote forest reserves in Ghana. Once again, it is clear that GNPC likes to anchor commercial deals more than it wants to acquire technical capabilities. Consequently, its desperation to raise billions at this stage must be looked at from the point of view of the commercial contracts it can control and not in terms of any desire to acquire the skills, technologies and reputation associated with operating producing oil fields.

7. This bears repeating: GNPC is already an operator on Ghanaian fields like OSWT, and has had stints as an operator (with nearly 80% stake) on even the Nyankom field it now wants to buy for roughly $400 million. It has just refused to invest in the hard things that will make it a good operator. It has instead focused on side gigs and deals.

8. GNPC hints that this time things could be different because it shall be understudying Aker. But GNPC is already a statutory and business partner of all oil companies that have ever operated in Ghanaian waters, many with a far superior track record and capacity than Aker. It can enter into technical contracts with any of them for far cheaper than what it intends to pay to buy Aker’s mentorship. It already has just such a joint venture with well regarded oil services & technology company, Technip, that it has failed to resource adequately for almost a decade now.

9. It bears emphasising the argument of the Civil Society Organisations (CSOs) and their activists: both fields – Pecan and Nyankom – that GNPC seeks to buy are grossly overvalued. The method used to value them, the so-called Discounted Cashflow (DCF) method, looks at future earnings. However the long-term price of oil used ($65 per barrel) is far higher than what most analysts are using nowadays (~$50) and the projected oil volumes from the fields are highly speculative. One of the two fields – Nyankom – has only one successful well drilled so far (the other well sunk there failed), and it has not been appraised, a critical pre-requisite before an oil field can be considered investment-worthy. At least 6 more successful wells will have to be drilled there to give investors comfort about its prospects. The second field, Pecan, is in very deep waters and will be expensive to run so costs are likely to be high. Taking all these facts into consideration, the Activists are of the view that the fair value to pay for an increased stake and role in developing the two fields is closer to $400m and not $1.1 billion. After all, the Norwegians are selling Ghana roughly 70% of assets they picked up for less than $200 million 2 and 3 years ago respectively.

10. To obscure the inexplicable appreciation of the value of the fields, the GNPC argues that $1.2 billion has been spent on useful capital infrastructure, which the Norwegian billonaires would have had the right to offset against taxes paid to Ghana under our petroleum accounting laws. These foregone taxes would have been repatriated from Ghana but shall now stay put here because of the deal. Very strange argument. First, the filings made by the Norwegians in Norway suggest far less has been spent on the fields – just a little over $300 million. The companies that sold them the fields – Hess and Petrica – also issued reports from which we can glean spending of a little over $300 million. What GNPC is really saying here is that, even should this venture prove successful, Ghana stands to lose over $600 million in future taxes due to shady accounting if its version of history is left unchallenged.

11. Then there are concerns about crony dealings. Some Ghanaian CSO activists met with the people GNPC says they and Aker hired to do an independent valuation: Lambert Advisory. In their presentations, they revealed that a company called Fueltrade has been inserted into the Nyankom deal for 5% (a stake that all along everyone thought was owned by a company called Quad). How come this transition was never publicised, considering the controversy surrounding how both Quad and Fueltrade came to own their stakes in the first place?

12. In a similar vein, in GNPC’s presentation to their Ghanaian cabinet before it hurriedly approved the deal (four days before the proposal was sent to Parliament for further ratification), they mention that after they increase their stake by 27% more in Pecan and by 60% more in Nyankom, they will merge both fields and create a Special Purpose Vehicle (SPV) to own the asset jointly with the Norwegians (along with pre-existing equity owners like Lukoil), who despite becoming minority owners (with about 20% combined stake) will become de facto operators renting out production platforms to Ghana. They also revealed that 5% of the SPV shall be allocated to “Indigenous businesses”. Given that this is a “back-in” transaction by an existing equity holder, funded through a sovereign loan, the thought of lurking private beneficiaries deepen concerns about cronyism.

