Ghana Oil: A Crude Awakening

To the uninitiated, oil exploration in Ghana is a fairly recent phenomenon, but in fact the first wells in the country were drilled in the 1980s. At that time. as Stephen Williams reports, local wags renamed the Gold Coast, as it was officially known in the colonial era, as the Seep Coast – on account of the number of tar balls and other evidence of oil that was found along the coast.

In the 1890s, the idea of drilling for oil offshore Ghana would have been considered hare-brained, and even in 1978 when Ghana became a modest onshore oil producer, the concept of drilling for black gold out in the ocean would have been considered novel thinking.
In 1995, the government of President Jerry Rawlings offered onshore and offshore acreages to international companies. Hunt Oil of the USA took the plunge. It acquired offshore acreage in the Cape Three Points Basin, leading the way for a slew of other companies to be attracted to Ghana’s hydrocarbon potential.

After more than a decade of exploration, the country struck appreciable commercial oil in June 2007, located 60km offshore between the Deepwater Tano and West Cape Three Points blocks. The field’s recoverable reserves have been variously thought to be more than 370 million barrels, 600 million barrels, 950 million barrels and even 1.8 billion barrels! But one thing is agreed on, the oil is located in a water depth of more than 1,000 metres.

The equity partners of the Deepwater Tano block are Tullow with 49.95%, Kosmos with 18%, Anadarko with 18%, Sabre Oil & Gas with 4.05%, and the Ghana National Petroleum Corporation (GNPC) with 10%.

The West Cape Three Points is held by Tullow with 22.9%, Kosmos with 30.88%, Anadarko with 30.88%, Sabre Oil & Gas with 1.85%, GNPC with 10%, and EO Group with 3.5%. Straddling the Deepwater Tano and West Cape Three Points is what is known as the Jubilee Field.

The Jubilee Field’s appraisal and development programme began at the end of 2008 when the Odum, Mahogany-2, Heydua-2 and Mahogany-3 wells were drilled. In October 2008, construction began to build a floating, production, storage and offloading (FPSO) vessel for the Jubilee Field.

The tanker vessel Ohdoh was specially converted for the Jubilee field and renamed FPSO Kwame Nkrumah in May 2010 at the Jurong Shipyard in Singapore. It was then towed to its location in the Jubilee Field, arriving some weeks later in June 2010.

A year earlier, four rigs to sink production wells had been acquired, and the FPSO was linked to the various production wells in November 2010, at a water depth of 1,100 metres.

The FPSO Kwame Nkrumah has the ability to process 120,000 barrels of oil and 160m cubic feet of gas each day, with a storage capacity of 1.6m barrels of oil.

The field delivered first oil in December 2010. By May 2011, the field was producing 70,000 barrels of oil each day from a total of five wells.

Reinforcing the extent of the Jubilee Field, in July 2011 the Hess Corp, a US-based oil and gas company, announced that it had found significant oil and gas at its Paradise-1 exploration well offshore Ghana in the Deepwater Tano-Cape Three Points area. Hess owns 90%, with the Ghana National Petroleum Corp, the state-owned oil company, owning the remaining 10%.

Kosmas Energy Ltd, based in Dallas, also reported an oil deposit three metres thick in its Banda exploration well in an adjacent West Cape Three Points lease. This confirms that Ghana’s Jubilee Field is the largest oil field to be discovered in West Africa in recent times.

But that is not to say that everything has gone to “best scenario” plan. Jubilee was originally planned to reach an output of 120,000 barrels a day this year, but now that level will probably only be reached late next year, when the original target of 250,000 barrels a day for 2013 would have put Ghana among the world’s top 50 producers.

Alongside the resource curse that can inflict so much damage on a society and an economy – this gives rise to one of the dangers of oil discoveries: the danger of the public’s over expectation of an instant financial windfall accruing to the country.

One industry figure, a Ghanaian who asked for anonymity, said that he did not think the oil would amount to more than 10% of GDP for at least two or three years. This year, output from Jubilee will range from 70,000 to 90,000 barrels a day as opposed to the 120,000 barrels target.

One explanation for this shortfall has been firmly countered by Tullow Oil which says Ghana’s inability to process “associated” natural gas found wit the Jubilee Field’s oil is not the reason for missing the production target of 120,000 barrels of oil a day.

“This is a new field; we cannot rush it. We cannot push to ramp-up production to get high numbers so everything looks great, and then we damage the wells. We can’t do that,” says Tullow’s chief executive, Aidan Heavey. “We are looking after the oil, the government is looking after the gas; and so what we’re looking at is how to manage the field.”

Heavey added: “Whether we produce gas or not is not going to affect the 120,000 barrels. Setting a target is one thing, but you don’t rush into it – you have to do it properly so that you don’t have issues. We will not take a risk to produce 120,000 barrels at Jubilee because it needs to be managed properly. With a new field, you learn as you go along and take technical information and make sure nothing is done to damage the field in the long-term, because the important thing is the asset.”

But Tullow and its partners are investing some US$400m to upgrade the wells’ design and has disclosed that the government of Ghana has approved the next $1.1bn phase of development for the Jubilee Phase 1A, that began in February this year.

The work involves sinking eight new wells (five production wells and three additional water injectors), and the expansion of the subsea network. Phase 1A will take around 18 months to complete.