Ghana: ‘Turnaround will generate $12bn in revenues’ – Tullow

By Nicholas Norbrook
Posted on Tuesday, 17 May 2022 16:11, updated on Wednesday, 18 May 2022 00:31

Wissam al-Monthiry
Wissam al-Monthiry

Africa-focused oil explorer Tullow hit the buffers in 2019: a string of problems with its Ghana operations led to the resignation of CEO Paul McDade, and dividends were scrapped. Two years later, the company is bouncing back, buoyed by better control of its productive assets and a culture reset, says Tullow Ghana MD Wissam Al-Monthiry.

TAR: After hitting a difficult patch in 2019, how has Tullow turned around its culture from a company that was good at striking oil to a company that is an efficient user of its oil resources?

Wissam Al-Monthiry: We set about creating an operating management system that is a buzzword for all the ways of work, you know, the processes, the systems, the daily meetings – ways to work under the umbrella of ‘every barrel matters and every dollar counts’. A simple example would be a really systematic loss-management system. We call any barrel of oil that we could have produced in a certain day that we didn’t produce for whatever reason, reliability or whatever, a loss. Building a way of thinking about those losses and evaluating the root cause associated with them and the creation of actions that permeate across the company, not just in the terms of the people running the floating production, storage and offloading (FPSO) units, ensure the non-repetition of those events that cause losses.

Fast forward to today, just in Ghana, you have two FPSOs that operated over 98% up times, which is a measure of percentage of your your total throughput that you predicted you could have produced for that day is produced or that year or whatever. You’ve got gas throughputs at record levels, you got production […] at record levels. And you’ve got on top of that a very efficient drilling and completions programme with a rig that was brought in that’s drilling at record costs and record scheduled deepwater wells. And all of that culminated in an outstanding performance.

Our costs, despite significant increases in oil prices in the last six to 12 months, have been on a downward trend relative to 2017, 2018, 2019, even 2020. And so, you know, those things are powerful combinations that have come about being an operating culture. The key thing we’re working on now is codifying all that, because, remember, ultimately, this is never just about Ghana. Codifying it and allowing in a way that would say we could take that and implement it in a future location, in a new operation is very important.

Back in 2018 and 2019, there were a couple of big issues with the wells. Has that been fixed on the mechanical side?

There were numerous challenges in the 2018, 2019 and 2020 drilling programme. So we put in a lot of focus in this kind of transformation on how do we become a world-class driller. It’s where we spend hundreds of millions of dollars a year, and so we need to get capital efficient on it. So we put a lot of focus on simplifying our well designs. We were being a bit sort of critical of ourselves. We were making wells more complex almost for complexity sake.

We had a myriad of issues on our rig that was causing downtime, non-productive time, on average close to the 20% range. And for rig rates in the hundreds of thousands of dollars a day […] that’s unacceptable. So we’ve a very systematic programme of what are the things causing us non-productive time and how we can check them off and stop them from reoccurring. In the last campaign, which is now 12-plus months in, we’re seeing non-productive time below 2%.

The third big thing around drilling completions has been better control of the supply chain. More so than any part of the oil and gas business, drilling runs through suppliers – from the common names like the Halliburton’s, Schlumberger’s and Maersk’s of the world to companies you’ve never heard of that work through the drilling supply chain.

So getting better control of that supply chain, creating the right governance around it and performance management and also, to be honest, simplifying and shrinking it. We went from something like 100 suppliers in our supply chain to drill well down to less than 10.

And the other big problem seems to be demand for the Jubilee field’s gas, which was not as high as expected.

First of all, I think there was a there was a dysfunctional relationship between us as producers and the off-taker and the Ghana National Petroleum Company […]. So there was a sort of clear connected day-to-day commercial relationship, particularly at the operational level. There was a contract signed. But, you know, having spent years sort of off-taking gas or providing gas to off-takers, you have to complement that commercial relationship with an operational one for that to kind of actually work day to day. And I would say there wasn’t enough emphasis on either on that day-to-day operation relationship. So I think that’s something we’ve addressed significantly.

I’d say the second thing is reliability. The FPSOs have had, particularly with Jubilee, a history of reliability issues that prevented sufficient oil production.

I talked to some of how we address that through the building of the operational culture, but that also impacted the predictability of our ability to get gas to the government. And if you’re a customer of gas, I don’t care what part of the world you’re in, predictability is important because you sign downstream contracts based on that and you have penalties and you have power suppliers. And the country had gone through a period in 2018 and 2019 of power challenges.

So what’s your your annual output now with the addition of your pre-emptive bid to buy Occidental’s Deepwater Tano assets?

The company’s total production predicted for the year is 59,000 barrels a day net.

Will that be expanded, given your new focus on being a production company and leveraging your Ghanaian assets?

Last year, we announced together with the government of Ghana, the Ghana Value Maximisation Plan, which is a 10-year investment programme by Tullow and its partners worth, at today’s oil price, about $4.5bn. We expect somewhere between 50 and 60 wells drilled over the next 10 years, as well as a tangible amount of major projects.

So probably $1bn of infrastructure installation on the seabed for both Jubilee and TEN. And we forecast that this 10-year investment programme at today’s oil prices, or even less than that, will bring the country about $12bn of cash flow in terms of taxes, royalties and oil entitlements. So quite a substantial foreign direct investment programme for the country that Tullow is committed to and it shows our commitment to Ghana for the long term.

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