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Ghana bleeds from oil contract, pays $40 million monthly for no show

Ghana has from October 2018 begun the monthly forfeiture of $40 million to Eni Ghana, as a result of the country’s failure to put in place appropriate infrastructure to off-take gas from Offshore Cape Three Point (OCTP) for the use of thermal plants. OCTP, operated by Eni Ghana, commenced operations in mid-2018, and has an agreement to produce the lean gas for onward off-take by the government of Ghana.

Unlike crude oil and liquefied petroleum gas (LPG) which are storable and could be transported to the international market, lean gas is not. Therefore in developing a natural gas field, the investors (OCTP Partners) had to be assured of a ready off-taker (Ghana), a ready market and guaranteed repayment.

The OCTP is operated by Eni Ghana as the lead operator with a 44.44 per cent interest, along with its partners Vitol Ghana with 35.56 per cent, the National Oil Company (GNPC) with 20 per cent.

Between the operators and Ghana, before the gas hit the shore, it requires infrastructure (pipeline) to transport the gas from the wellhead, through processing units and the delivery of the agreed volume to the off-taker (Ghana) for thermal energy generation.

Take-Or-Pay

Such infrastructure per the industry standard, should have been ready and pre-commissioned one clear year before the completion of the development and production of the Sankofa field.

However, since the commencement of gas production at the Sankofa field, the country has not been able to take the volumes of gas delivered to the shore by the partners, triggering off the Take-or-Pay clause in the OCTP oil contract.

The investment of more than $7-billion into the development of OCTP, which is a heavy, gas concentrated field project touted as a great relief-to-be for the country’s challenged power sector, was occasioned by Ghana.

In 2015, the Government of Ghana signed the deal with the Italian oil giant, ENI and partners for the production of about 180 million cubic feet of gas for which Ghana was expected to prepare adequately to receive and utilize or pay for the agreed volume of gas even when the country is unable to consume it all.

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