13. Consider that, in 2019, Government of Ghana went to Parliament twice to amend the agreements covering both fields, and on each occasion Ghana’s stake was lowered and amendments made to give the country very little say in how the fields are run. Aker and its Norwegian billionaire controllers insisted that this was necessary to be able to raise money to develop the fields. After struggling to raise the money, they have decided to dump the fields on Ghana at an inflated price, whilst staying on to rent equipment to Ghana also at inflated prices. What is worse, Ghana wants to pay for the privilege of being ripped off.

14. For all the above reasons the entire arrangement looks very fishy. It looks like Aker/Inge Rokke have teamed up with GNPC big fishes to rip off Ghana in diverse ways, first by tricking Ghana to give away its rights for nothing and then getting the country to buy them back at the cost of a fortune. And they will succeed unless they repent or are stopped.

15. This assessment is particularly apt when GNPC makes it look as though the Aker assets are the only ones available if it wants to take charge of an oil producing field. A false premise that bestows undue leverage on Aker in the negotiations. The truth is that there are other seemingly stranded fields in Ghana with discoveries that have more estimated oil resources than Nyankom and are available for cheaper if GNPC’s genuine intent is to become the operator of a producing field. Such prospects include Kosmos’ Wawa and Akasa, and Erin Energy’s Expanded Shallow Water Tano. The leverage is therefore actually on Ghana’s side. It is thus unpatriotic, from where the CSO Activists stand, for GNPC to be bearing down on the path it is currently on. But it is not too late to redeem themselves.

Additional insights are in this article.

With respect to the ruling of a Ghanaian High Court this afternoon that 30% of all “funds, revenue, and money earned, paid to, and accruing from the exploration and production of petroleum from the [ENI-Vitol owned Sankofa field] be preserved” in an interest-bearing escrow account held at a bank chosen jointly by Springfield, ENI and Vitol, here is the state of play:

A. ENI’s global operating margin according to MarketWatch is about 3.31%.

B. Its Gulf of Guinea numbers (i.e. its macros most relevant to the Ghanaian context) are probably similar.

C. Were the court, per its order, to detain 30% of gross revenues minus statutory payments (taxes, royalties etc due to Government and similar entities), ENI (and Vitol) will simply not be able to continue producimg any oil from the Sankofa field.

One would suppose that this would be encouragement for ENI (and its minority partners in Sankofa, Vitol) to sit down with Springfield and try to resolve the dispute over Springfield’s insistence that their adjoining fields be unitised immediately in compliance with a directive by the Ghanaian Energy Minister backed by a GNPC finding that:

I. The petroleum finds in the Springfield owned Afina field and the ENI-Vitol owned Sankofa fields are connected; and
II. That Springfield’s side of the conjoined pool holds more than half of the combined “accumulation” (simply, the volume of hydrocarbons).

ENI and Vitol dispute the findings based on:
I. Their separate analysis of the same data relied upon by GNPC to come to its conclusions and
II. The fact that this data is based on only one discovery well dug by Springfield and virtually no appraisal campaign.

ENI’s counter-argument based on the same data analysed by GNPC turns on their belief that there isn’t even enough oil on the Springfield side of the straddling fields to be worth developing and perhaps this is why Springfield has all this while not even bothered with an appraisal campaign or commenced production. They also contend that because they have been producing oil on their side of the “border” for quite sometime now, there would have been some “pressure effects” on the Springfield side, detectable in the GNPC analysed data, were the two fields to be truly connected.

To ENI, only the drilling of more appraisal wells on Springfield’s side will address the issue.

Given that in the last 20 years, the worldwide average cost of drilling and completing an offshore well exceeds $90 million, the issue of further appraisal of the Afina field is one of both risk mitigation and financial commitment. Hence, either Springfield lacks commitment or risk appetite.

GNPC and Springfield argue back that Ghanaian policy is founded on the principle that when adjoining fields are connected, they must be developed together in order to “maximise recovery” of the resource. Talk about further appraisal is premature when what is needed is immediate merger of the fields so that ENI does not continue to drain the common reservoirs.

Hence, the deadlock has evolved into a hopeless stalemate of technical analysis-paralysis.

