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I Didn't Praise Kufuor; Jubilee Oil Field Deal Was The Worst — Alex Mould

I Didn't Praise Kufuor; Jubilee Oil Field Deal Was The Worst — Alex Mould

The former Chief Executive of the Ghana National Petroleum Corporation (GNPC), Alex Mould has debunked media reports that he heaped praises on the oil and gas agreement negotiated, agreed and signed by the government of former President John A. Kuffour.

In a press statement, Mr Mould said nowhere in his presentation did he mention former President Kufuor’s name, “let alone heaping praises on him.”

He stated that, “at the said forum, I made it categorically clear that the Jubilee agreement is one of the worst agreements I have ever seen.

“My comment was specifically in relation to Additional Oil Entitlements (AOEs), that is how the windfall profit is shared between Contractor and the State if we experienced higher oil prices than was used in the projections of the economics for the approval of the Plan of Development (PoD),” he added.

The Oil and Gas expert said the discussion was on Greater Jubilee Full Field Development (GJFFD) economics from the PoD submitted in 2017 which sought approval to expand the Jubilee field development to include the Mahogany, Twenebuah, and Akasa (MTA) fields in the Kosmos operated West Cape Three Points (WCTP) Block.

The former GNPC Boss disclosed that GJFFD POD approved by government in 2017 had projected AOEs of only $35 million for the life of the project, “although we should be expecting something close to $500 million - $1 billion over the life of the project if average oil price exceeded $70 per barrel versus a Plan of Development projected price of $50 per barrel.”

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Below is the full statement:

RE: KUFUOR GAVE GHANA THE BEST OIL DEAL – ALEX MOULD

My attention has been drawn to a misleading news report published online, following my presentation last Tuesday at the University of East London’s maiden oil and gas conference in London on the subject "Can Ghana Avoid The Oil Curse?"

The said report, which claims that I had heaped praises on former president John Agyekum Kufuor for signing good oil deals during his tenure as president of Ghana, is nothing but fanciful conjecture of the author. It should therefore be disregarded.

For the avoidance of doubt, I wish to clearly state that I never said what has been attributed to me. Nowhere in my presentation did I mention former President Kufuor’s name, let alone heaping praises on him.

At the said forum, I made it categorically clear that the Jubilee agreement is one of the worst agreements I have ever seen with specific reference to Additional Oil Entitlements (AOEs) in the Petroleum Agreement (PA). For the benefit of readers, AOE is the sharing of a windfall profit ie any additional profits (as ascertained by rate of return of the capital the contractor put in the project) in excess of what was approved in the POD.

In simple terms if we agree to share the windfall profits equally (50/50), and say that the actual oil price was say $10 above what was approved in the POD, which was at $50/bbl, and assuming that there are 200m bbls produced over the PA lifetime, then the excess profit for all partners would be 10x200m =$2bn

For simplicity sake, excluding Royalties etc etc government should get 50% of the $2bn excess revenue or windfall profits ie $1.0bn

So the discussion was on Greater Jubilee Full Field Development (GJFFD) economics from the POD submitted in 2017, of PAs signed 2004-2006, which sought approval to expand the Jubilee field development to include the Mahogany, Teak, and Akasa (MTA) fields in the Kosmos operated West Cape Three Points (WCTP) Block.

I pointed out during my presentation explaining the economics of oil exploration and Production (E&P) that the GJFFD POD approved by government in 2017 had projected AOEs of only $35 million for the life of the project, although we should be expecting something close to $500 million - $1 billion over the life of the project if average oil price exceeded $70 per barrel versus a Plan of Development projected price of $50 per barrel.

I also mentioned that the people who signed that agreement had no clue about AOE calculations nor what they were agreeing to.

Even today as we speak, the Ghana Revenue Authority /Ministry of Finance and GNPC are still trying to grapple with the calculations, and Kosmos has even threatened government with going to arbitration if Govt insists on interpreting the AOE calculations different from what was written in the agreement at the time of signing the PA in 2004;

And btw, the Kosmos-Operated Block WCTP Block PA (2004) has worse AOE provisions for the State than the Tullow-Operated DWT Block PA (2006).

The PA for DWT was signed in 2006 and that of WCTP in 2004.

In subsequent Petroleum agreements, the State has better AOE provisions but this will still need to be revisited in the next version of the model agreement.

ALEX MOULD

MONDAY, 4TH NOVEMBER 2019.

ACCRA

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