The Joe Biden administration is eager to start discussing how it can apply its ‘build back better’ mantra to commerce with Africa when it ... virtually hosts the continent’s trade ministers this week. For their part, America's African partners want to make sure that Washington doesn’t bulldoze their two-decade-old, duty-free access to the US market in the process.
“We should be aiming for the same things,” CEO Kevin Okyere tells The Africa Report. “It’s always better to find an amicable solution. We will get over this hurdle and find ways of working together.”
The companies have been in dispute since an April 2020 directive from Ghana’s ministry of energy to combine the offshore Afina oil field, operated by Springfield, with Sankofa, operated by Eni and its partner Vitol, to reduce costs.
Eni protested the decision, saying there was insufficient evidence that the Afina field was commercially viable.
- After the companies failed to reach agreement, the government obliged Eni to operate the combined Sankofa-Afina field with a minority 45.5% share, while Springfield holds 54.5%.
- The court in Accra on 25 June ruled in favour of Springfield’s application to get 30% of revenues received by Eni and Vitol from the sale of oil from Sankofa while the companies try to resolve the underlying dispute.
- The payment, which will be put into an escrow account, amounts to approximately $40m a month.
A spokesperson for Eni declined to respond as to whether it will be possible to work with Springfield in the future. The spokesperson referred to a previous statement about whether Eni would appeal the ruling to a statement already issued by the company.
“We fully expect to take the appropriate steps necessary in order to protect our operations in the country, including appealing against this ruling,” the statement said.
State transparency needed
The lesson of the dispute is that big oil companies in Africa need to make “genuine partnerships” with smaller local ones, Okyere says in Accra. At present, “some of the partnerships are not real partnerships.” He rejects claims from Eni that Springfield did not make all its data available. “Eni had our data for longer than we had theirs.”
The court decision is “a great boost for Ghana’s economy” which will encourage local and international investors to put money into the country’s oil sector, Okyere says.
That interpretation may be overly optimistic.
The Africa Centre for Energy Policy (ACEP) in Ghana said in June that the dispute has the potential to undermine the progress made in encouraging investment in the country’s upstream petroleum sector. The principle of unitisation, under which oil or gas reservoirs straddling multiple licence areas are jointly developed, is well established, ACEP says.
- The process, it argues, is usually smooth because there are commercial benefits to both sides without the need for state intervention.
- When state involvement is needed, ACEP says, it must be “transparent in the application of the principles, laws, and science of unitisation”.
- Ghana has not fulfilled that need, ACEP says. The government “must inform the public on the basis of its unitisation directive in an effort to diffuse the local and international controversies on the matter.”
- The dangers of the dispute are worsened, ACEP notes, by the global energy transition, which means companies are turning away from new fossil fuel investments.
African indigenous oil producers will be the collective losers if the dispute ends up in international arbitration.
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