The prospect of the Government of Ghana, acting through GNPC and its upstream arm GNPC Explorco, acquiring Springfield Exploration and Production Limited’s interest in the West Cape Three Points Block 2 raises important questions about fiscal exposure, national interest, legal compliance and the future structure of Ghana’s petroleum sector.
Any assessment must be grounded in the legal architecture that governs upstream petroleum operations. The assessment should be in line with the Constitution, 1992, the Petroleum (Exploration and Production) Act, 2016 (Act 919), the Petroleum Revenue Management Act (Amendment), 2011 (Act 815), GNPC’s establishing Act, and associated regulations on licensing, unitisation and local content.
Legal and Institutional Framework
Article 257(6) of the Constitution, 1992 vests petroleum resources in the President on behalf of the people of Ghana. This imposes a fiduciary duty on the State to ensure that any acquisition or transfer of petroleum interests maximises long-term national value while protecting the public purse.
The Ghana National Petroleum Corporation Act, 1983 (PNDCL 64) mandates GNPC to participate in petroleum operations and promote Ghana’s technical capacity. Over the years, however, GNPC has shifted from a purely commercial operator to a hybrid entity with both commercial and national-policy obligations.
A state-led takeover of Springfield’s interest would need to be justified in light of GNPC’s capacity, balance sheet strength and statutory remit.
The Petroleum (Exploration and Production) Act, 2016 (Act 919) governs licensing and award of Petroleum Agreements; assignment and transfer of participating interests (section 16); unitisation requirements as stated in sections 35 to 38; relinquishment obligations, and the role of the Petroleum Commission in technical regulation.
A transfer of SEP’s interest to GNPC would require Ministerial approval on the advice of the Petroleum Commission, and it must be shown that GNPC has the technical competence and financial capability to undertake the obligations attached to the block.
It is important to note that the Petroleum (Local Content and Local Participation) Regulations, 2013 (L.I. 2204) aims to preserve Ghanaian ownership in upstream operations. A takeover by GNPC, a wholly state-owned entity, would improve indigenous participation. The question, however, is whether such participation is productive or merely symbolic if the corporation cannot finance work programmes.
Context of WCTP-2 and Springfield’s Position
Springfield holds the rights to West Cape Three Points Block 2 under a Petroleum Agreement approved in 2016. The company made the Afina discovery in 2019. The government later directed unitisation of the Afina discovery with Eni/Vitol’s Sankofa field in the OCTP block on the basis of a shared reservoir. That process has since been contentious.
If GNPC acquires Springfield’s interest, the State becomes a direct participant in the unitisation negotiations. This has major commercial and legal consequences.
Potential Advantages of a GNPC Takeover
One of the potential advantages of from Springfield is an enhanced state participation and resource control. A stronger state stake may allow Ghana to capture a larger share of rent. Under Act 919, the State’s petroleum share comes through royalties, carried and participating interests, corporate taxes, additional oil entitlements (if applicable), and surface rentals and other fees. A GNPC-led operation could, in theory, deliver higher long-term government take if the corporation develops the field efficiently.
Another potential advantage is the stabilisation of the unitisation process. With GNPC involved directly, negotiations between the OCTP partners and the WCTP-2 licensee may become less adversarial. The Petroleum Commission has struggled to enforce unitisation because the parties disagreed over reservoir connectivity, equity interests and operatorship. GNPC may bring institutional leverage and reduce deadlock.
Not losing the sight of local capacity building as a potential advantage of the takeover, GNPC Explorco’s participation in upstream operations is meant to develop Ghanaian technical competence. Acquiring a field with discovered resources gives Explorco a chance to move beyond passive carried interests and into real operational decision-making, thus seismic re-interpretation, well optimisation, reservoir management, and field development planning.
Prevention of asset stagnation is another significant potential advantage of GNPC takeover. If Springfield lacks capital to progress appraisal and development, the block risks stagnation. Under Act 919, this could lead to relinquishment. A GNPC takeover could prevent delays and keep the resource on a development trajectory.
Key Risks and Downsides
1. Financial Concern
The most significant concern is financial. Upstream petroleum operations especially appraisal drilling, front-end engineering design (FEED), and field development require substantial capital. GNPC’s financial position has been strained in recent years due to guarantees for gas offtake contracts, operational loans, pre-export financing arrangements.
If GNPC assumes Springfield’s obligations, the State takes on work programme commitments (minimum work obligations under the PA), cash calls for drilling and field development and liabilities in case of cost overruns or unsuccessful wells.
a. Work Programme Commitments Under the Petroleum Agreement
Every Petroleum Agreement contains a minimum work obligation, which forms the backbone of the exploration and appraisal phase. These commitments obligate the contractor to carry out a defined level of geological, geophysical, and drilling activities within specified timelines. Examples typically include acquiring seismic data, drilling exploratory or appraisal wells, submitting evaluation reports, and conducting reservoir studies.
