GNPC Distances itself from Sabre Oil, PetroSA Wahala

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GNPC
GNPC

The Ghana National Petroleum Corporation [GNPC] has shot down speculations that it may be implicated in allegation of corruption against South Africa?s national oil company in its acquisition of Sabre Oil and Gas Holdings Limited interests in Ghana.

GNPC said news reports on the transaction, amidst local speculations that GNPC may be implicated, the corporation observed that ?The original news reports did not link GNPC in any way to any of the alleged wrongdoings,?

In a statement issued in Tema on Tuesday, April 30 the national oil company said, any ?attempts to conjure any wrongdoings on the part of GNPC are unwarranted and unfounded.?

According to GNPC, there is no basis for allegations of corruption on the part of any of any of its officials.

?GNPC categorically denies any act of irregularity or corruption on its part in the transaction,? the statement adding that the sale of Sabre?s interests in Ghana to PetroSA was a private commercial arrangement between two independent and willing parties (seller and buyer) dictated by international norms.

?GNPC did not play any role in the pricing and sale negotiations,? it said.

GNPC said its role in the transaction was limited to ensuring that the requirements of the Petroleum Agreements were duly complied with as follows:

That:

1.??????? PetroSA would be able to meet the financial capability and technical competency obligations that it would be assuming;

2.??????? PetroSA would be an acceptable strategic partner to GNPC as required under Section 2[1] of the Petroleum Exploration and Production Law (PNDCL 84). This law requires all companies to conduct upstream petroleum activities in partnership with GNPC;

3.??????? That the interests of Ghana would be protected.

The Corporation said it was convinced about the three requirements above and accordingly provided its consent to the transaction.

?There is no basis for allegations of corruption on the part of any GNPC official.

We are confident that the ongoing enquiries on PetroSA will confirm these assertions,? the statement assured.

Sabre Oil and Gas Holdings Limited (Sabre) had stakes in Ghana under two petroleum agreements: Deepwater Tano (DWT) – 3.8250%; and West Cape Three Points (WCTP) – 1.8025%. These translated to a 2.7% interest in the Jubilee Field.

Meanwhile, amidst the speculations of media reports, Mr. Benny Mokaba, the Chairman of the PeroSA, has resigned from his position on the national oil company.

His resignation was announced days after PetroSA had reacted to corruption allegations leveled against it regarding its acquisition of stakes in Sabre Oil- a member of the Jubilee Partners.

In a news release issued by PetroSA on Monday the company admitted some impropriety in the acquisition process but said it was in the best interest of the business.

A publication in the weekly Mail & Guardian last Friday questioned payments made when PetroSA secured crude oil acreage in Ghana through the acquisition of Sabre Oil and Gas Holding Ltd in 2012. The newspaper alleged “irregular payments” ordered by top PetroSA managers totaling about $22 million in what it called a “feeding frenzy” at the oil company, which explores for and produces oil and?natural gas. It also sells petrochemical products.

According to Reuters news agency, the anti-corruption unit of the South African Police have started investigations into the matter following the publications.

“We are investigating PetroSA, but are not at liberty to talk about the nature of the investigation,” Captain Paul Ramaloko, a spokesman for the police’s special anti-corruption unit, the Hawks, told Reuters.

According to the statement the negotiating team?s mandate from the PetroSA Board was to negotiate up to a maximum of USD 640 million for the acquisition of Sabre Oil and Gas Holdings Limited, subject to the finalization of a Share Purchase Agreement (SPA) and approvals by all relevant authorities.

It named the authorities involved as PetroSA?s holding company CEF, the Minister of Energy, the National Treasury, the Reserve Bank, the Ghana National Petroleum Company (GNPC) and Ghana?s Minister of Energy. All these approvals were subsequently obtained and PetroSA managed all the conditions precedent subject to Board approvals,? the statement explained.

On the Sabre transaction and a separate plan to buy petrol stations in South Africa, PetroSA such deals often required “swift decision making and quick turn-around times”.

“In the process of increasing PetroSA’s chances of successfully closing these deals, unfortunately some deviations from our normal procurement processes have occurred,” the company said.

“These were duly declared in the annual financial report of last year,” it said, adding that its board of directors had commissioned a review and would report findings to shareholders.

