Unitisation Dispute Loss: Gov’t Needs To Admit It Was Wrong; Reverse Damage Done To Oil Industry – Ben Boakye
Executive Director of the African Centre for Energy Policy (ACEP), Ben Boakye, says Government needs to recognise the damage it has done to the country’s oil and gas industry due to its arbitration dispute loss to Eni/Vitol on the unitisation of the Offshore Cape Three Points oil field with that of the Afina oil field currently operated by Springfield.
According to Mr Boakye, Government’s forced unitisation directive on Eni/Vitol has scared away investors from wanting to invest in the country’s upstream sector.
“We need to recognize the damage done to the industry and reverse that, and we can start by acknowledging that we were wrong and by doing what we did, we scared away investors.
“We need to find ways to attract investors back into the upstream sector, but if we keep defending what we did in the case of Eni/Vitol and Springfield, saying that we are right, we won’t be able to bring them back,” he quipped speaking on the NorvanReports and BudgIT Ghana X Space Discussion on the topic, “Counting The Cost: When Government Ignores Expert Advice In Resource Dispute.”
Speaking further during the X Space Discussion, Mr Boakye noted Government since the beginning of the unitisation dispute has been impervious to the idea of using an independent firm to assess and prove the connection of the two oil fields belonging to the two companies for which the unitisation directive was issued by the Energy Ministry.
“By Government’s decision to unitise the fields, it was hurting the oil industry, and oil experts were surprised that we were unitizing the fields and it looked like were all dumb by doing that, but that was not the case but for the interests of a few people.
“I mean from the very onset, ACEP and IMANI, we were of the view that the Government was not acting right and that we needed to do the right thing to avoid embarrassment and that we didn’t need to spend a penny on going to the Tribunal,” he quipped.
Ghana’s attempt to forcibly unitise two offshore oil fields has resulted in a significant financial setback, with the country spending over $6.8 million in legal and administrative fees.
An arbitral tribunal in Stockholm recently ruled against Ghana in its dispute with Eni Ghana Exploration and Production Limited and Vitol Upstream Ghana Limited over unitisation directives issued by the country’s Ministry of Energy.
While Ghana avoided potentially hefty damages, the costs incurred in pursuing the case have raised questions about the government’s strategy.
The tribunal’s ruling reveals that Ghana spent more than $6.8 million on legal representation and administrative costs related to the arbitration. This figure does not include the additional €189,900 that Ghana has been ordered to pay towards the claimants’ arbitration costs.
Below is the table with full cost to the nation as a respondent in the case
These expenses come to light nearly two years after the Africa Centre for Energy Policy (ACEP), a Ghanaian think tank, warned President Nana Akufo-Addo about the potential costs of pursuing litigation in this matter.
In a prescient letter dated July 16, 2021, ACEP’s Executive Director, Benjamin Boakye, urged the President to “seek a second opinion on the matter before the country braces for an almost certain arbitration.” Boakye argued that the cost Ghana sought to avoid through unitisation was “a minuscule proportion of what it will be losing with the route being pursued.”
ACEP’s letter highlighted several risks that have now materialised, including the direct costs of arbitration, potential damage to Ghana’s reputation as an investment destination, and the opportunity costs of delayed field optimisation.
“The time lag is instead delaying what Ghana seeks to achieve through unitisation if the required technical investment had been made to prove Ghana’s case,” Boakye wrote, suggesting that further investment in technical studies might have been more beneficial than pursuing legal action.
The think tank also warned of broader economic implications, including potential negative impacts on Ghana’s credit rating and the risk of activating political risk insurance provided by the Multilateral Investment Guarantee Agency (MIGA).