If GNPC assumes Springfield’s obligations, the State becomes legally bound to fulfil these minimum work obligations. This means GNPC must deploy (or procure) the requisite technical capacity, project management capabilities, and financial resources needed to implement the approved work programme. Failure to meet these commitments may attract penalties, trigger relinquishment of acreage, or provoke disputes with the Petroleum Commission. In effect, the State becomes directly accountable for ensuring continuous operational activity in compliance with the PA. This responsibility also exposes GNPC to the risk that planned activities may not produce commercial discoveries, yet the work must still be undertaken because the commitments represent contractual obligations rather than optional activities.
b. Cash Call Obligations for Drilling and Field Development
Upstream petroleum operations, particularly drilling and field development, are capital-intensive. Contractors must respond to cash calls issued by the operator of the block requests for funds to finance planned exploration, appraisal, or development operations. By assuming Springfield’s obligations, GNPC would be required to honour these cash calls in full and on time.
This has two major implications. First, the State must mobilise very large sums of capital, often within short notice, to finance drilling campaigns, procurement of equipment, and development activities such as well completions, facility construction, and subsea installations. Drilling alone can cost tens or hundreds of millions of dollars per well. Field development costs can run into billions. For a national oil company already faced with revenue constraints, meeting these financial demands may place significant pressure on the national budget, public debt, or GNPC’s borrowing capacity.
Second, cash call obligations are unconditional. Whether or not a drilling programme yields positive results, GNPC must provide its share of funding. This exposes the State to substantial financial risk, especially in frontier or technically challenging basins where the probability of success may be uncertain. If GNPC fails to honour cash calls, the PA typically provides for dilution of its interest, suspension of voting rights, or default penalties, thereby weakening the State’s commercial position.
c. Liability for Cost Overruns and Unsuccessful Wells
Oil and gas projects frequently experience cost overruns due to technical challenges, delays in equipment delivery, unexpected subsurface complexities, or fluctuations in service costs. When GNPC assumes Springfield’s contractual position, the State automatically assumes responsibility for any such overruns. Because petroleum operations often span multiple years and require sophisticated engineering solutions, cost overruns can escalate rapidly, placing heavy financial strain on the national budget.
In addition to cost overruns, GNPC inherits the risk of unsuccessful wells. Not every well leads to a commercial discovery, and even wells drilled for appraisal can fail to de-risk a field adequately. These failures still incur the full cost of drilling, mobilising rigs, hiring service companies, and processing geological data. Since these costs cannot be recovered unless commercial production is achieved, they become direct financial losses borne by the State.
Moreover, unsuccessful drilling campaigns may weaken investor confidence, complicate future financing options, or diminish GNPC’s creditworthiness. The presence of such risks explains why private oil companies often rely on global portfolios to diversify exploration risk, an option not readily available to a national oil company focused on domestic acreage.
This exposes the Petroleum Holding Fund indirectly via GNPC’s borrowings and guarantees, raising concerns under the Petroleum Revenue Management Act, which emphasises prudence and intergenerational equity.
2. Competitiveness and International Operator Expertise
Another risk is the competitiveness and International Operator Expertise. Ghana’s upstream sector relies on partnerships with experienced international oil companies (IOCs) that bring technological know-how and financial depth. If GNPC becomes the major interest holder without securing a competent technical operator, development could slow.
Explorco does not yet have a track record of independently operating a deepwater field. This raises the question of whether Ghana would ultimately outsource operatorship, thus diluting the value of the takeover.
3. Legal Complexity Surrounding Unitisation
Even with GNPC in the picture, the unitisation framework under Act 919 requires agreement on the unit area, a unit operator, an equity participation formula based on reservoir contribution and Ministerial approval of a Unit Operating Agreement and Unit Development Plan.
These processes involve extensive reservoir modelling and commercial negotiations. GNPC’s involvement may simplify government oversight but does not remove the technical disputes that have stalled progress.
Market and Commercial Implications
Determining the value of Springfield’s interest is complex. Afina is an unappraised discovery. Its reserves and contingent resources are uncertain. Without an independent Competent Person’s Report (CPR), the State risks overpaying.
Acquiring an asset in a fluctuating global oil market carries inherent risk. A decline in prices may render the project uneconomic. A rise may improve viability. The State must be cautious not to acquire high-risk assets at a time when capital should be allocated to de-risked, revenue-generating projects.
Any future development will produce associated gas. Ghana’s gas sector has infrastructure gaps, tariff issues, and take-or-pay liabilities. GNPC, already the aggregator of natural gas under the Gas Sales Agreements, may deepen its exposure to downstream financial risks.
When the GNPC Takeover Could Be a Good Deal
A GNPC acquisition of Springfield’s interest could hold significant strategic value for Ghana if key conditions are satisfied. These potential benefits relate to asset valuation, partnerships, financing structures, unitisation dynamics, and capacity building.
1. Acquisition Price Reflects Actual Subsurface Value
The cornerstone of any petroleum asset purchase is the accuracy of the resource valuation. If GNPC acquires the block at a price that reflects independently verified subsurface data such as well logs, seismic interpretations, and reservoir modelling, then the takeover could be a financially prudent investment. A fair valuation would safeguard the State from overpaying for speculative resources while securing long-term revenue from future production. Given current uncertainties regarding Afina’s size, quality, and commerciality, robust due diligence is essential.
