The government of Ghana has entered into a commercial agreement with UNIPEC Asia Company Limited, a Chinese firm, to buy Ghana’s jubilee oil for the next 15 years. Under the agreement, Ghana will be supplying China 13,000 barrels of crude oil daily, which is the share of Ghana’s oil in the jubilee field. This is to pay for a 3billion Chinese loan Ghana obtained under a Master Facility Agreement with the China Development Bank. The Ghanaian parliament gave its assent to the agreement in February 2012 under the leadership of the deputy speaker of parliament Honourable Edward Doe Adjaho. According to the minority in parliament, going by the current oil prices, Ghana will be paying $6.4 billion to the Chinese for the $3 billion loan or give away 750 million barrels of the nation’s crude oil to one company for 15 and-a-half years. They have therefore said that the commercial agreement between the Ghana National Petroleum Corporation (GNPC) and UNIPEC Asia Company Limited is a rip-off.
The former Attorney-General and Minister of Justice, Honourable Joe Ghartey and also the MP for Esikadu/Ketan in the Western Region has said that the agreement was in violation of section 18 (7) of the Petroleum Revenue Management Act, 2010 (Act 815), which stipulated that the nation’s oil should not be collateralized for more than 10 years. Apart from the minority who is against the loan agreement many Ghanaians and analysts are condemning it saying that the terms of the agreement is unfair. They have argued that by the terms of the agreement, the interest on the loan alone would be almost 5 billion — about 1 billion short of double the actual loan amount which is an excellent return on investment for the Chinese government “but what about Ghana; what do they stand to achieve?” A US-based Ghanaian Professor of Economics at American University and President of Free Africa Foundation, George Ayittey, who came up with the above figures, is of the opinion that the deal is bad for Ghana.
The Executive Director of the Danquah Institute, Gabby Asare Otchere Darko has intimated that the government of Ghana which contracted the 3billion Chinese loan also seems not to factor in national and global events that could affect the future price of crude oil. He cited the financial health of major trade partners in Europe, the US and Asia; global economic growth projections (because it affects demand for energy), and market analysis for alternative energy sources. Not forgetting conflicts in oil producing countries such as the Boko Haram in Nigerian and the Middle East. Bright Simons, the Director of Research at an Accra-based think-tank has also said that per the terms of the contract, the loan will be disbursed not in bulk but in tranches over a five-year period, which further goes in favor of China. He also indicated that the loan is also meant to develop some infrastructure under the Ghana Shared Growth and Development Agenda (GSGDA), but under the agreement it will be built with Chinese construction workers, not Ghanaian workers. This means that the loan will create work for China without Ghanaian workers benefiting and this is happening at a period when Ghana’s unemployment rate is hovering around 11% according to a 2000 estimate.
But government officials are more optimistic about the loan than most critics could imagine. The Chief Executive officer of Ghana National Gas Company (GNGC), Dr. Adjah-Sipa Yankey, is reported by Reuters as saying the $700 million gas project which the loan will finance will be able to pay off the $3 billion loan after five years. There has been denial from government over some of the concerns raised. Minister for Finance Mr. Seth Terkper told newsmen that the claim that the Government of Ghana will pay as much as 2.3 billion dollars more for the loan it is contracting from the Chinese Development Bank in addition to the principal and interest is false. Honourable Terkper also denied the allegation that the oil was being collateralized. “Ghana’s oil is not being collateralized. The proceeds from the off-take will be paid into bank of Ghana just like any sale of crude oil and out of the proceeds that go into the Petroleum Holdings Account, the distribution will be made into the Stabilization Fund, Heritage [Fund] and [the] annual budget funding amount.”
He explained that the part of the proceeds that go into the Consolidated Fund will be the only resource that will be used in servicing the loan. Mr Terkper also denied claims that government has set the price at which the Chinese will buy the country’s oil at 85 dollars, well below the prevailing market price. Minority Spokesperson on Dr. Matthew Opoku Prempeh had earlier accused the government of pegging the cost at an unreasonably low price compared to the prevailing crude oil price. Mr. Terkper, however says the volatility in crude oil price makes it unrealistic to fix the price, adding that the “off-taker agreement calls for the use of average prices that will be adjusted periodically.” For some Ghanaians, the benefit of the loan far outweighs the concerns being shared by the minority. The areas where the loan is meant to be channeled include the Western Corridor Gas Infrastructure Project, Western Corridor ’Petroleum Terminal’ Project, Western Corridor ’Oil Enclave’ Toll Road Project, Western Corridor Railway Line Modernization Project- Takoradi-Kumasi, Dunkwa-Awaso Railway Line, Retrofit Phase 1, Western Corridor Infrastructure Renewal project- Takoradi Port Retrofit Phase 1, Sekondi Free Zone Project- Shared Infrastructure, Utility Services and Accra Plains Irrigation Project are of paramount concern to Ghanaians.
Samuel Okudzeto Ablakwa, the deputy minister for information in a press statement said the loan will help to accomplish the better Ghana agenda of the Atta Mills government. “The overall benefit of the loan is what we should all be concerned with.” He also indicated that those who are against the loan are certainly worried over the enormous benefit that the people of Ghana and the National Democratic Congress are set to do for Ghanaians.
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