By Kizito CUDJOE
The Minister of State-designate for the Ministry of Energy, Herbert Krapa, has announced that the ministry will collaborate with the Attorney-General to review the recent oilfield unitisation case and determine a subsequent course of action.
Krapa emphasised during his vetting by the Appointments Committee of parliament that the ruling confirms Ghana’s right to unitise oil blocks that overlap and do not require independent development.
The Minister of State-designate for the Ministry of Energy also highlighted the ruling’s positive aspect, which absolves government and the Ghana National Petroleum Corporation (GNPC) from any obligation to pay the US$7billion claim.
He clarified that while unitisation is permissible under Ghanaian law, the previously invoked procedure was flawed. He explained that government’s policy allows for unitising straddling wells to conserve infrastructure costs, thereby saving the expenses associated with separate development.
However, Ghana experienced a setback in an international arbitration case related to its efforts to unitise offshore oil fields – but managed to evade potentially substantial financial damages. The arbitration, conducted under 1976 Arbitration Rules of the United Nations Commission on International Trade Law (UNCITRAL) (SCC Arbitration U2021/114), concluded that Ghana had breached its Petroleum Agreement with Eni Ghana Exploration and Production Limited and Vitol Upstream Ghana Limited by issuing directives to unitise the Sankofa oil field with the adjacent Afina discovery.
The dispute originated when the Ministry of Energy ordered the unitisation of Sankofa field, operated by Eni and Vitol, with the Afina discovery operated by local company Springfield Exploration & Production Limited. The claimants contended that unitisation directives were issued prematurely and lacked proper technical justification.
The tribunal ruled that Ghana had not proven the existence of a straddling accumulation, a prerequisite for unitisation under Ghanaian law. It also criticised the arbitrary determination of tract participation and procedural irregularities in the unitisation process.
However, the tribunal dismissed the claimants’ substantial damages claim – which industry sources suggest could have amounted to hundreds of millions of dollars, deeming the claim premature as the unitisation directives have not yet been enforced.
Since the ruling’s announcement, some oil and gas experts have said it underlines the importance of adhering to proper procedures in resource management and highlights the challenges in quantifying damages in such complex scenarios.
Furthermore, it is seen that the decision could have far-reaching implications for Ghana’s oil industry and its approach to unitisation – potentially influencing 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 the claimants’ arbitration costs, amounting to €189,900.
It will be recalled that Attorney-General and Minister for Justice, Godfred Yeboah Dame, hailed the decision as a landmark victory for Ghana.
In a statement issued by the A-G, he reiterated government’s commitment to defending Ghana’s natural resources, vowing to contest all arbitration claims and actions designed to impose undue financial burdens on the country.
However, the Minority in Parliament, led by Ranking Member of the Mines and Energy Committee, John Jinapor, during a press conference debunked the A-G’s position that the ruling was a victory for the country.
According to the Ranking Member, the Minority in Parliament had advised government to seek an out-of-court settlement, but to no avail – resulting in a judgement debt of €189,900 slapped on the country following the ruling that Ghana had breached the agreement signed with entities involved in the matter.
He said based on the ruling, “The earlier directive by the Minister of Energy (then), Peter Amewu, stands null and void. The tribunal ruled in favour of Eni and directed that Ghana should refer to that directive”.
Mr. Jinapor contended that similar actions of government continue to cause revenue losses while making the country’s fields unattractive amid the decline of petroleum production.
The Minority therefore urged government to desist from claiming victory and engage the involved entities in finding an amicable solution to the matter.
