Gas pipeline to be fixed by Dec.

The West African Gas Pipeline Company Limited (WAPCo) says it expects to fix the damaged portion of its pipeline by December 25 to restore natural-gas supply to power plants in Ghana. Mr. Charles Adeniji, its Managing Director, said divers have discovered the exact location of the damage, caused by a shipping vessel on the coast of Togo, and that six joints have been recommended for replacement. A construction barge, he said, has been hired to fabricate the replacement of the six-pipe joints. The work involves not only the joining together of the damaged joints but the removal of water to make the pipeline dry to receive gas, he added. “As soon as the pipeline is dry to the specification that we want, we will introduce gas. It is at this point that we will say we have finished.” Part of the West African Gas Pipeline was damaged at about 2am on August 28, 2012 when a skirmish between Togolese Navy and a third-party vessel resulted in the vessel dragging its anchor into the pipeline and ripping it apart. The two ends of the pipeline were dragged about 10 and 15 metres off the original position. This resulted in an immediate shutdown of the pipeline from the source of supply in Nigeria. The recipient countries -- Benin, Togo and Ghana -- have since been without gas from the pipeline. Mr. Adeniji said WAPCo loses between US$500 to US$600 daily as a result of the damage. He called on governments in the sub-region to create a secured business environment for the company to grow and to forestall future occurrence of the accident. Meanwhile, the Electricity Company of Ghana (ECG) has announced an extension of its power-rationing programme to the end of October, tentatively. It has maintained, however, that businesses will be spared the blackouts to prevent production losses. source:B&FT

Focus on job creation -- Oteng-Gyasi

The focus of economic management in the next 10 years should be job-creation, Tony Oteng-Gyasi, former President of the Association of Ghana Industries, has said.

“Until we have a system for growing jobs, we cannot get to where we want to go. The next 10-years’ growth agenda must focus on job-creation.” 

Mr. Oteng-Gyasi made this observation at the Citi FM round table discussion aimed at shaping and influencing policymakers to take concrete decisions on issues of national concern.

Speaking under the heading of‘Ghana-The Next Ten Years’, Mr. Oteng-Gyasi opined that the nation has misplaced its priorities.  

He explained that using the cocoa sector model to attract more people into the agriculture sector will result in boosting job-creation.

“We have a model: the cocoa model which is what made us the world’s number-one producer of cocoa. 

“Why don’t we scale that model, improve it and look at other crops? Take rice and maize. Why can’t we grow enough rice and maize for ourselves? And the policies which will help us to achieve this are very simple,” he said.

He stated: “If we used all the tractors that have come into this country to farm, we would have ploughed this country several times and over. The truth of the matter is most of the tractors end up being used for transport purposes. If you go to the villages, from one village to the other, they go by tractor -- because we haven’t fixed the roads and that is the only means of transport they have.”

Mr. Oteng-Gyasi suggested that the money being channeled into the purchase of tractors should be used to guarantee a minimum price, because “if you guarantee a minimum price, you can be sure that all these gentlemen and young men around the cities will go back and farm. That is what we did with cocoa: guaranteed minimum price.” 

Other speakers explained that the need is for successive governments to invest in the human resource of the country, saying it’s the best way to achieve successes.

Patrick Awuah, the founder of Ashesi University, indicated that government must consider investing massively in healthcare and education as well as infrastructure.

He said: “I would argue that in order for any country to be wealthy, that third component -- the value added by citizens -- has to be the one that we all focus on.”

Outlining how value-creation by citizens could be achieved, Mr. Awuah said: “It requires a number of things; good governance and the rule of law. And so things like human rights and civil rights; but also good economic planning, and the right institutions in government that enable the private sector to do its work will do.”

On education, he said: “When I talk about education, I am not talking about kids sitting in the classroom not learning anything. It is getting the transfer of knowledge that enables them to add value to the national resources around.

“We need to have a healthy work force, so public health is also very important. It is not just about treating illness; it’s about preventing illness in the first place. So things like vaccinations and good sanitation and education, of course, play a role in that; and, finally, infrastructure.”

Citi FM’s series of round table discussions are aimed at shaping and influencing policymakers in Ghana to take concrete decisions on issues of national concern. It is a monthly national discussion platform created to bring together key sectors on relevant issues pertaining to national development.