The acquisition of Sabre gave PetroSA access to crude from the huge Jubilee field in Ghana.

Ghana is one of Africa’s newest oil exporters and has been attracting foreign firms. Oil production from the Jubilee field ranged from 110,000 to 115,000 barrels a day over the last 3 months, just short of the expected production plateau capacity, lead operator Tullow Oil have said.

The statement said that the final price of $500 million “plus contingencies” it paid for Sabre was “favourable to PetroSA”.

About a month ago, the South African government’s Central Energy Fund said an energy ministry probe had discovered “serious allegations” of top executives at PetroSA, a wholly owned subsidiary of the CEF, abusing their power.

The government has reported problems of serious mismanagement and inefficiency in many state-owned companies over the last few years, and some have also faced corruption probes.

Below is PetroSA?s statement of denial

PetroSA?s response to the specific allegations in the Mail & Guardian are as follows:

Sabre Oil Acquistion

The negotiating team?s mandate from the PetroSA Board was to negotiate up to a maximum of USD 640 million for the acquisition of Sabre Oil and Gas Holdings Limited, subject to the finalization of a Share Purchase Agreement (SPA) and approvals by all relevant authorities. These authorities were PetroSA?s holding company CEF, the Minister of Energy, the National Treasury, the Reserve Bank, the Ghana National Petroleum Company (GNPC) and Ghana?s Minister of Energy. All these approvals were subsequently obtained and PetroSA managed all the conditions precedent subject to Board approvals.

It is important to note that the final purchase price was less that the amount approved by the Board for the transaction.

The project team reported to Mr Everton September, the Vice President for New Ventures: Upstream, and he was responsible for ensuring that the project team executed the Board-approved mandate for the acquisition.

The management and shareholders of Sabre Oil and Gas Holdings never formally accepted the PetroSA team?s initial offer of US$480 million plus contingencies. Instead, Sabre insisted on USD500 million for the following reasons:

The PetroSA price during the acquisition process dropped from US$640 million to US$480 million plus contingencies;

There was concern that a price below the market value of Sabre would result in one of the Joint Venture partners pre-empting the PetroSA offer, something to which they were entitled in terms of the partnership agreement, in an effort to preserve their shareholder value.

Having considered Sabre?s demand and the reasons behind the demand, PetroSA?s then Acting CEO agreed to US$500 million plus contingencies, which was well within the Board-approved transaction price. The final agreement was a series of compromises by both parties, as typically happens in such transactions. The final negotiated deal was favourable to PetroSA.

The value of any negotiated terms is best tested in the open market. PetroSA?s deal was initially pre-empted by one of the existing partners in the Jubilee Joint Venture, thus signalling that our offer was competitive.

With respect to the retention amount, this was to provide for any eventuality that PetroSA might encounter during the company take over. The retention amount was included in the purchase price.

Regarding tax liability, PetroSA has mitigated all potential tax risks. There is currently no tax exposure related to the acquisition. In terms of the SPA between PetroSA and Sabre Oil and Gas Holdings, the seller has taken all responsibility for all tax-related expenses and transactions costs prior to the effective date of the acquisition.

The negotiations led to a deal favourable to PetroSA and South Africa, and the Sabre deal has presented an opportunity for the country potentially to grow its business presence in different sectors of the economy in West Africa, but especially in the oil and gas sector.

?Downstream Acquisition

An aspect of PetroSA?s corporate strategy is an entry into the downstream market. To deliver on this part of its strategy, the company has been exploring opportunities for downstream entry since 2007. PetroSA has pursued both organic and acquisitive downstream entry opportunities, and the company?s purchase of depots in Tzaneen and Bloemfontein in 2012 has been part of the implementation of that strategy.

In May 2011 the PetroSA Board mandated the executive management team, in a change in strategy, to engage with various industry players in order to explore opportunities to acquire a majority shareholding in their assets. These negotiations are on-going.

Core elements of deliverables for the advisor were the identification of funding options to support the project and selection of a company to purchase or invest in. Harith was appointed as a financial and transaction advisor for downstream entry. Since this matter was part of the investigation by the Board and CEF, PetroSA?s holding company, as soon as the due process of the investigation is completed all appropriate corrective action will be taken and an announcement made.

Source: The Business Analyst

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