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The Minister for Finance, Ken Ofori-Atta, has asked the Chief Executive Officer of the Ghana National Petroleum Corporation (GNPC), Dr. K.K Sarpong to explain circumstances that led to the country losing $9.83 million in oil revenue, as a result of under-pricing of oil products by the Corporation.

The Minister is demanding that the GNPC answers for why it sold crude oil from the TEN fields at a rate lower than the lowest on the market.

In a July 2018 letter sighted by citinewsroom.com, Ken Ofori-Atta said they allowed the off-takers to choose the lowest possible price for the product when it could have insisted on the highest possible price within the pricing window.

“The state would have gained a total of $34.12 million more,” the Finance Ministry observed.

Read excerpts of the Ministry’s letter below:

“The ministry has observed with great concern that the achieved price for the Ghana Group’s crude oil has fallen short of expectation, in comparison with Brent oil prices, sourced from Bloomberg.

“For the TEN field, GNPC gives the off-taker the option to choose whichever 5-day moving average of prices to use for determining the value of the cargo. This price is determined within 30 days before the Bill of Lading (B/L) date. GNPC’s letters regarding TEN lifting states the price determination, thus, “Any 5 consecutive quotations within a period commencing 30 quotations prior to Bill of Lading.”

“This has given the off-taker, the latitude to choose lower prices of value TEN crude oil. Our analysis reveals that, in 5 out of 6 cases, TEN crude oils was priced lower than the lowest possible Brent crude oil price based on different 5-days moving average within the 30-days window before the B/L date. All lifting except the 5th, were affected by this low pricing phenomenon. The potential loss, based on the low case scenario, is approximately US$9.83 million.

“If GNPC had insisted on the highest possible price within the pricing window, the state would have gained a total of US$34.12 million more, as shown in Table 1. High case price scenarios yielded price variances between US$0.76/bbl and US$8.80/bbl. A total of US$8.76 million was lost to the state on the 3rd TEN transaction, for example,” the letter addressed to the GNPC boss in July stated.

While urging the GNPC to treat the matter with urgency, the Finance Minister tasked GNPC to take steps to amend the contract with off-takers for lifting of the TEN crude oil, to take advantage of the high prices and also take steps to “ensure that the SGN and all other fields do not suffer consistent revenue losses due to the GNPC’s favoured pricing options”.

GNPC controversially buys $7.5m property

The GNPC was recently in the news for a similar controversywhere its Chief Executive, Dr. K.K. Sarpong was accused of ordering an urgent transfer of $7.5 million to a company he once worked for in 2017

The amount was for a six-block residential apartment purchased from Global Haulage Company Limited, where K.K. Sarpong was previously the CEO.

Analysts said Dr. Sarpong put himself in a conflict of interest position, but he and the Corporation denied any wrongdoing in the transaction.