Minority Urges Gov’t to Engage Eni, Vitol, and Springfield to Restore Confidence in Oil and Gas Industry

The Ranking Member on Mines and Energy, John Jinapor, has called on the government to engage with Eni, Vitol, and Springfield to reach an amicable solution and restore confidence following the recent oil unitization ruling.

An international tribunal ruled in favour of Eni and Vitol in their long-standing opposition to Ghana’s attempt to impose a unitization agreement on their Sankofa field in the Offshore Cape Three Points (OCTP) block and Springfield Energy’s Afina discovery in the West Cape Three Points 2 block.

Addressing the Parliamentary Press Corps at Parliament House in Accra on Wednesday, July 11, 2024, Mr Jinapor advised, “Government should quickly engage Eni and Vitol, engage Springfield, and find an amicable solution and an acceptable roadmap so we can restore confidence.”

He criticized the government for making poor decisions that have led to the consistent loss of oil majors from the country. Jinapor highlighted that oil production in Ghana has decreased from 71 million barrels annually to 48 million barrels, a decline of 32% over six years.

“The major oil companies are exiting Ghana—Exxon Mobil has exited, AGM has exited Ghana, Anadarko has exited, Eni is in court with Ghana, and so Ghana is seen as a hostile investment destination. Many oil companies are shying away from Ghana,” Jinapor stated.

He emphasized that the Minority has had enough and holds the government responsible for what he described as an “embarrassing spectacle” that was avoidable. “We cautioned them, civil society cautioned them, we knew we were heading for defeat because that decision lacked basis and was not backed by any law or common sense, but they refused, and today we are witnessing this embarrassing spectacle.”

Jinapor warned that this situation sends the wrong signal to potential investors, making Ghana appear as a hostile investment destination. He stressed the significant revenue losses Ghana has faced due to the unresolved issue and called on the government to swallow its pride and stop the misinformation campaign, admitting that the government lost the case.

Ghana suffered a setback in an international arbitration case concerning its attempts to unitize offshore oil fields but avoided potentially significant financial damages, reports suggest that after reading the ruling, in the matter of an arbitration under the 1976 Arbitration Rules of the United Nations Commission on International Trade Law (UNCITRAL) (SCC Arbitration U2021/114).

An arbitral tribunal seated in Stockholm has ruled that Ghana breached its Petroleum Agreement with Eni Ghana Exploration and Production Limited and Vitol Upstream Ghana Limited when it issued directives to unitize the Sankofa oil field with the adjacent Afina discovery.

The dispute arose after Ghana’s Ministry of Energy ordered the unitization of the Sankofa field, operated by Eni and Vitol, with the Afina discovery operated by local company Springfield Exploration & Production Limited. The claimants argued that the unitization directives were issued prematurely and without proper technical justification.

In its ruling, the tribunal found that Ghana had failed to establish the existence of a straddling accumulation, which is a prerequisite for unitization under Ghanaian law. It also criticized the arbitrary determination of tract participation and procedural irregularities in the unitization process.

However, in a significant relief for Ghana, the tribunal dismissed the claimants’ substantial damages claim, which industry sources suggest could have run into hundreds of millions of dollars. The arbitrators deemed the claim premature, as the unitization directives have not yet been enforced.

“This ruling underscores the importance of following proper procedures in resource management, but also highlights the challenges in quantifying damages in such complex scenarios,” said an oil and gas consultant.

“You cannot shortchange that. Ghana lost on the substantive issue. Every country has the right to ask parties to unitize oil fields to exploit their petroleum resources efficiently. However, the process of doing this matters. The Arbitral Tribunal found that ‘in the circumstances in which they were issued,’ the Unitization Directives breached the Petroleum Agreement. That is, the unitization was contrary to the applicable regulations and thereby breached Article 26(2) of the Petroleum Agreement,” economist and political risk analyst Dr Theo Acheampong also tweeted.

The decision could have far-reaching implications for Ghana’s oil industry and its approach to unitization. It may also influence how other African countries manage similar situations in their offshore oil sectors.

Despite avoiding a potentially large payout, Ghana has been ordered to bear its own legal costs and pay half of the claimants’ arbitration costs, amounting to €189,900.

The ruling comes at a sensitive time for Ghana, which is currently implementing an IMF-backed economic recovery program. The country has been seeking to maximize returns from its oil and gas resources to bolster its economy.

Neither the Ghanaian government nor the claimants responded to requests for comment before publication. The award is subject to challenge under Swedish law within two months of receipt.

Source:newsalertgh.com