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GNPC clarifies reserve position

  • SOURCE: | qwesa2big
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    The Ghana National Petroleum Corporation (GNPC) has dismissed claims by the African Centre for Energy Policy (ACEP) that the corporation is now operating as a slush fund, hence its decision to under-utilise its revenues to finance government’s deals.

    ACEP cited GNPC’s accumulation of US$141.7 million from the underutilisation of its 2012 and 2013 petroleum revenue allocations, the involvement in crude oil imports for the Tema oil Refinery (TOR) and the guaranteeing of power barges from Turkey for the Electricity Company of Ghana (ECG) as key evidence of a company slashing funds to be able to take up activities outside of its legal remit.

    The corporation has, however, dismissed such suggestions as lame, explaining that the accumulation of the US$141.7 million was in line with a new corporate objective that seeks to strengthen GNPC’s balance sheet to enable it to take advantage of opportunities in the petroleum sector.

    “The oil industry is capital intensive. GNPC’s major expenditure outlays are tied to project milestones. At the moment, the corporation is a partner in 14 petroleum agreements, all of which would require multi-million dollar investments at various phases,” the Director of Operations at GNPC, Mr Thomas Manu, said in an e-mail to the GRAPHIC BUSINESS.

    “This is why the corporation will not live from ‘hand-to-mouth’ and dissipate funds received in any given year but rather increase reserves towards corporate investment projects,” he added.

    GNPC’s allocations 

    The GNPC, he said, must be financially positioned to take advantage of farm-in opportunities that come its way, hence the decision to build capital in a prudent manner to be able to undertake such investments.

    “The cash balances GNPC holds have been invested optimally in anticipation of these investments that hold the potential of transforming the energy sector. If 13.64 per cent in Jubilee has yielded over US$2.6 billion, then the prudent thing for Ghana is to increase our stake in some of the other projects we are involved in,” he said.

    In 2012, the company was allocated US$230,949,926 from oil revenues. Out of this amount, a total of US$169,275,711 (73.29 per cent) was utilised, leaving US$61,674,215 as cash-on-hand but committed to approved projects.

    Out of the 2013 allocation of US$222,421,416 to GNPC, US$142,393,867 (64 per cent) was utilised, leaving cash for investments of US$80,027,549. This brought total accumulated funds to US$141.7 million as at the end of 2013.

    BNP Paribas deal 

    According to the 2013 annual report of PIAC, GNPC applied US$31 million of its share of revenues in 2013 to repay a facility from BNP Paribas. With the deal being an international transaction, the committee could not confirm parliamentary approval of the facility and therefore questioned the basis for using petroleum revenues to repay the facility.

    In response, Mr Manu explained that amidst acute shortage of fuel in the country due to Tema Oil Refinery (TOR)’s challenges in procuring crude oil, the government called on GNPC to assist in that regard.

    “Through that intervention, GNPC imported 10 parcels crude oil with a parcel size of approximately one million barrels between November 2009 and May 2011 for TOR to refine. TOR could not account for all the products they received. BNP Paribas was the bank that issued the letters of credit (L/Cs) covering the importation. The outstanding balance in respect of the BNP Paribas facility needed to be settled to halt the excessive interest that was building up. It, therefore, made economic sense to pay it off. This was done and accounted to the Ministry, Parliament and the SEC,” he explained.

    Mr Manu also explained the role that the GNPC was expected to play in bringing the 450MW power ships from Karpower of Turkey, a deal which some civil society organisations argue falls outside the mandate of the corporation.

    “GNPC’s participation in the project is at the level of providing a guarantee to enable the power barges in question to be brought into the country to help solve the current power challenges,” he added.

    He said GNPC’s mandate to dispose of petroleum, which included gas, made it prudent to contribute to that effort towards making available those barges which would eventually be available for the disposal of gas from the fields.

    He said GNPC had been ordered to provide financial guarantee for the 450MW power ships from Karpower of Turkey, a transaction that fell outside the mandate of GNPC.

    Issues of violation

    The Executive Director of the Africa Centre for Energy Policy (ACEP), Dr Mohammed Amin Adam, at an oil and gas training for financial journalists, said the allocation of Annual Budget Funding Amount (ABFA) to Ghana National Gas Company (GNGC) was not consistent with the law.

    According to him, the capitalisation of Ghana’s National Oil companies was to be funded from petroleum revenues earmarked for equity financing and investments and not from the ABFA.

    This is provided for in Section 7 (2) of Act 815 which says “the payment into the Petroleum Holding Fund shall be net of (a) the equity financing cost, including advances and interest of the carried and participating interests of the Republic; and (b) the cash or the equivalent of barrels of oil that shall be ceded to the national oil company out of the carried and participating interests recommended by the minister and approved by Parliament.”


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