The Future Looks Bright For Oil In Ghana

Ghana started producing oil one year and three months ago. Stephen Gyasi Jnr reports on what has happened since then, and what benefits it has brought the country.

It is 15 December 2010. The wheel tap is turned. Ghanaians go agog with ecstasy. The first gush oil is pumped officially by President John Atta Mills.

The turning of the tap on the Floating, Production, Storage and Offloading (FPSO) Vessel was a significant moment because it ushered Ghana into the group of oil-producing countries.

So soon a year has come. The country’s economy has done well, primarily driven by the oil production. By the end of last year, figures showed Ghana’s economy to have grown by 13.5%, making it one of the fastest growing in the world.

Since oil production started, the Jubilee Field has produced 22 million barrels of oil, and 21 oil cargoes have been exported, according to Tullow Oil, the main production company with headquarters in Britain.

“In 2010 we achieved exceptional exploration success and together with our partners delivered ‘first oil’ on schedule in Ghana by year-end,” says Tullow Oil’s CEO, Aiden Heavey. According to him, the cost of the first oil production is “expected to be within 10% of the original $3.1 billion budget”.

It is estimated that about $3bn will be spent to develop Phase 1A of the Jubilee Field. Tullow is reportedly planning to acquire a new FPSO but that will come probably in late 2012.

To date, the state-owned Ghana National Petroleum Corporation (GNPC) has lifted 2.9 million barrels of crude oil and has received $337.3m in revenue since production started, according to Ghana’s 2012 budget, presented to Ghana’s parliament by Finance Minister Dr Kwabena Duffuor.

He said the money had been allocated according to the Petroleum Management Revenue Act. “$112m was transferred to the Consolidated Fund; $54.8m to the Stabilisation Fund; $14.4m to the Heritage Fund, and the rest went to the GNPC as equity fund,” Duffuor confirmed.
Ghana is targeting a total revenue of $768m from oil in the 2012 fiscal year, based on an estimated average oil price of $90 per barrel, and a production level of 90,000 barrels a day.

Another of the oil companies operating in Ghana’s Jubilee Field is the Texas-based Kosmos Energy. In its financial results for the third quarter of 2011 (released in November 2011) it said it had generated $230m from the sale of approximately two million barrels of crude oil from Ghana in that period. This is against the second quarter’s revenue of $124.1m.

Even though the country has already had its share of oil spills, a situation that is not unfamiliar to many oil-producing countries, they have not been major and no extensive damage has been recorded so far. The Jubilee Field success has opened up the potential of the
adjacent deepwater Tano basin and led to a string of other discoveries. This has galvanised industry interest in Ghana’s three other basins in a way that suggests that the Jubilee Field is just the beginning.

The current production from the Jubilee Field is not even coming from the whole of the field but from its western and northern portions only, which is called the unit area. The rest of the field is yet to be developed even though stakeholder attention has been focused on it over the last three years.

However, during the same period a lot has happened within the Tano Cape Three Points basin and in the other basins.

There have been discoveries of oil and gas in other blocks by a consortium made up of ENI, Vitol and the GNPC, and another consortium made up of Vanco, Lukoil and the GNPC.

Over the last year, eight exploration wells were drilled. Six of them resulted in oil, gas and condensate discoveries. This represented the highest number of exploration wells ever drilled in the country in a one-year period, and resulted in a high success rate of 75% (compared to an industry average of 10%).

There is ongoing appraisal work on all the discoveries, and on four of them significant progress has already been made with very encouraging results. It is expected that a Plan of Development (POD) will be submitted by the oil companies in the middle of 2012. Appraisal work on a gas discovery in what is called the Sankofa Field was completed last year, and commercial assessment has commenced. Over the next five years, subject to the approval of the POD, the country expects commercial development and production of both oil and gas in all the discovered fields. If the resource can continue to be well managed, the future for oil in Ghana looks bright.