ExxonMobil Left Because Of Unplanned US4.2m VAT Payment

Reports have emerged that the reason why American gas giant, ExxonMobil, suddenly abandoned its interest in Ghana’s Deepwater Cape Three Point oil block was due to a raw deal it received from the Akufo-Addo government.

According to the reports, ExxonMobil was supposed to be exempt from the payment of VAT as part of the petroleum agreement it had with Ghana, but the government did not stick to the deal and ended up exacting US$4.2million from the company in VAT payments.

Article 12.8 of the DWCTP Petroleum Agreement (PA) has been copiously quoted in news reports to back the stories. It states that “Contractor, its affiliates and sub-contractors shall not be liable to pay VAT in respect of plant, equipment and materials and related services supplied in Ghana, to be used solely and exclusively in the conduct of Petroleum Operations under this Agreement”.

According to the reports, external consultants for ExxonMobil, Deloitte and Touche, wrote to the government to raise these issues.

Excerpts quoted from the communications include paragraphs from a follow-up letter thus, “we wish to follow up on this request as our client has not received any feedback from your office to date. Our client is currently compelled to make payment for VAT on supplier invoices which is an adverse cash flow impact on its operations considering that the company is clearly exempted from upfront payment of VAT in accordance with Article 12.16 of its Petroleum Agreement ratified by Parliament.”

“We look forward to your prompt response and issuance of VAT Relief Purchase Order booklet to our client.”

However, the Akufo-Addo government is said to have ignored the letters.

Four days ago, ExxonMobil wrote to the Minister of Energy, Dr. Mathew Opoku Prempeh, notifying him of their decision to abandon their interest in the Cape three-point oil block.

“EMEPGL hereby notifies the Republic that it has determined not to enter into the First Extension Period, and hereby voluntarily surrenders and relinquishes one hundred percent (100%) of its rights in and to the DWCTP Contract Area. EMEPGL also confirms that it hereby resign as Operator of the DWCTP Block and that it has fully performed the relevant Minimum Work Obligation under the Petroleum Agreement. The above is without prejudice to the EMEPGL’s accrued rights,” excerpts of the letter read.

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