Ghana's prospects brighten
After some offshore problems, the country’s upstream should see significant growth in the coming months
ONE of the few West African countries that will increase oil output capacity over coming months may even sanction a new development. But Ghana's reserve expansion is muted, while a fall in government revenues is affecting the economy.
Observers say the country's oil sector is in limbo while exploration budgets remain tight, though an uptick in activity would rekindle hopes of repeating Tullow Oil's headline-grabbing Jubilee field discovery in 2007. In 2015, Ghana produced 102,000 barrels a day of oil from Jubilee - until later this year, the country's only major operational field - and 120m cubic feet a day, all used to provide power domestically.
"Ghana is looking for the next big discovery," says David Thomson, principal sub-Saharan Africa analyst at energy consultancy Wood Mackenzie. "Everyone thought Jubilee was the start of something very big, but it hasn't quite followed through like that. The offshore is still relatively under explored, however, and some of the less credible licence holders have been removed."
In June, Tomas Mba Akabzaa, chief director at Ghana's ministry of petroleum, told a conference in South Africa that while a number of new agreements were signed last year, some explorers lacked funds. Four companies have lost their exploration licences in the Tano Basin, having failed to meet terms.
The Tullow-led Jubilee field expansion is one of the few West African projects that could be approved in the coming months, if the economics can be made to stack up.
Tullow submitted its full development plan for the project to the government last December, since when the two parties have been negotiating terms. The project, under which the Mahogany and Teak fields in the West Cape Three Points block would be developed, was redesigned to reduce costs, though full details have been revealed. The project will be based on a tie-back to the existing field, which makes it cheaper than developing from scratch.
Hinging on hope
The floating-production-and-storage (FPSO) vessel working at the Jubilee field, the Kwame Nkrumah, has a capacity of 120,000 b/d, but technical problems triggered a month-long shutdown of gas supply and curtailed oil production last year, when output averaged around 102,000 b/d.
Further repairs to the FPSO's turret also caused supply disruption this year, including another shutdown. Tullow restarted production at 30,000 b/d in May, and has gradually increased output until it averaged 90,000 b/d in June. The firm said on 30 June that it expected average production for the year to be around 74,000 b/d, down on earlier forecasts. To remedy the turret problems, Tullow wants to convert the FPSO to a permanently spread moored facility, with offtake through a new deep-water offloading buoy. This would involve further shutdowns.
But another Tullow-led offshore development, sanctioned before the oil-price collapse, is poised to come on stream. The $5bn Tweneboa, Enyenra, and Ntomme (Ten) project should be on stream in August, says Tullow.
Tullow says a ramp up of production towards capacity of 80,000 b/d is expected by year-end. But further drilling on the Ten field is unlikely to happen until a long-running maritime border dispute between Ghana and Côte d'Ivoire is resolved.
Italy's Eni is also poised to start producing oil from its FPSO project in the deep water Offshore Cape Three Points (OCTP) Block in the next couple of years. The project, which was given the go-ahead in January 2015, is scheduled to produce first oil in 2017, with first gas production due the following year. The FPSO has an oil production capacity of 58,000 b/d.
Ghana has a track record as one of the region's more reliable partners in recent years, after a rocky start nearly a decade ago. But the economy is going through a sticky patch. While the government of President John Mahama is now trying to introduce greater fiscal discipline, heavy spending based on lasting high oil prices led the country to run up huge debts.
Ratings agency Moody's recently described Ghana's fiscal strength as "very low", while praising the countrys efforts to reduce its fiscal deficit.
Moody's forecasts that real GDP growth will rise to 5.1% in 2016 and 6.5% in 2017, compared with 3.9% in 2015. But for such growth to persist, Ghana needs more hydrocarbons discoveries. Whether the government can make Ghana a sufficiently attractive proposition to international investors with little cash to spend on anything beyond their existing work programmes remains to be seen.
This article is part of an in-depth series on West Africa. Next article: Can Senegal rejuvenate West Africa's upstream?