NewsWest AfricaGhana's winning oil explorers face barriers

Fri,24Nov2017

Posted on Monday, 22 April 2013 16:37

Ghana's winning oil explorers face barriers

By Kwabena Mensah in Accra Additional reporting by Gemma Ware

Ghana’s oil and gas will power an economic transformation/Photo©ANNA CLOPETOil and gas companies have been racking up new discoveries but await regulations as debates intensify over tax payments and environmental safeguards.

 

Big decisions about the future of Ghana's oil and gas industry are confronting President John Mahama's new ministerial team. The urgency of the government's choices has been reinforced by the flood of new discoveries off the shores of western Ghana over the past few months.

Companies discovered new oil and gas reserves to the west of the main Jubilee field. To the east, there are significant prospects in the Volta Basin.

Since the Jubilee field started production in December 2010, explorers have made 16 substantial discoveries. These make the government's ambition of using oil and gas to support economic modernisation more viable.

Oil production and the planned second refinery could replace imported oil and products.

Similarly, gas production could provide liquefied petroleum gas for the retail market, and power the electricity grid and a proposed aluminium plant. The second oil refinery could provide the feedstock for a petrochemicals industry.

Although the government agrees on the broad aims, there is still overlap and competition between the agencies that develop and manage the resources: the Ghana National Petroleum Corporation (GNPC), Ghana National Gas Company (GNGC) and the Petroleum Commission.

The previous New Patriotic Party government sharply cut back the GNPC's mandate, restricting it to the exploration, production, lifting and marketing of crude.

Questions also remain about the regulatory regime, pricing structure and disclosure requirements.

Those matters are becoming a three-cornered battle: the government wants speedy progress, big investment commitments and job creation, above all; international companies are seeking more competitive pricing, especially for gas, and more acreage; and increasingly vociferous civic groups call for full disclosure of contractual, tax and royalty arrangements, along with much more rigorous safeguards for environmental protection and technology transfer.

Steve Manteaw of the Civil Society Platform on Oil and Gas has focused on the GNGC's management of the much-delayed gas processing project, questioning the accountability of the procurement procedures with China's Sinopec.

The GNGC's Kwesi Botchwey says that Manteaw's claims are unfounded.

FERTILISER FOR EXPORT

Planners are unsure about how much demand there will be for gas in industries outside power generation.

Gas can also be used to produce urea, the basis of nitrogen fertilisers. Mehdi Saint-Andre, managing director of fertiliser company Yara Ghana, is pessimistic about local production and demand.

"It's mainly for cereals that you use urea, but it's not used a lot in Ghana. It's not the preferred product. It would mainly be an export plant," he says.

Saint-Andre says potential investors such as Yara would have to balance demand with the price they could negotiate with the government. Ecobank argues that Ghana will not produce enough gas to support a mooted $1.2bn fertiliser plant.

For most international companies, their current problems are about managing growth. For example, the flow of oil to the floating production, storage and offloading (FPSO) facility from the Jubilee field has reached its targeted limit of 120,000 barrels per day (bpd) and will have to be shut down for maintenance in April.

United-States-based Kosmos Energy and Ireland's Tullow – partners in the Jubilee field alongside the US's Anadarko – are exploring the Tweneboa, Enyenra and Ntomme (TEN) field in the Deepwater Tano Block to the west of Jubilee.

A second FPSO with a capacity of 100,000bpd is being built in Singapore and should be available within 16 months to meet the expected production from the new fields.

DEVELOPMENT PLAN

Italy's Eni, in partnership with Dutch group Vitol, confirmed a significant discovery in the Sankofa East field in January that promises additional oil and non-associated gas. These fields will be dedicated to providing non-associated gas from Offshore Cape Three Points Block to the GNPC.

It is not clear which state agency will have the responsibility of negotiating these supply contracts.

Botchwey says that Eni and Vitol are discussing "a plan of development that would properly align the interests of these important upstream producers and investors with those of the country".

Local firms supplying products and services to the oil and gas industry are eagerly chasing contracts, according to UT Bank chief executive Prince Kofi Amoabeng. He says UT Bank is winning business from companies competing for oil service contracts.

"Currently, it's all being done by foreign companies, those who've worked with Tullow and the like before. But we can see this passing on to the Ghanaian entrepreneurs," he says.

But he argues that the government's local-content bill is overly ambitious: "It's talking about 90 percent of the oil business [by 2020]. I think that will probably happen over 20 or 30 years. But at least we have to put our foot in there and start growing it."

One promising example is the ship named MV Dutch Blue, which will ferry consumables to the rigs. A joint venture between local company Menergy International and Netherlands-based Holland Shipyard, "[Dutch Blue] is just the beginning," says Menergy director Kojo Asafo-Aidoo.

He says that the company's next vessel will be named after Fathia, the wife of Ghana's first president, Kwame Nkrumah●



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