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‘Local content has to be a priority’: Kweku Awotwi, MD of Tullow Ghana
The head of Tullow's Ghana operations, Kweku Awotwi, buoyed by the oil price, looks ahead to a new licensing round and the drive towards domesticating the industry
In September 2017, the International Tribunal for the Law of the Sea drew a line in the ocean sands: ending a long-running dispute over the rights to undersea oil between Côte d’Ivoire and Ghana, the tribunal ruled in favour of Ghana.
“It meant that we could resume drilling – for two and a half years we had done no drilling,” says Kweku Awotwi, the managing director of Tullow Ghana, who was appointed on 1 March 2018. Awotwi joined the company from the Volta River Authority and has worked across the power, energy and mining sectors.
The tribunal decision has meant a sharp uptick in the pace of exploration, and Tullow has drafted in a second drilling rig. Given the needs of the Ghanaian treasury, all parties are happy. That also puts the company in a good position for the oil-licensing round in 2019.
TAR: Would you have taken another rig had oil prices been at $45 per barrel?
Kweku Awotwi: We would not. There was a case we could make at $55 or $60 at the beginning of the year, but by bringing on a rig you’re spending $60m-$70m for a well. And your cash flow better be able to support that. So higher oil prices have definitely made the bringing on of a second rig a much more attractive economic venture.
How often do you review these kinds of capital expenditure decisions?
There was a discussion about the possibility of bringing in a second rig as part of the 2018 budget. But it was put in the contingent fund bucket. So there was a thought that we could possibly mobilise a second rig, but it would have to depend upon oil prices. So it’s not something you do week by week. We did provision for it, conditions triggered, and we were able to act.
What kind of oil price are you budgeting for in 2019?
I’m not sure it’s finalised, but I suspect it’s around $70-$75. I think the only guidance one could have is what the forward markets are doing. Right now the forward markets are fairly bullish.
What are your exploration plans?
If we’re talking about Ghana, Tullow is very keen to develop what we call the near-field areas, which are close to existing infrastructure that we may not have rights to. So that’s something that we are pursuing quite diligently. And then, of course, we’ve also signalled that we’re going to participate in the newly announced licensing round. There are about five or six blocks in the western part of the country that are going to be up for this licensing round. I think the applications will be put in some time early next year.
Given your time at the Volta River Authority, what’s your perspective on the state of the wider energy market in Ghana? Do you think that the pinch points of the past, particularly in power provision, have been smoothed out?
I do think we’re on an upward trajectory from where we were just two or three years ago. The country as a whole [previously] suffered from inadequate power capacity. And some of that inadequate power capacity was really inadequate fuel availability, right? Whether it was not enough gas to run the plant or not enough money to buy the fuel to run the plant. I think things have significantly improved, even from a gas point of view, where today Jubilee could be using over 160m cubic feet a day between Jubilee and Tweneboa Enyenra Ntomme.
Of course, Eni has started up, so gas is less of an issue. Even with custom gas pipelines it’s producing more gas this year than it has in previous years, I think they’re up to 80m-90m cubic feet a day. So the gas supply picture has improved significantly. […]
The government of Ghana issued a bond to pay off some outstanding debts in the power sector because liquidity was also a problem. And they made some progress […]
And maybe the third thing worth mentioning is that they’ve also just awarded a privatisation concession to an outside utility job manager, an electricity distribution company, the main one. So when you put all those things together, more gas available, a bit more liquidity, an attempt to be more efficient in the value chain, I do think some of the pain points of the last couple of years are behind us.
Critics of Eni and Vitol’s Sankofa deal say it costs Japan less to import gas from Qatar than it is going to cost Ghana to use its own gas. Is this really the best way to deal with Ghana’s energy needs?
It’s a reasonable question to raise. I can’t speak to the specifics. What I can say is that, yes, it is expensive gas, but you have to remember that it’s not associated gas [not found with deposits of petroleum] – compared to Jubilee, say. The economics of non-associated gas are that it requires its own infrastructure. And let’s not forget that for a long time we had no gas. […] It’s easy to query these things when you have 20/20 hindsight. Is there an opportunity to improve the terms and conditions and possible pricing? Perhaps there is. I don’t know. It might be helpful.
Why do you think the previous government’s liquefied natural gas and gas processing scheme was cancelled and the Russians brought in?
I have no idea. I wish I did!
What about local content? Some boosters of local content in Nigeria will point to the 2010 Content Development Act and say we are starting to see the fruits of that with companies managing to get pretty serious engineering jobs, finishing of rigs – a fair way up the value chain as well. Is that something you might see in Ghana?
I’m not familiar with the details of the Nigerian law, but in Ghana we have L.I. 2204 [the local content act] of 2013. That is a very important law, and I think we probably took a leaf out of the Nigerian book. But there is no question that local content has to be a priority for everybody in Ghana – Tullow and the Jubilee partners especially. It would be a shame if all Tullow and the partners did was produce oil without weighing capacity and expertise of the local economy and helping to create secondary industries that are locally based and supported.
Whether they are the law or not – and in fact in the Jubilee partners’ stability agreement there was a commitment to meet what at the time were our own local content targets when there was no law – there’s no question that local content is very important.
Can you point to a success story from Tullow local content?
There are many companies who started out very small that have grown up with Tullow. Just the other day I ran into a company called Conship, who do a lot of our freight and procurement, and they’ve grown over the years. They were there at the beginning and they’re doing very well at expanding and growing their operations. But they’re just one of several companies that we’ve outsourced to. A number of local companies help us in our warehousing. There are numerous examples, and it’s something that actually we take very seriously.