With the era of oil and gas under way in Ghana, the country’s legal and regulatory regime is still evolving and the roles of state agencies are changing. Yet amid the reforms the Ghana National Petroleum Corporation (GNPC), which is now more than three decades old, will continue to play a major part. GNPC is mandated to incorporate other agencies under its corporate structure, such as the state’s gas company. As new projects begin producing and revenue grows, GNPC will look to boost technical capacity, build a domestic gas market and gain credibility in international debt markets to finance its operations.
Funding & Structure
GNPC is one of the oldest energy sector arms of state, having been created in 1983 to oversee and exploit domestic petroleum resources. It owns stakes in exploration and production projects, and gets a share of after-costs oil revenues sent to the government. Initially that share was set at 40% but has been revised to 30% from 2014 to 2016, according to the Ministry of Finance and Economic Planning’s 2014 Reconciliation Report on the Petroleum Holding Fund, published in March 2015.
A total of $732m was allocated to GNPC from 2001 to 2013, 35% of which was spent on equity shares in the Jubilee field, but the company is starting to diversify its expenditure, according to a report from the Extractive Industries Transparency Initiative, a transparency advocacy group that conducts revenue reconciliation reports in resource-producing countries. As of January 2015 the company had $142m at its disposal, the group said.
CEO Alex Mould has announced that GNPC wants to tap capital markets and borrow from banks to build up its capital base for expenditure and creditworthiness. Yet those plans have suffered an adjustment in recent months, given the rapid fall in oil prices since the summer of 2014.
GNPC had in 2014 hoped to borrow up to $1bn from multiple sources, but that figure has shrunk. In March 2015 it was reportedly closing in on a $700m loan through a syndicate of private lenders to be led by commodities trader Trafigura. In April 2015 Mould said that the drop in oil prices would mean less borrowing – more likely in the range of $350m-400m, and at a rate of about 3.9%. This is lower than the sovereign eurobond sale in September 2014, which came with a coupon of 8.125%, but Mould said that GNPC’s cash flow from stakes in Jubilee and other projects soon to be producing would lower the cost of finance. The length of term could, however, be a potential obstacle, with Mould specifying that GNPC wanted to borrow for a period of at least seven years. Moreover, borrowing would require approval from several government bodies. GNPC and Ghana’s parliament have disagreed in the past on whether the latter’s approval is also required.
In the longer term the company is aiming to become an independent upstream energy producer, rather than simply an owner of stakes in fields others have taken the lead on.
GNPC is conducting an exploration campaign onshore in the Voltaian Basin, a strip of land along Ghana’s eastern border. Plans had initially called for six holes to be drilled, but this has been reduced to one, according to the minister of finance and economic planning’s update on the oil sector to parliament in November 2014.
The Voltaian Basin is thought more likely to contain gas than oil but also is considered prospective for minerals, and Ghana’s Mining Commission has been encouraging exploration there as well.
GNPC will also have functions in the mid- and downstream sectors. In absorbing the country’s gas firm, the Ghana National Gas Company, and overseeing the national gas market, GNPC will become the formal public sector off-taker of gas from producers and a seller to users, which for the foreseeable future will predominantly consist of power plants.