Gas joins oil in offshore boom

Following a competitive tender, the Ghanaian government awarded Chinese firm Sinopec a $750m contract to develop the National Gas Processing Project last year

The Ghanaian oil sector continues to go from strength to strength. Output on the Jubilee project is being ramped up and a string of other commercial discoveries are at various stages of development.

It is possible that Ghana will overtake a host of other African oil producers, including Congo-Brazzaville, Equatorial Guinea, Gabon and South Sudan, to become the third biggest producer in Sub-Saharan Africa after Nigeria and Angola. The government will benefit from all this upstream activity in terms of oil export revenues, economic diversification and the supply of much needed energy resources to the local economy. Stretching over the West Cape Three Points and Deepwater Tano blocks, the Jubilee project is being developed by a consortium led by Anglo-Irish firm Tullow Oil. Although output on Phase 1 was initially lower than forecast, it should eventually stabilise at around 125,000 b/d, doubling to 250,000 b/d when Phase 2 is completed.

The Jubilee partners are Tullow Oil (36.50%), Anadarko Petroleum (23.49%), Kosmos (23.49%), state owned Ghana National Petroleum Corporation (GNPC) (13.75%) and Sabre Oil & Gas (2.81%).

It is interesting to note that Tullow and Anadarko have been involved in many of the various other oil and gas discoveries that have been made on the continent over the past few years, including in Liberia, Côte d’Ivoire, Mozambique and Uganda. Taken collectively, these finds have opened up much more of the continent to oil exploration.

The Jubilee reserves are located in a deepwater area, meaning that the water is too deep to allow the use of conventional hydrocarbon production technology, such as fixed platforms. As a result, the consortium is using a floating production storage and offloading (FPSO) vessel, which can undertake all of the functions that its name suggests.

With an eye to Ghanaian history, the FPSO has diplomatically been named Kwame Nkrumah. Oil is offloaded on to waiting tankers for shipment around the world. Although this method is more expensive per barrel produced, it removes the need for oil to be piped onshore and then loaded on to tankers at a dedicated oil terminal. The construction of such infrastructure takes time and is very expensive. Apart from Jubilee, the Tullowled consortium has discovered the Akasa, Mahogany and Teak fields, plus the TEN project, which encompasses three smaller fields: Tweneboa, Enyenra and Ntomme.

Tullow reported that good progress was made on TEN in 2012 and the development plan for the project was submitted to the government in November. A tender for the front end engineering and design (FEED) contract has already been launched. A second Ghanaian FPSO will be utilised on the project, where about 70% of the estimated 200-600m barrels of reserves comprise crude oil, with most of the remaining in the form of gas. The FPSO and oil gathering infrastructure will be developed with spare capacity in mind in order to serve future discoveries that may be made.

Tullow’s most recent well, the Okure 1, identified a 17-metre-deep layer of oil in November, following on from the Wawa oil find in July. Angus McCoss, Tullow’s exploration director, said: “Wawa 1 was the first of three important remaining exploration wells to be drilled in the second half of 2012, to close out the exploration phase of the Deepwater Tano Licence. It found light oil and gas condensate, trapped separately from TEN and demonstrates once again that liquid rich hydrocarbons are pervasive in this prospective licence. We look forward to the drilling of Okure and Sapele in the second half of 2012.”

Apart from the discovery of Jubilee, about 75% of the wells drilled since 2007 have yielded oil, gas or other forms of hydrocarbons. As a result, it is little surprise that companies are queuing up to invest in Ghanaian hydrocarbon acreage. Other investors in the country include Afren, Hess Corporation, Hunt Oil and Norsk Hydro Oil and Gas, but – the Tullow consortium aside – it is Italian firm Eni that is perhaps enjoying most success. In January, Eni estimated reserves on its Sankofa East field on the Offshore Cape Three Points block at 450m barrels of oil equivalent. The Sankofa East 2A well discovered 76 metres of oil and 23 metres of gas and condensate, prompting Eni to begin to plan for commercial development.

The well was drilled in almost 1,000 metres of water, suggesting that yet another FPSO will be deployed here too. Eni Ghana Exploration and Production operates the block with a 47.222% share, with the remaining equity held by Vitol Upstream Ghana (37.778%) and GNPC (15%). The consortium has signed a memorandum of understanding with the government regarding the commercial development of natural gas on the block. The development of the Sankofa reserves should confirm that Ghana is far from being a ‘one hit wonder’.

More than just hot air

As with oil, gas from Jubilee is handled by the FPSO Kwame Nkrumah before being piped onshore. It is intended that all gas production will either be marketed within Ghana or reinjected to aid oil production, removing the need for gas flaring.

Much of the associated gas produced on Nigerian oil fields over the past 40 years has been flared, or burnt off, contributing to global warming and wasting a valuable natural resource.

However, unlike on other new African gas projects, there are currently no plans to process the gas into liquefied natural gas (LNG) for export, because the reserves thus far discovered are simply not large enough to support such multibillion-dollar investment. On a more positive note, however, the gas can be used within Ghana to supply thermal power plants and other industrial consumers. The Ghana Gas Company (GGC) was set up to handle and market gas from Jubilee but the start date for operations has been delayed from December 2012 until July 2013. Construction work on the scheme was halted in September because GGC failed to pay contractors on time. The company blamed the Ministry of Finance for failing to transfer the necessary funding on time. It seems possible that the delay will be a temporary setback but the incident should underline the importance of sound management for Accra.

Following a competitive tender, the Ghanaian government awarded Chinese firm Sinopec a $750m contract to develop the National Gas Processing Project last year. Payment will be made in the form of oil supplies. Sinopec will be required to ensure supplies to the 220 MW Tema power plant and construct a 150km pipeline from Takoradi to the 330 MW Aboadze power plant. It will also be required to double handling capacity to 300m cubic feet a day. More gas will be required when the Takoradi power plant is expanded. In late January, Ghana’s Volta River Authority (VRA) and the Abu Dhabi National Energy Company (TAQA) announced that they had concluded a financing deal for the $330m upgrade of the plant, which is already under way.

The money is being provided by a consortium of development agencies, including the World Bank’s International Finance Corporation, the African Development Bank, Deutsche Investitions-und Entwicklungsgesellschafte, the OPEC Fund for International Development and the Canada Climate Change Programme. The Takoradi plant is now owned by Takoradi International Company, which in turn is owned by TAQA (90%) and the VRA (10%). It has already been converted to run on gas rather than oil and will now be turned into a combined cycle facility.

The number of units will be increased from two to three, boosting total generating capacity from 220 MW to 330 MW, but without increasing the amount of feedstock required. Combined cycle plants allow turbines to be powered using the heat from neighbouring units that would otherwise be wasted. All power produced will be sold to the VRA under a 25-year power purchase agreement.