Financial Capability of Applicants. Considering that the AGM block is the deepest in Ghana so far (with water depths of between 2000m to 3500m), the financial requirement will be very significant as demonstrated in the minimum expenditure for the three phases of the exploration period amounting to US$511 million. Even though the applicants have shown that they can raise capital to finance operations, this is only indicative for some of them. Apart from AGR and MED Songhai which have shown internal financial strength relative to their participating interests and can therefore finance their operations from own sources, Minexco, the company supposed to be the financial muscle of the Contractor Group; and GNPC, have not demonstrated their financial capability in clear terms as there are no records of their cash flows attached to the documents presented to Parliament. In the case of Minexco, it only showed letters of financial support from HSBC and Line Trust Corporation Limited, but these do not constitute guarantees. This is further buttressed by the statement in the memo to Parliament by the Minister of Energy and Petroleum - “AGM and Minexco have made further arrangements to procure from an investment grade financial institution, a guarantee for any outstanding expenditure obligation of the Contractor under the proposed Petroleum Agreement”. Also, the fact that Explorco, a joint operating partner is not required to pay for the exploration of two xxxxx in the initial exploration period further exposes AGM to more financial commitments in the face of financial uncertainty exhibited by the company. On the other hand, the companies involved in the Cola Agreement – Cola Holdings Limited and Medea Development S A – have posted impressive cash flows indicating their ability to finance operations on their internal resources. Cola Natural Resources further filed two letters of guarantee of performance and financial solvency from PNB Paribas and HSBC Private Bank with PNB Paribas indicating that the Group has at least US$80 million in funds with the Bank. The financial capability of applicants for oil blocks cannot be overlooked as it constitutes one of the two major requirements for establishing the qualification of an applicant for a block. The other qualification is the technical capability of the applicant. Parliament must therefore evaluate the financial capability of the applicants in the Ghana-AGM and Ghana-COLA/MEDEA Agreements before approval.
