The Petroleum Commission has recommended for the termination of some four Petroleum Agreements (PA) involving some companies working in the Ghana petroleum sector. This follows some breaches of the Petroleum Agreement (PA) by these companies.
The contracts to be cancelled involve some companies working at the Offshore Cape Three Points South Contract Area, Shallow Water Cape Three Points Contract Area, Expanded Shallow Water Tano Contract Area and South West Saltpond Contract Area. The contracts were terminated on the advice of the Board of the Commission.
The companies are UB Resources Limited which held 70.47 per cent of the Offshore Cape Three Points South Contract, Sahara Energy Fields Ghana Ltd which held 85 percent of the Shallow Water Cape Three Points Contract Area, Erin Energy Ghana Ltd which jointly with its local partners Base Energy Ghana Ltd held 13.5 per cent of the Expanded Shallow Water Tano Contract Area and Brittania-U Ghana Limited which held 76 per cent of the South West Saltpond Contract Area.
UB Resources Limited
In a document at the disposal of the Daily Statesman Newspaper, the Board after its meeting held on 3rd September, 2019 recommended to the minister to terminate the PA involving the UB Resources Limited and repossess the contract area due to the Contractor’s failure to drill the mandatory exploration well as part of its minimum work obligations under the PA despite the extension of the Initial Exploration Period (IEP) granted by the Minister.
According to the board, the commission communicated their unwillingness to grant a further extension of the PA as requested by UB Resources in a meeting held with the company on 15th of January 2019 until it had secured a drilling rig.
UB Resources according to the commission has been unable to comply with the directive within the period directed by the Board and has not reverted to the Commission to provide any updates.
The board further stated that the contractor breached a material obligation by failing to assign not less than 30 per cent of its Participating Interest to a Technical Partner within twelve months of the effective date of the PA as required under Article 2.11 of the PA.
They said, the Contractor has breached provisions of L.I. 2221 relating to registration and subsequent renewal with the Commission and L. I. 2204 for the failure to have the participation of an indigenous Ghanaian company as a Contractor party to the PA.
“Pursuant to Article 23.6 of the PA, the rights of the Contractor under the PA upon a termination of same shall cease except for such rights that have accrued and without prejudice to any obligation or liability that may have been imposed or incurred prior to the termination of the PA.” The commission said.
The Commission advised further that in addition to its recommendation for the termination of the PA, the Contractor should be required to honour all obligations and/or liabilities that accrued prior to the termination of the PA.
Sahara Energy Fields Ghana Ltd
In the case of Sahara Energy Fields Ghana Limited, the Board advised the Minister to terminate the PA and repossess the contract following the failure of the contractor to fulfil its minimum work obligations under the PA despite the extension of the IEP which was granted by the Minister.
The letter by the Minister stated that if the Contractor fails to fulfil the obligations required under the PA before the expiration of the extension, the PA shall be terminated.
According to the Commission, it is of the opinion that the various engagements of Sahara by the Board and Management of the Commission have shown that the Contractor lacks the capacity to fulfil its work obligations under the PA.
They said, the Contractor, being a predominantly downstream company, lacks the technical capacity to independently fulfil the obligations under the PA, yet it has also not shown any commitment in finding a Technical partner who can help in fulfilling these obligations.
They added that the Contractor failed to pay Surface Rental fees to the State in violation of the requirement to do so both under law as well as the PA.
As stated in Article 23.4 (g) of the PA, failure to make payments due to the State within thirty days of notification of same by the State is a ground for the termination of the PA.
They stated that the Contractor breached the provisions of L.I. 2221 which mandates them to register with the Commission and pay the required fees in order to be issued with a permit prior to engaging in petroleum activities in the upstream petroleum sector.
Erin Energy Ghana Ltd
The Board recommended in the case of Erin Energy that the Contractor failed to meet the June 2019 deadline set by the Minister in the 8th May 2018 letter to Erin to drilling the exploration well as part of its minimum work obligations even after the expiration of the First Extension of the Exploration Period on 22nd July 2018.
Section 23 (3) of Act 919 gives the Minister the discretionary power to terminate the PA under such circumstances.
The Board said Erin Energy does not have the financial capability to continue in its role as Operator on the block and cannot fulfil the minimum work obligations under the PA considering that the parent company, Erin Energy Corporation, has filed for bankruptcy which has brought the activities of Erin in the partnership to a standstill.
“The Contractor has not paid Surface Rentals to the State as required by law and the PA for 2016, 2017, 2018 and 2019.” They said.
They added that the Contractor party has also failed to register and or renew its permit in contravention with L.I. 2221.
The Board indicated that, they are of the opinion that the Minister in accordance with Section 13 (5) of Act 919 may consider giving Base Energy, the local partners of Erin, the option of assuming all of Erin’s interest as well as its rights and obligations under the PA and proceeding on its own as Contractor.
They however reminded the Minister in selecting this option to avert his mind to the processes outlined under Regulation 25 of the Petroleum (Exploration and Production) (General) Regulations, 2018 (L.I. 2359) to change the operator of the Contract Area.
Brittania-U Ghana Limited
The Board in the case of Brittania U Ghana Ltd said the Contractor has not fulfilled its minimum work obligations as provided under the PA. They said the Contractor failed to pay Surface Rental fees to the State for 2018 and 2019 despite several reminders by the Board. This according to the commission gives cause for the termination of the PA.
They stated that the Contractor/Operator breached the provisions of L.I. 2221 which mandates them to register with the Commission and pay the prescribed fees in order to be issued with a permit prior to engaging in petroleum activities in the upstream petroleum sector.