The GNPC, the Law, and Kosmos

E. Ablorh-Odjidja
August 7, 2010

In a piece titled, “Kosmos Broke No Laws”, GNPC defended its actions against Kosmos. What happened after this piece was written invites comment; if not for any reason other than to reveal a peculiar mindset it attempted to conceal.

Writing for the GNPC, Mr. Thomas Manu, Director of Exploration and Production at GNPC, claimed Kosmos attempted to sell her Jubilee Oil Field in a “wanton disregard for the laws of Ghana and willful indifference to compliance with its obligations under Petroleum Agreements, to which it is a party.”

Kosmos was alleged in this claim to be guilty of making “GNPC data available to over twenty international oil companies, including Exxon Mobil,” in the attempt to sell her oil production stakes.

A serious charge. So, why would GNPC not go directly to the courts for redress if it has been harmed as asserted?

As Mr. Manu explained it, “Over the past one year, rather than regularizing the data breaches, Kosmos and Exxon Mobil have engaged in various transactions with each other, and have also ignored the clear indications from the Government of Ghana that compliance with the laws of Ghana is a fundamental pre-condition for investing in Ghana.”

GNPC was, therefore, implying a contractual breach by Kosmos. Again, shouldn’t the courts be the arbiter now?

Instead, GNPC has so far preferred to turn this case into a political drama; all to the detriment of the country’s budding reputation as an attractive investment destination.

In the context of this case against Kosmos, GNPC could have assumed it a given, right from start, that any investor/wildcatter in the petroleum industry would eventually put his stakes up for sale, Kosmos not exempted.

Kosmos would sell, with profit in mind. To have assumed that a business-savvy petroleum company like Kosmos would not eventually sell its find, with profit in mind, would be a case of extreme naivety.

GNPC, with this case against Kosmos, must have assumed that the Ghana public was ignorant about this selling tendency in the petroleum industry.

Currently on offer to Kosmos is the $4 bn benchmarks from Exxon-Mobil. Understandably, for the sale to be completed, it has to be substantiated with the exploration data. But, the sale could not be accomplished. Mr. Manu, in his missive, did not explain why.

Mr. Manu’s GNPC, which sat idly under the NPP government is now the super-active keeper of the petroleum laws under the new NDC government. The same laws under which the Kosmos/Exxon sale is being conducted were still in place under the previous administration.

To no one’s surprise, from 2009 onward the GNPC has come under new management, the NDC government.

GNPC has now become more aggressive and is blocking the sale, not through the laws and the courts, but by a series of political maneuvers.

Manu’s missive seems to promote the idea that Kosmos is not dealing in good faith. That she has illegally exposed data belonging to the GNPC, thus Ghana, to a long list of prospective buyers, and therefore, has done damage to Ghana.

Yet, despite the list of grievances alleged, Manu says GNPC has plans to sell the Kosmos stakes at a “fair market value.”

What “fair market value” is for GNPC and Manu remains to be seen. The offer of $4 bn by Exxon-Mobil is considered by many experts as “fair market value.”

But it is looking very much like the change in administrations has something to do with the shift in the GNPC business approach. Manu's accusation of Kosmos of having done “irreparable damage” to Ghana with the exposure of exploration data as part of the sale attempt is the political part of the drama.

How any fair market price could be offered for a “petroleum prospective” without examination of the data involved, is a highly perplexing proposition.

Some experts think the GNPC’s grievance so far has all to do with the size of the sale. Some 4bn for the Kosmos stake is a price that the GNPC could not afford. Therefore, the drama we are seeing now is a ploy to force Kosmos’ value downward to within a range that GNPC could afford to buy.

But will this lower price entail the “fair market value” that the GNPC still insists on?

According to Mr. Manu, “as the national oil company, the GNPC has a duty to ensure that all petroleum activities are conducted per the laws which have been enacted to protect Ghana’s interests.”

We should assume then that the fair market price is the downward one that GNPC is looking to materialize.

However, some think low-balling of the price does not support a fair market practice. That the effort is driven by some selfish aim is the more plausible reason. And judging by the GNPC’s attitude now, this may seem the case.

But, as Mr. Manu explains, “no entity can conduct exploration, development or production of petroleum without partnering GNPC.”

We are yet to understand from him why a purchase by Exxon-Mobil will preclude this option.

Or, perhaps, the GNPC wants a preferred oil company as the next partner. Perhaps, one from China?

How the global market reacts to this Exxon/Kosmos case in Ghana is another matter. But this seems not to be a consequence that the GNPC has thought worthy of consideration.

Throughout the exploration years by Kosmos, the GNPC never accused Kosmos’ of wanton disregard for the laws of Ghana.”

Suddenly with the change in political administrations, the GNPC has become aware of a transgression. Kosmos’ sales effort started under the old NPP regime. And now, under the new NDC regime, the Kosmos stakes to Exxon-Mobile have made the GNPC super sensitive about the sale.

The case has not reached the courts, but Mr. Manu has already defined the damage.

“The loss of potential licensing fees as a result of Kosmos’ unlawful conduct is significant. Reduction in the inherent value of the data, as a result of making it available to such a wide group of recipients, has increased the risk of wider dissemination and unauthorized use… and has irreversibly altered the investment landscape in respect of these assets in a way that constitutes a very substantial negative economic impact on Ghana.”

Yet, and again, despite the ‘reduction in the inherent value of the data’ alleged, the GNPC still wants to own the oil stakes of Kosmos, hence the need to put restrictions on the data exposure.

But any contract that seeks to limit the show of information on a property before purchase must raise a huge concern for the buyer. In this case, the restriction, as sought by a state institution such as GNPC, must be deemed unfair to Kosmos.

Exposure of data for the sale of petroleum prospective or any worthy property must be a must. Only dupes can be expected to buy properties without the disclosure of documents or necessary data on the property.

The Brooklyn Bridge of New York was once offered for sale without document. And that sale made history for the wrong reason.


Exxon-Mobil has the “financial capabilities” required to make the purchase legitimate. But the requirement for “the alignment of their strategic interests (Exxon-Mobil in this case) with ours (the GNPC)” is is another matter.

While this “alignment” may look innocuous on paper, in reality, this part of the proffer can be the spear point to pierce the deal. The prospect of the most capable potential buyer can sink under this above arrangement/

The GNPC’s wish to buy the controlling shares of Jubilee is as clear as it is hopelessly ambitious. On the question of competency alone, Exxon-Mobil is better positioned to give us more bang for the buck, with its worldwide production and distribution network.

The history of our state-controlled enterprises offers no hope that we can compete successfully in this global arena called the petroleum industry, even at the continental level.

E. Ablorh-Odjidja, Publisher www.ghanadot.com, Washington, DC, August 7, 2010
Permission to publish: Please feel free to publish or reproduce, with credits, unedited.