On new strategies in oil and gas production
What impact have the drop in global oil prices and the rise in US shale production had on exploration and production in West Africa?
MENSAH: There is a possibility that the trend of lower global energy prices will be sustained over the long term and impact financial projections on the revenue side. For example, some of the investment decisions for the Tweneboa-Enyenra-Ntomme (TEN) project were made at the time of higher prices, and probably, if those choices had to be made today, outcomes would be different.
However, there is an exploration upside related to costs since the rate of drilling has decreased. In the long run, those companies with the ability to properly identify reservoirs with a high success rate will be well positioned to do business in Ghana. There is always the potential to find additional resources.
How would you describe the biggest downside risk facing current exploration activities in Ghana?
MENSAH: Exploration risks are inherent to any activity. Companies with low success rates may not find adequate incentive to continue operations. Also, there is some regulatory uncertainty. Ghana might be replicating countries with more experience, such as Norway, in terms of increasing the government take. The main difference lies in the fact that Ghana does not function at the same level of development, and contracts in those countries include provisions for recovering exploration costs.
Overall, there might be a slight danger of increasing the government’s share too aggressively in a way that diminishes investor interest. However, there are open channels with the regulators, and they have a good understanding of what incentives can help the development of the sector. I am confident that these concerns will be addressed.
In what ways can flaring be limited? What can be done to improve gas offtake?
MENSAH: Gas requires more complex infrastructure and is certainly more relevant to Ghana than oil. Previously, sufficient infrastructure was not in place, which caused flaring, but this is no longer the case. As of today, the TEN and Jubilee oilfields have been interconnected. GNGC is taking maximum gas. This means that if there is excess gas at Jubilee, it can be re-injected into the TEN field. This process significantly reduces flaring.
Additionally, thermal plants have been enabled to receive more gas, which is a useful way to power the country. In the long term, there is the possibility of incorporating liquefied natural gas if required. However, this is not a priority as there is plenty of indigenous gas that can be developed first, resulting in lower costs per KWh.
How successful has Ghana been at encouraging local content in the energy sector?
MENSAH: Local content development has been relatively successful. The oil services industry provided an example of this with the progress at the Jubilee oilfield. Yet there is still much more to achieve. We need to think about the long-term improvement of competencies and knowledge, and to go beyond acting in a supporting role. If within 15 years Ghanaians don’t run 70-80% of the industry across all positions, we will have failed.
A very important part of this journey is related to capacity building, and for this the presence of major international oil companies should be welcomed. The benefits of additional skills and the exposure those firms provide far surpasses any concerns. It is also in the best interest of industry players to train a competent local workforce to control overhead costs. It would be a win-win situation for all of those involved, and would contribute to the sector’s sustainability in volatile times. The long-term objective of the country is to create an attractive playing field for global companies. If the government and local players can deliver, there is no reason why major companies would not become more involved.