Monday, 20 July 2020

GNPC operations under review amidst COVID-19

 Parliament urged GNPC to position itself for better financial prudence

 

Adnan Adams Mohammed

 

The State Owned Enterprise representing the nation in the in the petroleum sector exploration and production, Ghana National Petroleum Corporation (GNPC) this week was featured in major news headlines on its operations and the impact of the Coronavirus pandemic.

 

Parliament, last week, gave approval to the 2020 work plan of the GNPC which sought to expend about US$500 million for the year with a call on the Corporation to better position itself to be more financially prudent.

 

The Emmanuel Akwasi Gyamfi chaired the Committee on Energy and Mines, whose report on the 2020 schedule of the GNPC was approved and adopted by the plenary,

 

But, the Minority in Parliament is not enthused with however the present government is borrowing form the GNPC as though it is a financial institution. The minority has therefore cautioned that, GNPC must not be treated as a financial institution where the government keeps borrowing from.

 

“The government owes GNPC over $300 million. They [GNPC] need $500 million to finance their activities for the year 2020”, Deputy Ranking Member for the Committee on Mines and Energy, Dela Sowah has, adding that, “What the government owes them [GNPC] is equivalent to 66% of GNPC’s estimated budget so if you look at it, it doesn’t make sense. Why is it that the government owes them so much and yet they need money to do their own activities and they don’t have.”

 

The Parliament Select Committee on Energy and Mines chaired by Emmanuel Akwasi Gyamfi, whose report on the 2020 schedule of the GNPC was approved and adopted by the plenary recommended to the GNPC to look for potential investors to take over the Prestea Sankofa Gold Limited (PSGL) to make it financially prudent.

 

The PSGL reportedly ceased operations in 2016, but the GNPC continued to allocate funds from its petroleum operations in unsuccessful efforts to revamp it. Again, an amount of US$5.00 million has been earmarked for the activities for the PSGL in 2020.

 

However, “the Corporation explained that all efforts to revamp the company in view of its socio-economic importance-job creation and possible revenue to the State, has not been successful”.

 

The Committee was of the view that the continuous expenditure on such non-revenue generation venture was financially not prudent; and accordingly urged the Corporation to look for potential investors as, a matter of urgency and priority, to take over the company.

 

As part of the report, Mr Gyamfi, who is also the Member of Parliament for Odotobri Constituency, announced that

 

It was disclosed that, Cabinet has taken a decision to cede the midstream gas operations to the Ghana National Gas Company, but the Corporation would continue to play its role as Aggregator of the Gas in the upstream sub-sector. However, the midstream operations involving the processing, transportation, distribution and sale of the gas to the end-use, are being transferred to the Ghana National Gas Company.

 

The Chairman of the Committee informed the plenary that the Deputy Minister of Energy, during the Committee’s interaction with him, explained that inflows from the GNPC from the gas business was just about 2.5 per cent of its total budget, and assured that, relinquishing the gas management business to the Ghana National Gas Company will not significantly affect the Corporation’s finances, and therefore suggested unbundling the gas business by allowing the Ghana National Gas Company to assume the role of operator to maximize the benefits of gas resources to the country.

 

In 2020, scheduled activities of the GNPC, both midstream and other projects, are made up of the construction of oil and gas enclave roads, with a budgetary allocation of US$30million; a revamping of the Prestea Sankofa Gold Limited, whose initial budget of US$11.26 was downsized to US$5million.

 

“An interim re-organisation committee has been established to revamp the company’s operations,” Mr Gyamfi announced.

 

Other planned projects are investment in the petroleum hub, marine patrol vessels, and fertilizer and biotechnology projects.

 

The non-petroleum capital projects would involve the Accra Head Office, the Corporate Operational Head Office in Takoradi, Research and Technology, Works and Landed Project, refurbishment of the Petroleum House in Tema, completion of works on Chapel Hill and works on redevelopment of the Takoradi Beach Road.

 

The Energy and Mines Committee Report noted that the price war between Saudi Arabia and Russia and the impact of the Corona Virus pandemic led to a crash in oil prices in the first quarter of 2020.

 

Consequently, GNPC’s Chief Operating Officer has indicated that, new oil exploration activities which had been planned for this year are suspended, blaming the COVID-19 pandemic, which it says has negatively impacted on the oil and gas industry in Ghana and the world at large necessitating international oil companies (IOCs) to take business decisions to safeguard their investments which are mostly the nation’s interest.

 

Mr James D. Yamoah, speaking at a virtual conference by the Africa Centre for Energy Policy (ACEP), said, “some of the companies have decided to suspend their operations in the country, while others have deferred their operations to the second and third quarters of 2021”.

 

The current disruptions created by COVID-19 across all sectors of the economy, have enabled the GNPC to emphasize the need to be supported to build the corporation’s operatorship capabilities to tackle the impacts of the pandemic.

 

Mr Yamoah said the low oil price on the global market, which have adversely affected GNPC’s revenues and cash flows, have also affected the share of state revenues that government leaves to the Corporation to meet its operational expenses.

 

Consequently, the GNPC has had to renew its emphasis on diversification of energy sources and maintaining revenue streams that, going forward, would help the national oil company.

 

Yamoah admitted that the GNPC needs to consolidate its gains in the upstream segment and that it has to pursue an aggressive change in strategy from being just a facilitator to a full operator in the upstream business.

 

“There must be a continuous and increased investment in GNPC operated blocks. The Corporation would have to leverage its commercial subsidiaries like the GNPC Exploration and Production Company Limited for commercial participation” he noted.

 

With regards to some of the strategic responses and risk mitigations that the Corporation had taken, Mr Yamoah said it had embraced a safety mind-set and every staff of the GNPC had to take a proactive approach in response to the COVID-19 outbreak.

 

He said as part of efforts to contain the spread of the COVID-19, staff were abiding by the protocols drawn by the World Health Organisation and the Ghana Health Service.

 

“We are working from home and it is very lonely, our job is such that without a physical presence at our work, all what we do is hampered, and then also the stress and the mental health (problems) that come with it.”


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