GNPC defends $700m loan
The Ghana National Petroleum Corporation (GNPC) has defended its action to secure $700million from the international market to enhance its operations.
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In a statement issued in Accra yesterday, the GNPC said the amount would be used to support its increasing oil and gas infrastructure investment and cash requirements from its participating and commercial interests.
Additionally, it said the loan would be used to provide guarantees for the Offshore Cape Three Points (OCTP) contractors for the offtake of natural gas from the field.
According to the corporation, based on expected outcome of ongoing negotiations, it expected to raise a bank guarantee of about $200 to US$300 million.
Apart from providing guarantees, it explained that the loan would be used to augment its working capital, including oil and gas trading working capital needs.
The move by the GNPC has generated intense debate in Parliament and on media outlets.
While some members of Parliament have contended that the GNPC had erred in securing the loan without seeking parliamentary approval, others believe that the amount would not be used for the intended purpose.
Confirming that it was securing the $700million, the statement explained that the tenure of the loan would be five years with an interest of 4.43 per cent.
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Justification
Justifying its action to secure the loan, the GNPC said the corporation could not continue to fund its operation from its resources on a sustainable basis given the national consensus for increased national participation in the industry.
Within 15 years funds from the public sources for GNPC capitalisation would cease and, therefore, it was prudent for the corporation to build up capital for its growth. This is normal commercial practice. No serious company lives from year- to- year (hand to mouth),” it stated.
Explaining further the rationale behind the loan facility, the GNPC said it was in negotiations with the Offshore Cape Three Points (OCTP) partners to pay for the pipeline and receiving facility in the OCTP (Sankofa-GyeNyame field) gas development project to enable a lower gas price to Ghanaian consumers.
That investment, it said, would amount to $493 million. This will save the country from paying 22 per cent interest if the partners were to pay for that investment.
Furthermore, the statement said GNPC had an immediate requirement of US$105 million to pay as part of natural gas price negotiated with the OCTP partners.
The effect of such measures, it explained, was to lower gas prices paid by Ghana to the OCTP partners and thus reduce electricity costs to Ghanaians.
Again, the statement said the GNPC had a commitment to pay $36 million, being 40 per cent of the pipeline cost to connect TEN gas to the Jubilee FPSO.
“This is necessary to send the TEN Field gas to the Ghana National Gas Company (Ghana Gas) for processing. This will save the country from paying 15 per cent interest if the partners were to pay for this investment.
“The facility was not for undertaking exploration. Nobody borrows to finance exploration. However, there are ongoing development costs,” it said.
No parliamentary approval
On the vexed question of whether or not the GNPC needed a parliamentary approval to secure a loan, the statement explained that approvals required for GNPC borrowing, in line with Section (15) of Ghana National Petroleum Corporation Act, 1983 (PNDC Law 64) included approval by the Minister of Finance upon recommendation by the Minister of Energy and Petroleum.
According to the statement, the GNPC secured the approval from the Minister of Finance upon recommendation by the Minister for Energy and Petroleum.
It categorically stated that “GNPC does not require parliamentary approval to borrow. GNPC sought and secured a legal opinion from the Attorney General as well to this effect.”
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The statement refuted any claims that the GNPC was using Ghana’s oil as collateral for the loan
Rather, it explained the GNPC was only using its share of oil revenue, as provided for by the Petroleum Revenue Management Act (PRMA), to secure the loan.
It said the government’s share was not included at all in the effort to borrow money.
Competitive process
On how competitive the process was, the statement said the GNPC embarked on a competitive process in March 2014, to raise $500million to $700 from the international financial market and that the process followed was in line with the GNPC Law 64.
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According to the statement, the GNPC was investing $54million to increase its stake in the Deepwater Tano Cape Three Points block in which together with Hess it had made seven discoveries.
It said about $15billion to $20 billion was expected to be invested within the decade to appraise and develop new discoveries as the industry was growing in size and was expected to reach $20billion by 2015 and $60billion by 2022.
“GNPC is repositioning itself to take commercial leadership in the indsutry, to become local content enabler,” it said.