Tracing the Eni-Springfield dispute and why Ghana has been sued in London

With the September 18 unitisation deadline imposed by Ghana on Eni and Springfield fast approaching, Eni has intensified its opposition to the April 2020 directive.

On April 9, 2020, then Energy Minister, John Peter Amewu, issued a directive to Eni Ghana Exploration and Production Limited to merge its Sankofa offshore oil field with a nearby discovery made by Springfield Exploration and Production Ltd.

Experts say Mr Amewu’s directive is consistent with the common practice within the oil industry where nearby fields that are part of the same geological structure are combined.

The process of merging nearby fields, known as unitisation, essentially distributes the hydrocarbon resources between license holders in proportion to their share of the initial discoveries.

People with deep insights in the oil and gas industry tell Prime News that unitisation allows owners of merged oil fields to maximise production as they pool resources and equipment together.

But Eni has been against Amewu’s directive from the get-go.

Eni is against the unitisation of its Sankofa oil field, which it operates jointly with Vitol Holding BV, with Springfield’s Afina field because it claims Springfield had not sufficiently tested its discovery to show that it shares a reservoir.

As Amewu’s directive triggered a stalemate, Springfield accused Eni of mining petroleum from the straddling contract areas, including its Afina oil field.

Springfield dragged Eni to court, for creaming off part of its revenue by producing oil from the Afina oil field.

Eventually, on June 28, 2021, the Commercial High Court sitting in Accra ruled in favour of Springfield’s application to freeze 30% of revenues received by Eni and Vitol from the sale of crude oil from the Sankofa field.

Eni cites that ruling in its suit against the Government of Ghana at the London Court of Arbitration and describes Springfield’s claims in the matter as “baseless”.

Eni and Vitol allege in the UNCITRAL suit that Ghana’s unlawful attempts to impose and enforce a unitisation of the Sankofa oil field “within the contract area…with the Cenomanian oil discovery, which is yet to be appraised…” is what they seek to correct through the court.

“Sankofa Field is part of the OCTP project, a USD 10.6 billion project supported by the World Bank (of which USD 6.05 billion has been invested to date), which is producing hydrocarbons in large volumes for the benefit of the Ghanaian state in the sum of hundreds of millions of dollars per year.

“By contrast, the Afina Discovery currently amounts to a single exploration well which has not been appraised, far less developed. There is not even any evidence that the Afina Discovery is capable of producing hydrocarbons at a commercial flow rate,” Eni and Vitol tell the London court.

The Claimants say by Amewu’s unlawful directive, the Government of Ghana now “seeks to compel a scenario where not only is the Sankofa Field combined with the Afina Discovery, but where the Ghanaian owners of the untested and unappraised discovery are granted a staggering 55.545% equity interest in the proposed joint producing, multi-billion-dollar asset.”

“The practical impact of Ghana’s unlawful unitisation is ongoing and real and is currently being played out in the Ghanaian courts.  Emboldened by Ghana’s actions, Springfield is currently suing the Claimants to enforce its alleged rights in the Sankofa Field which the unlawful directives seek to establish,” Eni and Vitol tell the London of Arbitration.

Reliefs sought

Eni and Vitol are seeking the following reliefs:

1. DECLARE that the Purported 9 April Directive,  Purported  14  October  Directive, Purported  6  November  Directive  and  any  other  steps  taken  to  implement  those directives represent a breach of contract under the Petroleum  Agreement;
2. ORDER that the Respondents lake no further  action  to  implement the purported unitisation  of the Sankofa Field and Afina  Discovery  on the  terms  of the purported 14  October  Directive,  the  Draft  UUOA  sought  to  be  imposed  by  the  Purported  6 November Directive or otherwise;
3. ORDER the  Respondents  to  pay  damages  in  an  amount  to be  quantified  for  the losses  suffered  by the  Claimants  arising  out  of the Respondents'  breaches  of the Petroleum Agreement, Ghanaian law and international law on a joint and  several bases;
4. ORDER the Respondents  to pay  all of the  costs and  expenses  of  this arbitration, including the fees and expenses of the Claimant's counsel and any witnesses and/or  experts in the arbitration, the fees and expenses of the Tribunal and the fees of the SCC on a joint and several basis; and/or
5. ORDER such further or other relief as the  Tribunal May in its discretion considers appropriate.

Download the full document of the suit below.