With this context in mind it is not surprising that some analysts I have spoken to believe that the High Court ruling could break the stalemate. Until now, ENI had no real incentive to speed up resolution as its production was unaffected. Detaining 30% of revenues from the field is sure to get the attention of ENI’s bosses in the Piazza Ezio Vanoni.

D. Entering into discussions about unitisation does not however address the fundamental issues at play since increased pressure on ENI by itself does little to bring clarity to the contentions outlined above in such a manner as could propel the disputing parties towards an out of court settlement with a view to getting the order vacated to relieve the pressure on ENI’s finances imposed by the order.

E. ENI may evaluate the development as offering it no other option but to get an interpretation of the order from the Court that restricts the detention of “funds, revenues and money” to profits rather than gross revenues per se.

F. Or to quash the order entirely in a higher court.

G. Or to stop production altogether if it cannot achieve either of the two outcomes above. What is a fact is that it cannot comply with an order to sequester 30% of total revenue and maintain production at the same time. Judging by its operating margins, such a thing is a financial impossibility.

H. Regardless of how much ENI is boxed into a corner, and even if the ruling accelerates the commencement of discussions about the unitisation process, there is no guarantee of a quick resolution because as everyone who has looked at the matter closely knows: the devil is in the detail:

I. Who will be the unit operator of the joint field once Springfield’s Afina field and ENI-Vitol’s Sankofa field are unitised or merged?

II. Who will be the technical operator of the joint field?

III. Will the Plan of Development of the joint field entail any modifications of the design of ENI’s already producing field? For example, ENI’s 2019 Akoma discovery could be fast-tracked by using Sankofa-associated infrastructure. How will the precise unitisation configuration impact such plans?

IV. Will a joint Plan of Development impact existing ENI production?

V. How will Springfield fund its share of the joint appraisal of the field it used to own alone (Afina) should the unitisation configuration favour separate development?

VI. How will Springfield fund its share of the development of the joint field should the configuration chosen require redevelopment given its previous challenges with fundraising for its drilling campaign?

VII. Will the equity split among Springfield, ENI and Vitol be determined subsequent to appraisal of the Afina Field? If so, how is that different from the status quo? In short: is determining how much ENI, Springfield and Vitol should own in the joint field dependent on finding out how much oil is in Springfield’s field right now through additional appraisal? If so, then aren’t we back to square one? Because this is precisely what ENI has been pushing for and Springfield has been resisting. But if that is not done, then how will the percentage equity split be determined? If the split is not determined how can a joint plan of development be agreed upon?

Here is where GNPC has done the nation a great disservice. Its advice to the Minister so far lacks the depth and creative thinking needed to truly unlock the complexity of trying to merge an already producing field with one that has not yet been fully surveyed (technically, “appraised”).

As a minority stake owner in both Afina and Sankofa, and as an entity that can increase its leverage further in a merged field, GNPC has the strategic positioning to think more holistically about a path to resolution that can accelerate unitisation because it presents all the parties with a win-win unitisation configuration. There are a thousand and one ways in which a unitisation can be done, but most are impractical and few are pareto-efficient. GNPC’s technical insight would have been most useful if it had helped to break the strategic logjam through superior analysis of options, scenarios and trade-offs.

Instead, GNPC has failed to help the Minister think through the details and intricacies properly by making it look as if all that matters is to procure the bare minimum technical reasons to support unitisation. When in fact it is how unitisation is to be approached that has caused this unfortunate stalemate. Unfortunate, because the continued delay in the development of Springfield’s Afina implies lost opportunities of employment, revenue to the state and the potential development of indigenous capabilities in the oil and gas sector. Whilst any legal risks to ENI’s Sankofa’s continued production mean immediate adverse effects on jobs, spending in the local economy, gas supply for power, and government revenue (which in 2019 amounted to nearly $260 million).

Nothing in the analysis GNPC, in its capacity as the national oil company, and thus de facto principal technical advisor to the state, has produced to date offers any serious insight as to how unitisation can be creatively structured to overcome the very real uncertainties about volumes in the separate fields, equity splits of the joint field and need for redesign of existing production architecture to accommodate a greenfield operation. And we have read all their reports on the matter.

