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GNPC sees its future as an independent operator

Interview - December 17, 2014

Ghana´s potential as an oil producer has been evident since the discovery of the offshore Jubilee field in 2007. Alex Mould, CEO, Ghana National Petroleum Corporation, talks about GNPC’s plan to become a “full operator” with 15 years, developing its oil resources independently. He also discusses the important role of finance in the company´s planned expansion.


Could you tell us about the impact of the Jubilee discovery in the everyday life of the Ghanaian people and the role of GNPC both in the discovery and the upstream aspects?

I see the discovery of crude oil as incremental income for the government. It is a new source of revenue the government did not have before. But at the same time for the people of Ghana and for industry, it is going to change the lives of many people in the western region, not just the oil but also the gas. As a country we need to produce a lot of electricity. Akosombo dam produced 60% of our electricity, and the demand for electricity in five years is supposed to be almost doubled. This means that we need to be building power plants nearly every three months. That can only happen if two things are possible. First of all, you should have the raw material to produce electricity, and the raw material is gas, because it is the most economical and the most environmental-friendly as well. We know that we do have gas fields out there. We have associated gas from Jubilee, we have associated and non-associated gas coming in from the TEN project and also from the ENI Sankofa area project. We have a lot of gas, so we need to tap that gas; we need to be able to bring it onshore for them to process it into electricity. This is going to create jobs, because we are going to have two plants processing the gas and pumping it through the pipeline to the power generation plants. It is also going to create more production of electricity; IPP’s (Independent Power Producers) are going to be formed where they will be able to now have bankable transactions, being able to bring in the raw material at a relatively modest cost to produce electricity at relatively modest cost for the people of Ghana.

We know that GNPC is well positioned to enter into strategic alliances with world-class oil companies, to explore and develop this potential for their mutual benefit. What is the need for specialized financial institutions in the oil and gas sector to ensure a long term commitment and a successful experience for the investors?

This is a finance business, we do use a lot of technology to find, transport and produce oil. The deals have to be bankable, so you have to work with financial institutions that are willing to take the risk and are trusting in the players. So for us, as much as it is important that we want investments in the country, we are looking for players that really know what they are doing. We want people who have expertise in deep and ultra-deep water exploration, like you have in the Gulf of Mexico. We are discussing with Shell, with Chevron, and with all the big players. A few years ago nobody would have look at Ghana, but they realized that the basin that we have is a world-class basin. What has changed over these years is the technology, so we have to be associated with companies that are the forefront of technology. Most of these are the U.S. companies, but there are also companies from other countries who are investing on this. We are looking at encouraging and giving place to a diverse number of players. We have the Russians, the Americans, the English, and Nigerians. We are really screening if they have the competence, and if they have the technical and financial backing.

The U.S. investors we are looking at have the right practices. The foreign corruption acts (U.S. Foreign Corrupt Practices Act)  are very important. For us is not only having the money, but you need to have the technical capability to do the work.

Which internal and external factors have changed and what are the reasons behind the five-year plans in changing GNPC’s strategy?

Our strategy is quite simple. In GNPC, within five to seven years we want to be operators. That is a huge step forward. To be an operator means you need to have the muscle and the expertise to do these kinds of things. But we are pacing ourselves; we will start as a joint operator, because you have to walk before you run. We believe that in about fifteen years we are going to be a full operator, operating most of our fields. We are also looking at the Volta basin, which is the next biggest thing to happen. That is the basin that is going to project Ghana forward. Here is where GNPC is taking a step forward to do most of the exploration itself, especially the initial seismic work to sell the data to the companies that are coming to explore.

It is evident that this is the time for an investor to invest in Ghana, before you start doing things on your own. Do you think your vast financial experience is a major backup for this strategy?

This is a financial play, and it is important to have the right financial structures so as to move forward. We have set up a company in GNPC and that company is going to be the commercial (arm) of GNPC, and is going to be able to raise money on its own in a future to do explorations and take a certain percentage of every field we give out. GNPC, on behalf of the government, has a normal 10% carry, but if you really believe your fields are that good you should be able to take some money and put it as a bet there as well, and that is what GNPC is going to do. So we have talked to a number of financial institutions about what the strategy is for GNPC in this commercial endeavor and we are working with them to see how we can raise money. If any of the players or partners is selling down we will be looking to see if we can join with other players and take over some of those equity portions that they are selling.

Our strategy is quite simple. We have to replace our green reserves, catalyze the local content development, have a building capacity, and expand our activities. You can’t continue being a 10% participant and expand your activities. So, together with the technology and the advisors we have, we will be looking at opportunities to buy real estate to do the major exploration activities.

Some investors may feel marginal. We are looking at various technologies over the world. To buy one FBSO (Floating Production,Storage and Offloading) to do a field, you are talking about spending around 45 billion dollars. So if you have a field that is not economical, you may have partners that give it up. So yes, I think you are looking at financial play, the ability to put a financial structures together, to be able to raise money and take advantage of such opportunities.