Madam Speaker, I beg to move, that this Honourable House adopts the Report of the Committee on Mines and Energy on the Petroleum Agreement among the Government of the Republic of Ghana, the Ghana National Petroleum Corporation (GNPC), Vanco Ghana Limited and LUKOIL Overseas Ghana Limited for the conduct of exploration and production operations in the Offshore Cape Three Points Deep Water Block.
Madam Speaker, the Committee duly met as you authorized, and in the meeting, we agreed that the reference documents such as the 1992 Constitution of the Republic of Ghana should be given to us. We also used the Standing Orders of
the House, all the Petroleum Agreements including the Petroleum Exploration and Production Law of 1984, PNDC Law, 84.
Madam Speaker, the Committee
therefore presents its Report as follows.
1.0 Introduction
The Petroleum Agreement among the Republic of Ghana, Ghana National Petroleum Corporation, Vanco Ghana Limited and LUKOIL Overseas Ghana Limited in respect of Cape Three Point Deep Water Block Offshore Ghana, was laid before the House by the Minister for Local Government and Rural Develop- ment, Hon Joseph Yieleh Chireh, on behalf of the Hon Minister for Energy, on Wednesday, 22nd April 2009, and was subsequently referred to the Committee on Mines and Energy for consideration and report in pursuance of article 103 (3) of the 1992 Constitution and Standing Order 188 (2) of the House.
Following the referral, the Committee met on Friday, 26th April 2009 with officials from the Ministry of Energy and the Ghana National Petroleum Corporation and considered the Agreement and hereby reports as follows:
2.0 Reference Documents
The Committee made reference to the following documents during the deliberations:
i.The 1992 Constitution of the Republic of Ghana.
ii. The Standing Orders of the House.
iii. The original Petroleum Agreement document between the Government o f Ghana , Ghana Nat iona l Petroleum Corporation on one hand and Vanco Ghana Limited and LUKOIL Overseas Ghana Limited
on the other hand.
iv. Petroleum (Exploration and Production) Law 1984 PNDCL 84.
3.0 Acknowledgement
The Committee is grateful to the Minister for Energy, Hon Dr. Joseph Oteng Adjei, the Deputy Minister for Energy, Hon Emmanuel Buah Armah and other officials from the Ministry of Energy and the Ghana National Petroleum Corporation for attending upon the Committee to assist in the deliberations.
4.0 Background
Vanco Ghana Limited entered into a Petroleum Exploration and Production Agreement between the Government of Ghana and the GNPC on 19th August, 2002. The Agreement covered an approximate area of 10,305 square kilometres in The Deep Water Cape Three Points Block Offshore Ghana.
At the end of the exploration period, Vanco exceeded the minimum contractual seismic obligation by acquiring, proces- sing and interpreting 3,184 sq. km. of new 2-D data and interpreting 1,055 km of existing 2-D seismic data and acquiring 1,500 sq. km. of 3-D seismic data. Vanco also exceeded the contractual minimum expenditure requirement by US$7.0 million. Vanco could however not meet its obligation of drilling an exploration well during the contract period. The Committee was informed that this was due to the scarcity of specialized deep water rigs on the world rig market at the time.
Article 4.10 of the original Petroleum Agreement gave Vanco Ghana Limited the right to negotiate a new Petroleum Agreement if at the end of the exploration period Vanco desired to carry out further
exploration work in retained areas.
In accordance with the provisions of the original Petroleum Agreement, a new Petroleum Agreement has been negotiated among the Republic of Ghana, GNPC and Vanco Ghana Limited. and LUKOIl Overseas Ghana Limited. (as joint applicants) for the Exploration and Production of petroleum in the Offshore Cape Three Points Deep Water Block covering approximately 5,146.62 square kilometres.
5.0. The Applicants
Vanco Energy Company Limited is an independent oil and gas company with a mission to explore and develop frontier oil and gas opportunities worldwide with focus on deep water. Vanco Energy Company Limited has built a Deep Water Africa exploration portfolio since 1997 and is now a leading deep water acreage holder in Africa with more than 10 million Deep water acres under licence. Vanco holds and operate under six licences in five countries including la Cote d'Ivoire, Ghana, Equatorial Guinea, Gabon and Ukraine.
LUKOIL Overseas Ghana Limited. on the other hand was incorporated under the laws of the British Virgin Islands and is currently registered in Ghana as an external company. LUKOIL is one of the world's leading vertically integrated oil and gas companies.
The main production region of LUKOIL is Western Siberia. The company is also carrying out international exploration and production projects in Kazakhstan, Venezuela, Saudi Arabia and la Cote d'Ivoire, amongst others.
6.0 Interest of the Partners
The Petroleum Agreement under consideration was negotiated within the
framework of the Petroleum (Exploration and Production) Law 1984, PNDCL 84; the Model Petroleum Agreement which serves as the main guide for the Petroleum Agreement, the Petroleum Income Tax Law, 1987 (PNDCL 188); the Environmental Protection Agency (EPA) Act 1994 (Act, 490) and the Environmental Assessment Regulations,
LI. 1652, 1999.
In the new Petroleum Agreement, Vanco, the current operators will have 28.339 per cent ownership interest and LUKOIL will have 56.661 per cent ownersip interest and will be the operators of the project after the drilling of the first exploratory well. GNPC has 15 per cent carried interest through exploration and Development. GNPC has the option to take an additional paying interest of up to 5 per cent upon commercial discovery.
7.0 Terms of the Agreement
The Committee noted that the Agreement provides for an exploration period of five (5) years divided as follows:
i. initial Exploration period of three (3) years;
ii. first extension period of one (1) year; and
iii. second and final extension period of one (1) year.
7.1 Work Programme and Financial Commitments
The Committee was informed that, by the terms of the Agreement, the applicant is expected to fulfill the following minimum work and financial obligations within the contract period:
a) Initial Exploration Period -- Three (3) Years
i. the contractor shall acquire, process and interpret a minimum of one thousand, five hundred (1,500) square kilometres of new 3-D seismic data;
ii. the contractor shall drill a minimum of two (2) exploration wells in the contract area; and
iii. the contractor shall invest a minimum of US$100,000,000.00 for work in the initial Exploration Period.
b) First Extension Period -- One (1) Year
i.contractor shall reprocess existing data where required;
ii.drill a minimum of one (1) exploration well in the contract area; and
iii.contractor's minimum expen- diture for the first extension period is forty-five million U n i t e d S t a t e s d o l l a r s
(US$45,000,000.00).
c) Second Extension Period -- One (1) Year
i. contractor shall reprocess existing data where required;
ii. drill a minimum of one (1) Exploration Well in the Contract Area; and
iii. contractor's minimum expen- diture for the first extension