Fast -track review agreement

The Ghana Chamber of Mines has asked government to fast-track the review and renegotiated stability agreement to guarantee investor confidence in the country’s mining regime. 

“We think that the committee established by government to review and renegotiate all mining agreements must work faster, because investors are very sensitive to instability. 

“Investors need to be assured that the fiscal regime will not let them down. It is important that government work on that. What investors are looking for is stability in the regime over a period of time.

“Investors apply a lot of speculation and this requires planning, so they want assurance that the regime will not change every year,” the Chambers’ Chief Executive Officer, Dr. Toni Aubynn, told B&FT in an interview in Accra.

Early this year, government set up a seven-member national renegotiation team led by academic and jurist Prof. Akilagpa Sawyerr to critically review, re-negotiate and redesign the entire mining regime so as to  ensure the state derives maximum benefit from the sector. 

The first task of the committee is to review and re-negotiate any part of the stability agreement between the Republic of Ghana and any mining company that is not in the best interests of the country.

The team’s second task is to revise the manner of granting stability agreements, and the third to redesign any existing or draft agreement to ensure that it yields better social and economic returns for the country. 

The team will be assisted by a local resource team and advised by international mining experts in discharging its duties.  

After government gave indication last year of its intention to renegotiate contracts with mining companies, some miners had hoped to count on the stability agreements which contain fixed clauses and conditions to shield them from any sweeping revisions.

 Among the changes were a review of the corporate tax-rate for the industry from 25 to 35 percent, the imposition of an extra 10 percent windfall tax, and a reduction in the capital allowance rate from what was sometimes as high as 80 percent to 20 percent for five years.

At least two miners, Anglogold Ashanti and Newmont, have signed such agreements with the government that freeze taxes, royalties and other conditions over 10-15 years, and have said they do not expect to be immediately affected by the new rules.

Anglogold Ashanti Limited, which signed a stability agreement with the state in 2004, has said it will not scale-back planned investments at the Obuasi mine, its biggest operation in Ghana, despite the tax-changes -- which include an increase in the corporate tax from 25 to 35 percent, a windfall-profit tax of 10 percent and changes to capital allowance rates. 

Anglogold believes it will remain productive for at least the next 30 years.

When early indication of the government wanting to review the mining regime and contracts was given two years ago, Newmont said the company had reminded government of its stability pact, but was nonetheless “willing to “talk”.

Review petroleum and exploration laws

Ghana’s petroleum and exploration laws and regulations must be reviewed to reflect the happenings of the industry and to aid development of the economy, Mr. John-Peter Amewu, Regional Extractive Industry Knowledge Hub, GIMPA, has stated.

“The country’s petroleum and exploration laws have outlived their usefulness and there is a need to go back and review the laws.

 “We have some regulations -- specifically the Ghana National Petroleum Corporation laws of 1984 (PNDC Law 84) -- which have been in existence for over 25 years now.

“This needs to be reviewed to reflect the happenings of the industry,” Mr. Amewu told oil and gas journalists at a training programme in Accra. It was organised by Revenue Watch Institute in collaboration with Penplusbyte

Making a presentation, he said: “Ghana’s petroleum policy is an integral part of the National Energy Policy, and the main goal of that policy is to sustain and optimise the exploitation and utilisation of Ghana’s oil and gas endowment for the overall benefit and welfare of all Ghanaians, present and future.”

He explained that the historical evolution of the petroleum industry in Ghana can be classified into five distinct phases.

This classification is due to various degrees of factors, among which science and technological advancement and political interventions feature prominently in enhancing the probability of discoveries during the periods.

“Ghana has a legalframeworks for managing the petroleum sector. It is a strategy for ensuring an orderly and efficient development of the sector,” he said.

The country is yet to pass its new petroleum bill, creating some uncertainty about new fiscal terms for oil operations.

The country is likely to seek an increase in its share of revenues from crude-oil production. Already, government has announced its intention to include a clause in the new regulation compelling oil producers to set aside a portion of their production for local consumption.

Ghana’s Jubilee oil field has hit 83,000 barrels per day (bpd) as at last month, following success with an acid stimulation exercise conducted by field operator Tullow Oil and partners, an ECOBANK Research report has stated.