Without creative breakthroughs in thinking, the unitisation process, even when commenced, will become bogged down in a similar protracted analytical stalemate as we have witnessed over the last two years.

It is time for the Government to broaden its advisory arsenal well beyond the GNPC, an organisation that has become more and more lacklustre under its present leadership.

Ghanaians go to the polls today to elect or re-elect a new Parliament and President. I have been analysing the survey data about people’s partisan preferences and motivations for voting in the public domain over the weekend.

The election is tighter than the researchers are predicting. Which is very interesting because almost all the serious researchers and pollsters are saying the ruling NPP is winning easily.

There is some evidence that turnout will be high among the base for both parties but there is a bigger net margin among independents who feel disappointed by the NPP’s decisions and actions in a number of major transactions. This group of voters may outnumber those who decide to just stay away out of disillusion about the political system as a whole. The data indicates that such trends will be most manifest in Greater Accra, which the opposition NDC is pushing very hard to flip. NPP’s hold over Central Region is, another bellwether swing state, on the other hand, seems much firmer. Which reinforces the split & tight verdict bubbling up from the models.

These developments have made what should have been a cake walk for NPP suddenly very competitive. Given the extent of battering the NDC received in the last elections, they shouldn’t even seriously be in the race this time as they chose to retain the same candidate.

The suspected apathy among the NPP base is, however, completely unfounded. NPP leaning voters have been energised by the intense NDC bombardment during the campaign, making for a fascinating showdown in this otherwise boring and drab election.

Another thing I found time over the weekend to look into is the role “corruption” will play in this elections.

Here, the argument that has been making the rounds is that “corruption” is not featuring at the top of voters’ concerns.

I have looked at the underlying sentiment data informing this academic analysis. I think the interpretation is suspect.

It is actually a well known issue in “social choice” mathematics. The likes of Gibbard, Satterthwaite, Debreu and Arrow have all commented on various aspects of this issue, and Condorcet’s methods have been applied for decades to handle some of the nuances.

When you ask people to pick one choice from a list of alternatives, you cannot proceed to establish an aggregate preference, which is how most of the researchers dismissing corruption as a factor appear to have done.

Let me illustrate.

Say there are ten issues of concern and you ask people to choose their top one.

12.5% choose issue A, and the rest of the votes are split equally among the remaining 9 alternatives. Of course the 12.5% of voters who chose issue A outstrip the other groups numerically but the interpretation is meaningless since issue B may be more widely represented as the second or third priority for all other respondents, gaining more weight as a result.

That is why the sound approach is to always have people rank their issues and then develop an ordinal scale to weight preferences/selections.

If you did that, you would find that whilst corruption may not be the number 1 or even number 2 issue for most voters, it may rank high enough across such a wide swathe of voters that it becomes much more important than simply using the percentage of people who chose it as their number one concern to measure its relevance.

There is also the sociological dimension. Corruption may not directly worry people except to the extent that it creates a sense of underlying unfairness, which then poisons the climate, leading people to demand more welfare from politicians.

So, the loud demands for bigger and better roads or free water and free education may actually emanate from a sense that a few people are enjoying the national patrimony and therefore that regardless of national debt or fiscal stability, all the money should go into visible indicators of welfare.

In that sense, resentment against corruption could manifest in other ways other than just a distinct focus or concern voiced out by voters.

If these inferences are plausible, then they can influence how voters evaluate a candidate’s policies and credit their performance, hence impacting their willingness to vote for or against them.

The challenge confronting this type of analysis in this election is of course that both candidates have not sufficiently addressed intense campaigns by their opponents now or in the past about their weak anti-corruption credentials so some “cancelling out” could have ensued.

With the online and non-scientific polls overwhelmingly favouring the Opposition and the scientific polls predominantly favouring the incumbent, my sense is that we should be cautious about the seeming consensus by professionals that the NPP is set for a smooth return to power.

My attempt to bridge the worlds of professional analysis and anecdotal evidence convinces me that the NPP has more to be apprehensive about than they think.

In the end, we hope that this elections shall turn out very well and that Ghana gets to add another enviable credential to its democratic trophy cabinet.

