Seeks $1.7B loan to develop oil and gas assets
August 3, 2021
Ghana’s plan to buy and develop assets to push its oil and gas exploration gathered momentum last week.
The west African country seeks its parliament’s approval to borrow $1.65 billion to achieve this plan.
This plan comes two months after Exxon Mobil Corp exited an offshore project.
Estimates show Ghana will need around $1.3 billion to buy a 37% stake in the Deep Water Tano/Cape Three Points asset run by Aker Energy AS. A further 70% stake in the South Deep Water Tano field run by AGM Petroleum Ghana Ltd., according to presentations made in its parliamentary this Monday.
The time has come for Ghanaians to “become masters of our own destiny when it comes to our oil and gas resources,” Charles Adu Boahen, Minister of State at the Ministry of Finance, told Bloomberg news agency.
“There will certainly be the demand for fossil fuels in countries outside of the West that will continue to use diesel- and petrol-fired cars and consume power generated from fossil fuels for the foreseeable future,” he said.
If approved, the stakes would be acquired through the Ghana National Petroleum Corp. subsidiary, GNPC Explorco.
Finance Minister Ken Ofori-Atta warns Ghana could be “left with stranded assets”.
Aker Energy, too, is in talks with authorities to reduce the development cost of its Pecan oil field, for which Ghana is now seeking to borrow $350 million to cover capital expenditure, bringing the total funds required to $1.65 billion.
Ghana’s Finance Minister Ken Ofori-Atta warned last week that the country could be “left with stranded assets,” if it didn’t accelerate exploration amid the transition to renewable energy.
The minister’s concerns are valid. The push for lower-carbon energy may reduce the value of Ghana’s hydrocarbon resources over time.
According to Bloomberg NEF, nine of the world’s largest international oil companies sold $198 billion worth of assets from 015 to 2020 in a bid to decarbonize for the longer term.
The new strategy for the country to “become an operator in its own right” may require a legal amendment to allow the state-owned oil company to enter reserve-based lending transactions, which could raise financing without putting further pressure on the government purse, Ofori-Atta said in his mid-year budget speech on Thursday.
Ghana’s public debt already stood at 77.1% of its economic output by the end of June. A shortfall in oil receipts and the fallout from the pandemic pushed last year’s budget deficit to 11.7% of gross domestic product, compared to an initial projection of 4.7% for 2020.