Impeccable information from the Ministry of Finance have it that the Head of Energy, Oil and Gas at the Ministry of Finance, Dr Joseph Kwadwo Assensu, who ill-advised the Minister of Finance, Ken Ofori-Atta into believing that the GNPC contract over the TEN crude oil sale is palpitating as he sits on tenterhooks, not knowing what fate holds for him after exposing the Minster to ridicule.
It would be recalled that, Mr. Ofori-Atta two weeks ago wrote to the Ghana National Petroleum Corporation, GNPC, seeking clarifications into perceived losses of about $34.12m in revenue, following from the sale of the TEN crude oil.
The letter ultimately exposed the Ministry since it turned out that GNPC’s method of pricing was duly approved by both the Ministries of Finance and Energy before the said contract was entered. Questions in the media then were why the Minster issued that letter when in fact his Ministry, together with the Energy Ministry had approved same before GNPC entered the deal. Clearly, these questions which remain unanswered, hang on the necks of the Minister like an albatross, considering the fact that reasons for the issuance of the letter remain unclear as the situation begs for answers questioning the competences of the Ministry’s advisors.
Dr Kwadwo Assensu, who our sources say must have wrongly advised the Minister into thinking that, the achieved price for the Ghana Group’s crude oil has fallen short of expectation, in comparison with Brent oil prices from Bloomberg actually goofed in his professional advice to such a sensitive Ministry. His misinformed advice to the Minister compelled the Minister into issuing the letter to the GNPC, which letter, wrongly assumed that, “this has given the offtaker, the latitude to choose lower prices to value TEN crude oil”.
The Minister’s letter had added that, “our analysis reveals that, in 5 out of 6 cases, TEN crude oil was priced lower than the lowest possible Brent crude oil price, based on a different 5-days moving average within 30-days window before the B/L date. All lifting except the 5th were affected by this low pricing phenomenon” The letter stressed that, “The potential loss, based on the low case scenario, is approximately US9.83 million. It further argued that, “If GNPC had insisted on the highest possible price within the pricing window, the state would have gained a total of US$34.12 million more”. The humiliation in the competencies of Dr. Kwadwo Assensu came to the fore after a detailed response by the Chief Executive Officer of GNPC, Dr. K.K Sarpong’s to the letter revealed that, the “losses” alluded by the Ministry’s letter were “erroneous” as the Minister’s letter suggested that GNPC could simply select the highest price out of pricing option ahead of time and impose same on the buyer.
This, GNPC explained, is because in the first instance, it’s unfair to take the pricing bit of the contract alone as bases for any claim of losses.
More so, the Bloomberg source that was used as reference by the Ministry of finance “is not a reference for trading crude oil by GNPC and indeed producers or buyer”.
Rather, GNPC’s crude price is based on Plattts Crude Oil Marketwire and therefore, the prices quoted in the Ministry’s letter cannot be verified and is therefore misleading. It further clarifies that, “since the TEN crude oil trades at a discount, “the achieved price” actualized by the GNPC is net of this differential which includes a fee paid by the buyer for exercising that option. The Ministry’s analysis therefore appears to have ignored the discounts in respect of the TEN and SGN crude oils, thereby, over estimating its calculations of “losses”.
Experts are amazed to realized that, as was indicated by the GNPC boss, that “In fact, contrary to claims of losses to the state as the Minister’s misinformed letter sought to portray regarding GNPC’s transactions with Litasco, the country made substantial gains running into over US$20 million. The gains, include, the “supply of HFO at a competitively priced premium of $6.5 per metric tonnes for an annual supply of about 720,000metric tones”.
“Annual savings of two guarantees that amount to $179 million at a cost of 5.25% per annum compared to 9% per annum charged previously, brings savings of US$10.3 million” the GNPC letter clarifies. Its added that, “there is also a financing cost of 5.25% (APR) on the US$100 million loan to BOST which is very competitive when compared to similar loans secured by government entities priced at 9% or even more. This ultimately results in savings of about US$8.25 million over the two years of the loan period”.
Lingering questions are that, if the likes of Dr. Kwadwo Assensu remain in office and continue to provide such advice to such a critical state institution as the Ministry of Finance, then Ghana will be plunged into taking crucial decisions that will be inimical to the very fabric of fledging economy.