Ghana’s leap into the ranks of oil-producing countries happened in record time, taking just 42 months from discovery to production. That speed brought with it complications that have necessitated a revision of forecast output. However, the bulk of those hiccups appear to have passed and the outlook for 2013 is looking encouraging, with the flagship Jubilee field set to hit maximum targeted production and new commercial discoveries about to come online.
In a trading statement released in January, Tullow Oil, the leading foreign player in Ghana’s oil industry, said it expected a busy period in early 2013 at the offshore Jubilee field.
Tullow said it had reached production of 110,000 barrels per day (bpd) at Jubilee, the highest achieved since operations started in 2010. The firm further said it would be testing its floating production, storage and offloading capacity in the coming weeks. Technical problems with the infrastructure have kept output below Tullow’s target of 120,000 bpd, which it expected to achieve as early as 2011.
Nonetheless, the firm described 2012 as fairly successful, as technical and cost issues were overcome. The field has produced around 50m barrels of oil since 2010, with output averaging 80,000-90,000 bpd. Output has been increased recently by additional acid stimulation, which required significant investment, and now seems to be bearing fruit, Kosmos Energy, one of Tullow’s partners in Ghana, said in December 2012. The consortium now expects full capacity production to be achieved this year.
Kosmos said that a new production well at Phase 1A of the Jubilee field had been completed and that it expected four more to be drilled, completed and commissioned in the next six months.
Tullow has a 36.05% stake in the field; Kosmos and Anadarko Petroleum, both based in Texas, have 23.49% each; state oil firm Ghana National Petroleum Corporation (GNPC) holds 13.75%; and Sabre Oil and Gas, another US investor, has 2.81%.
Outside of the Jubilee field, Ghana’s oil output should continue to rise in the medium term as successful exploration efforts are also being reported in other fields.
On January 18, major international press reported that Eni, Italy’s largest energy company by market value, said offshore drilling operations at the Sankofa East 2A block had confirmed commercial potential. The firm said it estimated the overall potential of the discovery to be around 450m barrels of oil equivalent (boe) in place, including natural gas and associates, with 150m boe recoverable. It added that it had started to draw up plans for commercial extraction following the positive finds. The Sankofa East field is located in the Offshore Cape Three Points block.
Eni’s announcement came a month after GNPC and partner Hess announced a fifth discovery at the Deepwater Tano/Cape Three Points Block, in this case at their Pecan-1 exploration well. Thomas Manu, the director of operations at GNPC, said the discoveries had “significantly increased the hydrocarbon reserves of the block”.
Ghana’s young oil industry – the first discovery there was in 2007 – is regarded as one of the better-regulated in Africa, with the government following best practice models from countries such as Norway in framing legislation regarding the management of oil revenues. Although it is still heavily dependent on other commodities, including gold and cocoa, for a majority of its export revenues, the country is anxious to avoid the “resource curse” that has affected other oil producers, and in recent years has invested considerable time establishing an appropriate regulatory framework. Given the rapid development of the sector, it has had to start almost from scratch, putting key legislation in place after production started.
The Petroleum Revenue Management Act details clear mechanisms for the collection and distribution of oil earnings, including setting aside 30% for future-generation funds. Meanwhile, the passing of the Petroleum Commission Act in 2011 established an independent body to monitor and regulate the sector, with GNPC moving onto a more commercial footing, thus reducing conflicts of interest. A Public Interest and Accountability Committee has been set up to monitor compliance with industry law, although critics say that it is underfunded. Stephen Manteaw, chairman of the Civil Society Platform on Oil and Gas, an independent Ghanaian organisation, has told the international press that the implementation of legislation is still a challenge.
Boosting local content and broader domestic participation in the sector is a key objective for the government, although Manteaw says the government’s efforts to encourage greater participation in the sector by Ghanaian investors are hampered by the demanding requirements. For example, some firms need to prove turnover of $5m and pay fees of $30,000, renewable for $25,000, which is pricing many Ghanaians out of the market.
The government’s keenness to ensure that some of the revenues from the sector flow back into national coffers is understandable, particularly given the disparity in development in the north of the country and the consistent need for improved job creation rates and physical infrastructure. Local content plays a key part in encouraging that, but thresholds for investment also ensure that only serious investors with capacity participate. However, as output rises and new discoveries come online, there may be more scope for expanding the positive benefits oil production brings about.