US Kosmos Energy, one of the Jubilee Field partners, recently announced that production is now at 83,000 bpd due to the success achieved with an acid stimulation programme on one of the wells.

The Jubilee Field may finally be on the path to reaching earlier production targets of 90,000 barrels per day (bpd) following an increase in production in August.

Since the start of 2012, Jubilee production has settled around 70,000 bpd; Kosmos reported an average production rate of 63,100 bpd in Q1 while Tullow reported 67,000 bpd in May.

However, average production in August is likely to be above 80,000 bpd. The partners plan to conduct acid stimulation on other wells; two new production wells are also expected to come on-stream before the end of 2012, which will boost production beyond 90,000 bpd.

The report by ECOBANK Research stated: “Success at the Jubilee Field supports our optimistic outlook on Ghana’s crude oil potential. On base estimates, the Jubilee Field is believed to hold about 800 million barrels, which at a peak production of 120,000 bpd would guarantee Ghana at least 18 years of production and revenue from export sales.”

“The potential is greater if the country is able to further de-risk Jubilee Field reserve estimates of 1.5 billion barrels.  Tullow has also estimated that the upcoming Tweneboa, Enyenra and Ntomme (TEN) fields hold an average recoverable reserves potential of 360 million barrels of crude oil.

“This boost to production will cost the Jubilee partners at least US$1.1billion at completion, as the remediation programme includes the drilling of eight new production wells which could take another 14 months to complete.

Furthermore, the acid stimulation exercises conducted on some of the wells were at an estimated cost of US$30million -- Kosmos Energy reported its share of the costs to be US$10million.

“Success at the Jubilee Field supports our optimistic outlook on Ghana’s crude oil potential,” it said.
At base estimates, the Jubilee Field is believed to hold about 800 million barrels, which at peak production of 120,000 barrels per day will guarantee Ghana at least 18 years of production and revenue from export sales.

This could easily be more if the country is able to further de-risk Jubilee Field reserve estimates of 1.5 billion barrels.  Tullow has also estimated that the upcoming Tweneboa, Enyenra and Ntomme fields hold an average recoverable potential of 360 million barrels.

The country’s offshore oil exploration area is firmly situated in the West African Transform Margin in the Gulf of Guinea, which the United States Geological Survey (USGS) believes hold an estimated 33 billion barrels of crude oil.

This is continually being affirmed by discoveries offshore Ghana, Cote d’Ivoire, Liberia and Sierra Leone. Ghana’s oil reserve potential is largely still under-explored and could compete favourably with Nigeria’s offshore potential.

This notion has already attracted considerable investor interest, more recently from South Africa’s National Oil Company, PetroSA, which has bid for local Ghanaian firm Sabre Oil & Gas’s stake in the Jubilee Field.

Jubilee production should peak in 2013 at a rate just above 120,000 bpd. This would lift Ghana above older mid-tier producers such as Chad, Cameroon, Cote d’Ivoire and the Democratic Republic of Congo (DRC).

Jubilee Field partners are also fast-tracking plans to develop the Tweneboa, Enyenra and Ntomme (TEN) field. A plan of development (POD) for TEN will likely be submitted before the end of 2012.

Production could start from those fields by 2015, further boosting Ghana’s production to 150,000 bpd or more. Within a full year of production, crude oil is now Ghana’s third-largest export revenue earner after cocoa beans and products and gold, the highest revenue earner.

In spite of the good tidings, there are some challenges that need to be overcome.
Meanwhile, explorers operating offshore Ghana and in proximity to Cote d’Ivoire could face some loss of acreage in the on-going dispute between the two countries over maritime boundaries.

This situation particularly affects parts of the Jubilee Field where the TEN discoveries were made, along with the Owo and West Tano facilities ahead of plans to access gas from these fields -- generating concerns from operators such as Kosmos Energy and Tullow Oil

New Gold Fund officially listed

Ghana Stock Exchange (GSE) has officially listed Absa Capital’s New Gold Exchange Traded Fund (ETF) on the local bourse with an initial offering split into 400,000 units, to test market demand.

South African group Absa Capital took the decision to list its gold-backed ETF on the GSE after the primary listing in South Africa and other listings on bourses in Nigeria and Botswana.