2. GNPC Secures a Strong Technical Partner and Clear Operatorship
GNPC’s capacity to manage complex offshore assets depends heavily on access to technical expertise. If the takeover is accompanied by the entry of a capable international technical partner, preferably one with deep-water experience, the operational risk diminishes substantially. A clear operatorship structure ensures that decisions around drilling, development, and production are led by competent entities, preventing delays and cost overruns. This arrangement would allow GNPC to participate meaningfully while avoiding the dangers of assuming technical roles beyond its present capabilities.
3. Ring-Fenced Financing to Avoid Burdening Public Funds
If the financing for the acquisition and subsequent development is ring-fenced, meaning it does not draw resources from the Petroleum Holding Fund or the national budget, the takeover becomes more feasible. Innovative structures such as reserve-based lending, farm-outs, or special purpose vehicles could protect public finances. By ensuring that national savings from petroleum revenues are not jeopardised, GNPC can pursue commercial goals without exposing the State to macroeconomic risks.
4. Potential to Accelerate Unitisation and Field Development
Unitisation of Afina with TEN has been stalled due to disagreements over valuations, reservoir continuity, and operatorship rights. If GNPC’s takeover helps streamline negotiations because the State becomes a direct participant rather than a regulator, the development of the resource could accelerate. Faster unitisation would enable earlier production, potentially boosting national revenues and optimising the use of Ghana’s existing offshore infrastructure.
5. Opportunity for Genuine Technical and Managerial Capacity Building
A successful acquisition could serve as a platform for GNPC to acquire hands-on operational experience, particularly if structured to include capacity-building obligations from technical partners. Active participation in reservoir management, drilling campaigns, and project execution would strengthen national competence, reduce long-term reliance on foreign operators, and advance Ghana’s strategic objective of building a world-class national oil company.
When the Takeover Could Be a Bad Deal
Despite the potential rewards, the proposed acquisition also carries significant risks. These risks stem from financial exposure, governance weaknesses, political interference, and unresolved technical and commercial disputes.
1. GNPC May Assume Liabilities Beyond Its Financial Strength
The most immediate danger is that GNPC inherits substantial liabilities associated with minimum work obligations, drilling commitments, and possible cost overruns. If the costs of fulfilling these obligations exceed GNPC’s financing capacity, the State could face substantial fiscal burdens. Offshore drilling and development in Ghana’s deep waters are capital-intensive, and unsuccessful wells or delays could further deepen financial exposure.
2. Political Pressure Could Overshadow Commercial Judgement
A takeover driven by political motivations—rather than commercial logic—could undermine the integrity of the investment. If government decision-makers pressure GNPC to proceed without sufficient due diligence, independent valuation, or risk assessment, the State may end up making a loss-making acquisition. Political interference in technical decisions has historically weakened national oil companies worldwide.
3. Lack of Transparency in Asset Valuation
Where the valuation process is not transparent or is conducted without independent expert input, the risk of overpaying for the asset increases significantly. Transparent, competitive, and data-driven valuation is essential. If valuation is rushed, withheld, or influenced by vested interests, the acquisition could result in a significant transfer of value from the State to private actors, effectively a misallocation of public resources.
4. The Takeover Could Become a De Facto Bailout of Springfield
If the transaction provides Springfield with financial relief or an exit from obligations it cannot meet, without corresponding value accruing to the State, then the takeover becomes a bailout rather than a strategic investment. This could set a troubling precedent, signalling that distressed private operators can transfer liabilities to the State, eroding accountability in the upstream sector.
5. Continued Unitisation Disputes Could Delay or Negate Benefits
If the underlying disagreements between Springfield and Tullow/Ophir/Kosmos on reservoir behaviour, operatorship rights, or equity allocation remain unresolved even after GNPC steps in, the expected benefits of the takeover will not materialise. Prolonged disputes could immobilise the asset, wasting State resources and delaying potential production for years.
6. Crowding Out Private Capital and Damaging Investment Attractiveness
A State-led takeover may raise concerns among international oil companies and financial institutions about Ghana’s commitment to free-market principles. If GNPC’s involvement is perceived as displacing private capital or creating an uneven playing field, investor confidence could decline. This is particularly problematic at a time when global capital for upstream projects is shrinking and governments must compete for investment.
Conclusion
A state-led acquisition of Springfield’s interest in WCTP-2 has both promise and peril. Ghana’s legal framework contains adequate safeguards. Act 919’s transfer approval process, the Petroleum Commission’s regulatory authority, and fiscal transparency rules under Act 815. However, these safeguards work only if applied rigorously.
The transaction could support national participation, unlock a stalled asset and enhance Ghana’s influence in the unitisation process. At the same time, it exposes the State to substantial financial commitments at a time when GNPC’s balance sheet is tight and public debt pressures remain high.
By Samuel Saint-Ayisi