My colleagues at IMANI also can’t wait for the winner to be declared so that we can start putting their policies and political conduct under harsh scrutiny.

I am personally looking forward to chasing the Electoral Commission to account for its many procurement perversions whilst seeing off the current design of the present Government’s mineral resources monetization strategy.

May Ghana prevail!

In his fascinating 1981 article on the subject for the British Journal of Politics, the Canadian-born British scholar of government, Professor Anthony King, charts the path by which there emerged in Britain a certain kind of actor on the national scene best described as “the career politician”, a fiercely partisan and complete ‘insider’, whose adult life has been spent exclusively on scheming in a bid to rise within the ranks of a political party.

A careful reading of King suggests that it was not until the 1970s that this kind of civic actor assumed increasing significance in British politics.

In fact, were one to cast one’s eyes to 1870, the point in time when British GDP per capita was double the current level in, say, Ghana or Nigeria, one would be quite surprised to find that the leading political figures of the day and the majority of the Lords and Commons in Parliament, and at the helm of both the Conservative and Whig parties, were not individuals who could be described as either ‘professional politicians’ or ‘career politicians’. 

Tom Mann, the great syndicalist, was actually an engineer. Applegarth was a mine technician turned trade unionist. Mushet was a steel baron. Wellesley was an infantry man. Perceval was a full-time barrister. Ashley-Coope was an educator. Even the seeming exceptions to this rule, the likes of Gladstone, Palmerston, and Disraeli were known for their massive forays into academia and scholarship. 

In fact, as late as 1950, the Oxford Don Herbert Nicholas discovered after a detailed survey that only 2.5% of political candidates vying to enter the British Parliament were career politicians. That is 4 in every hundred.

An intriguing fact that stands out in works like Professor King’s is the recognition that career politicians tend to be fiercely partisan, are overly focused on ‘national stage posturing’ for quick recognition and promotion, rather than working to improve social conditions at the grassroots, and are, despite being skilled in grandstanding, more likely to be out of touch with the true values and aspirations of the mainstream society. They are thus incapable of producing the kinds of grand consensus necessary to get diverse interests in a nation to work collectively towards some unifying agenda. 

This is all very interesting and raises the rather unsettling question of whether a country with a per capita income half that of the United Kingdom nearly 150 years ago can today afford to maintain a political system dominated by career politicians all eyeing a heavily oversubscribed tax kitty.

Of course, we use the British examples here merely because we are drawing on a subject of rigorous academic study and not because Britain is some contemporary paragon of democracy.

[This piece draws on a blogpost I posted elsewhere in 2013.]

Regarding the current raging controversy over the Government of Ghana’s intent to allocate all future royalties tied to mining leases that produce virtually all of Ghana’s gold, i.e. the two Agyapa Royalty Special Purpose Vehicles, I’m not sure I’m going to be writing a lot about the subject given my current schedule. 

But knowing that most folks are even busier than I am to follow the debate, I thought I should serve my readers this small morsel of the intricasies.

The equation right below this paragraph is the farthest one can go in compressing the issues for a casual reader to get to the heart of the matter, which is whether Ghana’s gold resources are being packaged as a sweetheart deal for some favoured investors or not. Any further condensation will rob the analysis of all nuance.

The bulk of the controversy can be resolved if the protagonists can agree on the numbers in the equation in the above panel, and the resultant valuation of the resources being partially privatised. That figure can then be compared to the proposed upfront payment for the shares in the local, unlisted, SPV to which the royalties are being allocated (and which is 100% owned by the overseas SPV billed for listing on the London Stock Exchange).

So, is the whole transaction a sweetheart deal or not? The answer centers on the equation.

Based on the current arrangement, the upfront payment has been pegged at $500 million for 49% of the local SPV’s book value, thus valuing the portfolio of future royalty streams at $1 billion. Since conventional valuation techniques, as alluded to in the equation panel above, suggest a value of 3x multiple, controversy is inevitable. But it could also be a question of the assumptions behind the numbers used in the equation.