It is the first commodity-backed exchange-traded fund on the GSE, aimed at helping to broaden the range of securities on the bourse. It is the only gold-backed ETF on the continent, which is a simple and cost effective way of investing directly in physical gold bullion through a GSE listed share.

ETFs are securities traded on exchanges like shares, but track the combined value of a portfolio or basket of underlying assets such as shares, commodities and bonds.

New Gold, Africa’s largest ETF, is the best-performing ETF on the continent over five years with a return of 22.55 percent per year, a two-year return of 24.76 percent, and a return over three years of 21.66%. As at August 1, 2012, New Gold’s assets under management were US$2.15billion.

Dr. Sam Mensah, Chairman of Council of the GSE, made the official listing pronouncement and together with officials of the South African group Absa Capital rang the bell to signal its official admission to the trading platform in Accra.
 
Kofi Yamoah, Managing Director, GSE, explained that investors will be able to track the performance of the security once they know the gold price and dollar-cedi exchange rate.
 
“Besides, listing on the bourse will help diversify the stock exchange away from the equities and bonds that currently dominate it.”

 Mr. Yamoah added that the listing will deepen and broaden the security types that are available and traded on the bourse, and that the listing will also provide a learning platform for the development of other ETFs in future.

Dr. Vladimir Nedeljkovic, Head of Investments at Absa Capital, expressed hope that New Gold ETF will bring valuable additions to the country’s investment space.

 
“The introduction of Exchange Traded Funds to the GSE offers both individual and institutional investors a cost-efficient and convenient way to invest in multiple shares or other assets, such as commodities, through a single security,” he said.

“We have been encouraged by the success of the New Gold ETF in the African markets where it has been listed. Africa is an exciting proposition for this product, and we will continue to explore opportunities across the continent.

“The listing is in line with Absa Capital’s overall strategy to expand its suite of products and services in sub-Saharan Africa, said Dr. Nedeljkovic.”

Mr. Benjamin Dabrah, Managing Director Barclays Bank Ghana, said gold is a reliable store of value and the ETF will provide an avenue for investors seeking alternative investment products.

 “We are confident that the product will benefit the entire Ghanaian nation because it is a transparent product which offers value for money.

“ETFs provide investors with liquid and low-cost exposure to underlying commodities or other assets, and trade like a stock on an exchange.”

Patrick Kingsley-Nyinah, Director of Oak Partners speaking at media interaction on ETFs, said on the African continent ETFs have been in issuance since November 2002 with the introduction of Satrix 40, which tracks the top-40 companies on the Johannesburg Stock Exchange (JSE).

“After Absa introduced the New Gold ETF on the JSE in May 2004, it was subsequently cross-listed on the Botswana Stock Exchange in July 2010 -- the first ETF dual-listing in sub-Saharan Africa with a current net asset value of approximately US$2.5billion.”

Batsile Ngomane of Absa Capital, explaining the benefits of ETFs, said: “It offers benefits of diversification like a pooled investment vehicle and that of a stock’s tradability. ETFs can be sold short and margined, just like any other listed equity.

“In jurisdictions that charge capital gains tax, ETFs offer a tax-efficient structure due to their slow turnover and hence lower tax liability due from sales and realisation of capital gains.

 “Portfolios of ETFs are transparent and allow for the operation of arbitrageurs to keep the trading price as close as possible to the net asset value.”

Absa Capital, the corporate and investment banking division of the Absa Bank Limited and affiliate with Barclays Bank, is a leading South African corporate and investment bank with global reach, offering clients financing, risk management and advisory solutions in a wide range of currencies and structures across the globe.

Absa is a leading originator of exchange traded funds in the South African market, and has 48% of the market share based on assets under management.

AngloGold injects US$682m to transform operations

AngloGold Ashanti (AGA) Ghana says over US$$682million has been invested in its Obuasi and Iduapriem mines to transform the operations into world-class mines.

This investment has been focused on reshaping the infrastructure, upgrading the mining methods and seeking to rectify -- as rapidly as far as possible -- both social and environmental legacies, in accordance with the company’s values.

This is also to enable the company to produce more gold at lower costs to generate more cash and meet its commitments to both shareholders and stakeholders.

