The recent ruling by an international tribunal in a case brought against Ghana by ENI and Vitol is big news for all industry watchers in the upstream petroleum sector.
We spoke to the CEO of the Ghana Upstream Petroleum Chamber, David Ampofo on the implications of the ruling.
Q: What exactly is the case and the ruling?
A: The ruling declared that the Republic of Ghana breached the Petroleum Agreement with Eni by issuing Unitization Directives in a manner inconsistent with the law. At the center of the dispute lies a directive by the Ministry of Energy ordering the unitization of two oil fields known as the Sankofa-Gye Nyame oil field operated by Eni and the Afina discovery operated by Springfield.
Eni and Vitol who were claimants argued that the unitization measures were unlawful as they did not satisfy the procedural requirements under the applicable Ghanaian laws and regulations as well as international principles and best practices. The Ministry disagreed, arguing that the unitization was procedurally justified as confirmed by Ghanaian courts.
So, on 16 August 2021, Eni Ghana and Vitol filed the Notice of Arbitration against the ministry and the final ruling is what was recently announced.
Q: What is industry’s response to the ruling?
A: We are all heaving a sigh of relief. The Chamber is glad that the arbitration proceedings have finally come to an end. Arbitration in business has a way of slowing things down and Ghana’s oil and gas industry was not spared. It is also good to know that Eni Ghana and Vitol are not opposed to a unitization conducted in accordance with applicable laws and international oil and gas practice. For us at the chamber, this as an opportunity to find our way back to reinvigorating the industry. We are looking forward to the parties sitting around the discussion table to decide the next steps. Eni Ghana and Vitol have indicated their commitment to the development of the Sankofa oil and gas field and to making further investments to expand production.
Q: So, what are the implications of the Arbitral Award?
A: I think the implications are quite clear. Ghana is to withdraw the directive for unitization submitted by the Ministry to Eni Ghana. It also means that the proceedings commenced by Springfield in the Ghanaian Courts should be halted. This will ensure that Ghana is in compliance with the Award and enable both parties to pursue an amicable path forward.
Q: So where to from here?
A: This is the time for cool heads to prevail. Coming to the discussion table is a good first step and will send a positive signal to Eni, Vitol, Springfield and other prospective investors. Good faith at a time like this is crucial. Legal battles always take a toll on the parties but I’m sure the outcome will be a positive one.
Q: What has been governments response so far?
A: It seems to me that government is keen to put this matter behind it as soon as possible as the industry needs reinvigorating and Eni Ghana’s role together with partners will be critical to this. It is very important to bring the various discoveries that have been made to production. The last time I checked there was about 2 billion barrels of oil equivalent already discovered but still sitting in their reservoirs and waiting to be produced. Its good news that Eni Ghana and Vitol have indicated that they do not oppose a possible future unitization between the Sankofa oil field and the Afina discovery. It’s probably time for the Afina discovery to be tested and appraised so that any further discussions can be based on agreed data and global best practice.
Q: How optimistic are you that this ruling has the potential to reinvigorate the upstream business?
A: I believe all the parties have been keen to get a resolution of the matter and we finally have. We need to get Eni back to delivering the barrels. Being the only oil super-major and integrated energy company in Ghana, places ENI in a position of leadership in industry, and the Chamber is keen to ensure that the partnership with Ghana thrives. ENI operating in Ghana, is good for Ghana. I believe that government recognizes that also. As I always say, we are in this together. It would also be great to see the indigenous company Springfield, progress in its post-discovery activities.
Q: Any events from the Chamber that we can look forward to?
A: The Chamber would like to invite all industry stakeholders to our Annual Ghana Oil and Gas Conference scheduled for the 25th and 26th of September 2024 at the Marriot International Hotel. We will take the opportunity to launch two important documents – the 2024 Upstream Petroleum Report and another entitled “Ten years of local content and participation in Ghana’s upstream oil & gas industry”. These documents will be very useful to the oil and gas community. It’s a high-powered conference and you can register at https://ghanaupstream.com/register/.