Admittedly, rigorous data can be notoriously hard to get in Ghana. A sizeable portion of the confusion derives from ambiguity of the total extent of gold production whose royalties are encumbered by the deal. Repeated claims by the Ghanaian Government that what is at stake are 12 production leases and 4 development prospects completely befuddle the reality of there being 48 mining leases at stake. Considerable upcoming production has been assigned making the estimate of total scope bigger than most people suppose, even if smaller, harder to police, mines are ignored.

Suggestions that less than 3 million ounces of annual gold production from the large mines, or something in that region, are unfounded, as that claim has no basis in the agreement. The agreement is very clear about coverage extending to all the major current producing sites as well as many major upcoming projects.

For a quick insight into upcoming prospects, one only need look at the Namdini project in Ghana’s upper-eastern corner, where indicated reserves have been revised to well over 6.7 million ounces of gold. This is just one project. The 4.9 million ounces per year production figure for the indeterminate time into the future during which the agreement shall be active is thus potentially even conservative.

Ghanaian Government spokespersons also brooked some controversy when they appeared to suggest that even the upfront payment for the future royalty streams is tied to the market cap of the overseas SPV secured at IPO, rather than to a peg between the introductory offer price and the book value of the local SPV, the entity actually set up to own the royalty streams.

They have thus suggested that the $1 billion valuation is just indicative. From the agreement extract above, it is quite clear that the valuation of the royalties is far from indicative. It is hardcoded in the agreement.

The Government appears perplexed by the controversy. Its spokespersons argue that “everybody” can get a piece of a company during an IPO, so accusations of potential conflict of interest or under the table dealings, despite the involvement in the deal structuring of relatives of senior officials, are outrageous.

But things are not so simple. Especially for a potentially, considerably, undervalued stock.

First, unless the assumptions used in the equation are completely off, the Government, as argued above, seems to be valuing Ghana’s gold royalty assets at about a third of what ordinary valuation techniques would suggest.

Second, not “everyone” can afford or have the means to access a new, hot, stock on a premium bourse like the London Stock Exchange. For a hot IPO, only the darlings of the brokers and underwriters usually get the juiciest benefits of participation (buying low during book-building and selling high when the stock debuts on the exchange, and just before the market turns again).

 So, unless the assumption is that most Ghanaians have friends in the Square Mile of London, we have to accept that very few Ghanaians can afford to participate or get any of the shares, much less profit from the massive upsurge in share price that will result if the stock is deemed undervalued by savvy investors. Only a few super-connected Ghanaians can and will make any money from a windfall caused by deliberate undervaluation of the stock in order to create a price surge after the IPO.

The problem of course is that initial undervaluation hurts Ghana, whose royalties have to be priced-in based on the initial “consideration” in the contract of acquisition, as highlighted previously. After the inevitable price corrections, the country can expect capital gains, from its half-stake in the listed entity, to be slow and unsteady, judging by other gold royalty companies of similar size and scope (including the only one listed on the London Stock Exchange, Anglo Pacific Group). Historically, dividends have not been a reliable source of revenue in sovereign wealth portfolios.

Many Ghanaians would not be enthused if the only thing the IPO does is make a few dealmakers millions of dollars whilst 75.6% of all future royalties due the country from all current gold producing mines permanently find their way into an overseas vehicle over which the country has no control (due to onerous “arms-length” provisions in a series of agreements governing the transaction).

Already, much of the suspicion has originated from high, speculated, legal fees paid to transactional advisers. By the time the IPO is through, as much as 10% of the total funds raised could go to the bevy of brokers, underwriters and other advisors working on the deal. This is certainly more expensive than most securitisation deals done outside a public market like the London Stock Exchange. Even the Government admits that it has been approached by “royalty streaming companies” seeking a private transaction, which raises the question of why a bidding competition/beauty parade of such companies couldn’t have been the right approach. Or even borrowing directly against the future royalty inflows, though the Government does say it is loath to increase the country’s official debt.

Near as I can tell, these valuation issues are at the heart of the controversy. The remaining squabbles can only be a series of value judgements and ideological preferences. And about such, reasonable people can always disagree. In a democracy, the most we can hope for, where values and ideology are concerned, is respectful compromise.