Mr. Peter Anderton, Senior Vice President, AGA Ghana, said this at the company’s maiden townhall meeting held at Tarkwa in the Western Region.

The meeting brought together stakeholders including chiefs, opinion leaders, government officials and individuals, and was aimed at deepening community engagement and updating stakeholders on the performance and challenges facing both the company and the communities.

It was also to create the opportunity for meaningful interaction with stakeholders, especially people in the immediate communities.

Mr. Anderton indicated that beside the thousands of Ghanaians employed by the AngloGold Ashanti, its contribution to the country’s economy is enormous and has manifested in several ways.

He said AGA has paid about US$394million to the government, made up of direct and indirect taxes, and funded many corporate social responsibility projects to raise the living standards of the people in and outside the immediate communities.

“As part of its contribution to communities and societies where it operates, the company has funded the construction of more than dozen schools and partnered with Institute of African Studies of the University of Ghana to promote the study of the contribution of Africans to world civilisation.

“In the area of health, the company has created access for thousands of people to modern medical care through the construction and operations of hospitals and clinics; and currently AGA is scaling-up its Malaria Control Programme, started in Obuasi, to 40 districts and municipalities in the country -- most of which are in the malaria-endemic regions in the northern part of the country.”

He added: “AGA has also provided a number of infrastructure including schools, health facilities and among others in both the Obuasi and Iduapriem host communities.

“The company’s apprenticeship schemes in the operational areas have made it possible for hundreds of University and Polytechnic as well as technical school graduates -- most of whom are from host communities -- to access practical training in engineering, welding and fabrication, and management,” he said.

Mr. Paul Evans Aidoo, Western Regional Minister explained that the contribution of the mining industry to the country’s development cannot be over-emphasised.

“I have keenly followed development in the mining industry for a long time, and have always blamed mining companies for not doing much to publicise what they have been doing in the country to show how best the industry can be used to propel growth of the economy.

“For the mining companies, failure to be transparent enough and to throw more light on your activities is like operating in the dark.”

Gold drives up revenues

Cummulative mineral revenue for the first half of 2012 was US$2.76 billion -- up by 19% as against US$2.313billion recorded in the half-year of 2011.

“The impressive first-half performance was largely on the back of the performance of mineral revenue from gold and bauxite, despite the dip in reveue from diamond and manganese,” Dr. Toni Aubynn, CEO of the Chamber, disclosed to B&FT.

Gold, which has in recent times seen a remarkable increase in world price, saw an appreciation in revenue of 20%. The metal recorded US$2.69billion for the half -year, as against US$2.24billion for the first half of 2011.

Gold production was up by 6%.  This is attributed to the fresh production from Perseus Mining Ghana Ltd and Adamus Resources, which commenced production in the second quarter of 2011.

On the other hand, bauxite increased significantly by 82% on account of the substantial rise in shipments of the ore, which went up by 71%. Shipments rose from 173,601 tonnes in the half-year of 2011 to 295,993 tonnes for the same period in 2012.

Diamond purchase dipped significantly by 33% from 185,557 carats in the first-half of 2011 to 123,699 carats of the same period in 2012.

Manganese shipments saw a decline by 25%, and this translated into a slump in manganese rev

enue by 24% -- from US$61,489,236 in the first half of 2011 to US$46,981,229 for the same period in 2012.

“The performance of the mining industry in the area of production six months through the year has been mixed, but the generally significant increase in revenue confirms mining’s continuous position as a key fortress for the country’s economy.

“The industry, which has been a major contributor to the economy, witnessed an increase in the overall minerals revenue while output and shipments of some of the product segments recorded negative variances,” Dr. Aubynn said.

He anticipated a rise in this year’s gold production, after full-year gold production in 2011 declined marginally.

Total investment inflow into the country’s mining sub-sector increased from US$770million in 2010 to US$780million in 2011.  

High gold prices are motivating mining firms to increase production. New companies have also come on-stream. The higher rates make it profitable for mining companies to mine low-grade ore.

Gold output last year came down two to three percent compared to the year before, and the decline could have been deeper but for the fact that Australian miner Adamus Resources poured its first gold in January last year.

Two more mines are expected to come on-stream this year, and we also anticipate that Adamus will increase its production. So we are going to see production go up this year.