Jubilee Oil Holdings: GNPC to collateralize future cash flows for $500m loan – ACEP, IMANI
National Oil Company, the Ghana National Petroleum Corporation (GNPC), is alleged to have intentions of collateralizing future cash flows from Jubilee Oil Holdings Limited (JOHL) for a loan facility worth $500m.
Some $390m of the loan facility according to ACEP and IMANI is meant to be used for exploratory activities by the GNPC.
The remaining $110m is meant to settle the remainder of a $164m loan advanced to the GNPC by the Ministry of Finance and Ministry of Energy.
Jubilee Oil Holdings Limited (JOHL) is a company owned by the GNPC but registered as a foreign company and situated in a Cayman Islands, a known tax haven.
Last year, GNPC acquired a 7% interest in Jubilee and TEN oil fieldsfor about US$164 million from Occidental (Oxy) through a process that breached the law and hid Ghanaian assets from all the accountability mechanisms established for the efficient management of petroleum revenues.
The Ministries of Energy and Finance loaned tax revenue from Oxy to GNPC to pay for the acquisition of the 7% interest. At the time of the acquisition, the 7 percent interest was held by Jubilee Oil Holdings Limited (JOHL) through Anardako WCTP, Oxy’s Ghana registered subsidiary.
Instead of acquiring the 7 percent interest, GNPC acquired JOHL in the Cayman Islands, which subsequently became independent of any local company.
For ten months since the acquisition, JOHL had operated in Ghana’s upstream petroleum sector without registration in Ghana as required by Ghanaian law.
Again, contrary to an earlier communication from GNPC that it intends to transfer the acquired interests to Explorco, its subsidiary, the Corporation only recently registered JOHL as an external company, maintaining its foreign identity,
“Recent intelligence gathered on the Cayman Islands registered company indicates that GNPC has proposed to the Ministries of Finance and Energy to collateralize the future flows of the company for a loan of US$500 million. The Corporation intends to use US$110 million of the US$500 million loan to settle the loan advanced to it by the Ministry of Finance to acquire the interests.
“This comes on the back of the Corporation’s claim that it had paid US$60 million of the Ministry’s loan, even though there is no trace of this payment to the Ministry of Finance. The Corporation plans to spend the remaining $390 million on its exploratory activities, significantly with nonperforming contractors,“ the two think tanks noted.
According to ACEP and IMANI, the proposed collaterilsation by GNPC raises critical accountability questions such as:
- Payments to Finance Ministry – GNPC claims it has paid $60 million to the Finance Ministry. However, this payment cannot be traced in the government’s petroleum reports. This is an entrenchment of the breaches inflicted on the PRMA in relation to the acquisition of the 7% interest. Therefore, the Ministry of Finance needsto account for the $60m payment made to it.
- Borrowing for exploration is too risky – the Corporation intends to take on excessive risk by borrowing with interest to finance exploration instead of committing portions of its free cash flow as generally done by oil companies.
- Most of the programmed oil blocks for investments are not performing – the Corporation intends to spend the $390 million of the loan on Explorco exploration costto-first-oil in Eni Block 4, Springfield WCT-2, GOSCO OWST, Base Energy (ESWT), Eco Atlantic DWCTP-WO and other anticipated upstream investments. Apart from Block 4 and WCT-2, which have made some discoveries, the rest of the blocks still require financially credible investors to operationalize the terms of their respective agreements. Those blocks have been active for almost a decade without significant work. In an ideal situation, all the companies should have lost the blocks for non-performance and non-compliance with their agreement and the laws of Ghana.
Both ACEP and IMANI have recommended that the GNPC provide comprehensive information on the operations of Jubilee Oil Holdings Limited and immediately bring the asset to Ghana by collapsing the tax haven entity.
