Aker-GNPC deal: FPSO price inflated by over US$600mn

A case of an inflated price has been identified in the botched Ghana National Petroleum Corporation (GNPC) and the Norwegian Petroleum Company, Aker Energy transaction in which GNPC wanted to pay Aker US$1.65 billion to acquire a 37 percent stake in the Deepwater Tano/Cape Three Points (DWT/CTP) and 70 percent interest in SDWT.

The inflated price has to do with the cost of the Floating Production Storage and Offloading (FPSO).

FPSO is a marine vessel, used by the offshore oil and gas industry, for the production and processing of crude oil.

Ghana would have lost a colossal US$565 million, if the deal had gone through in the form and shape it was presented by the GNPC last year.

The two institutions, had been involved in negotiations to acquire Ghanaian oil blocks, and needed an FPSO for the exploration of the crude oil.

Interestingly, while the state-owned GNPC is quoting whopping US$600 million, Aker Energy says the FPSO, is rather costing a paltry US$35 million; US$565 million less than what officials of GNPC led by its immediate past Chief Executive Officer (CEO), Dr Kofi Koduah Sarpong, had in presentations told Akufo-Addo’s cabinet, the Ghanaian media and civil society organizations during the heated GNPC-AKER debate last year.

The deal was suspended after it was discovered that, GNPC did not conduct any due diligence on the wells before expressing interest in them willing to cough up a massive US$1.62 billion.

Dr Sarpong and Dr Baah-Nuakoh, GNPC’s General Manager, Sustainability and Stakeholder Relations in many power point presentation, said “Aker’s share of cost = US$740 million, comprising FPSO (US$600 million) and cash calls and IGC financing (US$140 million)”.

But the Norwegian company in its “Fourth quarter and preliminary annual results 2021” mentioned that “Aker Energy and its license partners have secured the FPSO Dhirubhai-1, from Ocean Yield for USD 35 million, for the Pecan field development and are working to firm up cost and schedule and further optimize the concept to mitigate cost inflation”.

The report said that, “Aker Energy is an E&P company aiming to become an offshore oil and gas operator in Ghana”, adding “Aker Energy and license partners are working to submit a revised Plan of Development for the DWT/CTP block by the end of second quarter 2022”.

Benjamin Boakye of the African Centre for Energy Policy (ACEP) was the first to identify and raise issues with the inconsistency in the amounts presented by the two institutions i.e. GNPC and AKER-Energy.

He took to his Twitter handle, saying “in the same accounting year, the cost of the same FPSO is $600m to GNPC and $35m to investors. Activist saved Ghana from the #Aker transaction. I hope the media houses that said CSOs were Anti-Ghana are following the numbers”.

Dr Sarpong, in his farewell message to GNPC workers had stated that “Aker Energy’s Pecan Field will come on stream in the very near future” meaning the Akufo-Addo government was still interested in the deal.

Aker-energy in the “Fourth quarter and preliminary annual results 2021” also stated that “during the quarter Aker Energy secured further financing from African Finance Corporation of an additional 100 million dollars in senior secured convertible bonds. Aker Energy is evaluating different strategic options for its ownership in the DWT/CTP block. In August 2021, the Ghanaian Parliament approved a mandate for GNPC to negotiate a transaction with Aker Energy regarding a potential acquisition of a stake in the DWT/CTP block”.

The Herald is also investigating a report that the Aker deal, has been whittled down to around US$300million from a high of $1.6 billion.

Sometime last year, many civil society groups and personalities challenged the GNPC-Aker deal.

One such person was Dr Theo Acheampong, a Petroleum Economist and Political Risk Analyst, who stated that the proposed $1.65bn Aker

Energy/AGM – GNPC farm-out deal is overpriced.

He told Accra-based Joy FM on its Super Morning Show, Tuesday, August 10, that “in my view, there’s overpricing of the assets, the assumptions that went into the assets need to be questioned and we shouldn’t be paying for the amounts that are being quoted”

Dr Acheampong, stressed that the oil price being used i.e $65, $67 per barrel, for the transaction, is questionable.

According to him, the valuation could have been based on between $50 and $55 dollars per barrel, which will reduce the value of the entire transaction substantially.

He further stated that after consultations with experts in the oil and gas industry, he arrived at a conclusion that the entire deal should be valued at a cost not more than $500million.

“I have been running some numbers myself, and from consultations with persons who work in the industry both in Ghana and outside, I don’t think that the two assets are worth more than 500million dollars,” he said.

He added that, “if you run a number of the scenarios and the numbers based on the production, projections and oil prices, you’re not looking at anything more than half a billion in terms of the value and that’s where I think we have to go back to question a number of the assumptions that are really going into these numbers that are being bandied about.”

“As far as I know, nobody has certified the reserves, nobody has certified the contingent resources on the South Deep Water block, as far as I know, the commerciality of the Nyankom-1X has a big question mark around that and if all of these are taken into account, the value should be much lower,” he added.

GNPC had claimed that the approval will allow GNPC to own significant stakes in offshore oil blocks for the first time since it was established in 1983, adding Ghana’s interest in the Aker Energy and AGM blocks will increase to 47% and 85%, respectively.

GNPC, has argued in its proposal to Parliament, that the new ownership structure will provide it and Ghana a firm ground to face the emerging energy transition in a well-prepared manner and create significant value for the benefit of the Ghanaian people.

Once finalized, GNPC Explorco, the commercial wing, would also become a joint operator with Aker Energy in both blocks through a new joint operator company, providing an opportunity for GNPC to acquire operatorship capacity to enable it to play a major role as an Exploration and Production company.

Bright Simons, a global thought leader, also has raised red flags over the planned acquisition of stakes in Aker Energy and AGM Petroleum Ghana oil blocks by the Ghana National Petroleum Corporation (GNPC) saying it’s mind-boggling.

In an article analyzing the developments, Mr Simons rubbished the GNPC’s reasoning for entering into the deal.

He said the GNPC’s explanation that it wants to become a major operator in the production of oil within Ghana was “plain nonsense” as it has had past opportunities.

Mr Simons, further noted that the GNPC, via subsidiaries, had not proven to be capable of bearing fruits in operations at South Deep Water Tano (SDWT) and the Offshore South West Tano Block (OSWT).

Source: The Herald