Petroleum Commission recommends termination of agreements with four oil companies Featured

By Kwasi Frimpong November 06, 2019 922 1 comment

The Petroleum Commission (PC) has recommended the termination of petroleum agreements (PAs) of some companies awarded drilling contracts by the Ghana National Petroleum Corporation (GNPC). This follows some breaches of the PAs by the companies.

The affected companies are UB Resources Limited, which holds 70.47 per cent of the Offshore Cape Three Points South contract area; Sahara Energy Fields Ghana Ltd, which holds 85 per cent of the Shallow Water Cape Three Points contract area; Erin Energy Ghana Ltd, which, jointly with its local partners Base Energy Ghana Ltd, holds 13.5 per cent of the Expanded Shallow Water Tano contract area; and Brittania-U Ghana Limited, which holds 76 per cent of the South West Saltpond contract area.

UB Resources Limited

According to a report at the disposal of the Daily Statesman, the board of the PC recommended to the Energy Minister to terminate the PA with UB Resources Limited, and repossess the contract area due to the firm’s failure to drill the mandatory exploration well, as part of its minimum work obligations. This is even in spite of the extension of the initial exploration period (IEP) granted by the Minister.

The PC communicated its unwillingness to grant a further extension of the PA, as requested by the firm.

The firm has been unable to comply with the directive within the period directed by the PC and has not reverted to the commission to provide any updates.

The firm also breached a material obligation, by failing to assign not less than 30 per cent of its participating interest to a technical partner within 12 months of the effective date of the PA, as required the agreement.

The firm has, again, breached some provisions of L.I. 2221, relating to registration and subsequent renewal with the PC, and L. I. 2204 for the failure to have the participation of an indigenous Ghanaian company as a contractor party to the PA.

The PC advised further the firm should be required to honour all obligations and/or liabilities that accrued prior to the termination of the PA.

Sahara Energy

In the case of Sahara Energy Fields Ghana Limited, the Commission advised the Minister to terminate the PA and repossess the contract following the firm’s failure to fulfil its minimum work obligations under the agreement, despite the extension of the IEP granted by the Minister.

The PC is of the opinion that various engagements with Sahara Energy have shown that “the contractor lacks the capacity to fulfil its work obligations under the PA.”

The Commission adds that even though it is a predominantly downstream company, which lacks the technical capacity to independently fulfil the obligations under the PA, the firm has also not shown any commitment in finding a technical partner who can help in fulfilling these obligations.

The firm also failed to pay surface rental fees to the state, in violation of the requirement to do so, both under law and the PA.

According to the PC, the contractor breached the provisions of L.I. 2221, which mandates it to register with the Commission and pay the required fees, in order to be issued with a permit, prior to engaging in petroleum activities in the upstream petroleum sector.

Erin Energy

Erin Energy Ghana Limited, according to the Commission, failed to meet the June 2019 deadline, set by the Minister, to drill the exploration well, as part of its minimum work obligations, even after the expiration of the first extension of the exploration period on July 22 2018.

Section 23 (3) of Act 919 gives the Minister the discretionary power to terminate the PA under such circumstances.

Erin Energy is also said not to have “the financial capability to continue in its role as operator on the block and cannot fulfil the minimum work obligations under the PA, considering that the parent company, Erin Energy Corporation, has filed for bankruptcy, which has brought the activities of Erin in the partnership to a standstill.”

“The contractor has not paid surface rentals to the state, as required by law and the PA, for 2016, 2017, 2018 and 2019,” the report adds.

The firm has also failed to register and or renew its permit, in contravention with L.I. 2221.

The Commission is of the  opinion that the Minister, in accordance with Section 13 (5) of Act 919,  “may consider giving Base Energy, the local partners of Erin, the option of assuming all of Erin’s interest as well as its rights and obligations under the PA and proceeding on its own as contractor.”

Brittania-U

According to the Commission, Brittania U Ghana Ltd has also not fulfilled its minimum work obligations, as provided under the PA. The contractor also failed to pay surface rental fees to the state for 2018 and 2019, despite several reminders by the PC. This, according to the Commission, gives cause for the termination of the PA.

The firm also breached the provisions of L.I. 2221, which mandates it to register with the Commission and pay the prescribed fees, in order to be issued with a permit prior to engaging in petroleum activities in the upstream petroleum sector.

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