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OPEC bulletin 2–3/14
I n F o c u s
Production headaches
“We understand that promoting local content has a posi-
tive social impact, as well as being a responsible busi-
ness practice which enhances bottom line and reputa-
tion,” said President and General Manager of Tullow
Ghana, Dai Jones.
First oil from the country’s Jubilee field, which holds
over one billion barrels of crude, happened in 2010. The
Jubilee partners, where Tullow is the operator, have built
a $3.5 million technical training centre at the Takoradi
polytechnic in the Western Region to bring Ghanaians
into the oil business.
Jubilee is an exciting asset as the government plans
to use oil revenues to transform the economy and offer
new skills and opportunities to its citizens — thereby
expectations about its production profile are high and it
is unsurprising that there is so much debate about how
Ghana’s energy policy should evolve to meet the multi-
tude of interests of different stakeholders.
Speaking to 241 key stakeholders, comprisingmem-
bers of parliament, regulators, community representa-
tives, environmental groups and employees in 2012,
Tullow found that local employment and development of
local suppliers had not matched the hopes of the govern-
ment, local businesses and the citizens of Ghana.
“It is clear from this that we need to ensure we man-
age expectations as to the size and timing of these oppor-
tunities in the lifecycle of an oil project,” the company
admitted.
Risks in maintaining and optimizing the local supply
chain become particularly prominent when things do not
go quite to plan. Jubilee’s production has been flaky, due
to technicalproblemswith thewellswhichhavenowbeen
fixed and gas export issues which are still ongoing.
According to Jubileepartner, KosmosEnergy, the field
delivered over 87m b of oil at year-end 2013.
TullowOil, the parent company of TullowGhana, said
that in 2014 the field will produce, on average, 100,000
b/d. This is lower than its initial target of 120,000 b/d
as the onshore Atuabo plant, which is to process 150
million standard cubic feet/day of associated gas has
fallen far behind schedule from a January 2013 start-up
to May 2014. This has resulted in the Jubilee consortium
re-injecting gas into the field.
The Ghanaian government and Tullow are exploring
other gas disposal alternatives, including limited flar-
ing, which will enable the field to average 100,000 b/d
in 2014. This year, additional infill wells and subsea
infrastructure are scheduled to boost recovery andmain-
tain plateau production levels, but this cannot happen
until gas exports start.
Controversy
Kojo Agbenor-Efunam, Deputy Director of Oil at the
Environmental Protection Agency, said the reservoir had
reached unsafe levels for gas to still be re-injected. But
flaring is a controversial option as there is a zero gas-flar-
ing policy: flaring is only permitted in emergency circum-
stances under the country’s Petroleum Law.
The questions are how much the consortium should
be fined and for how long the flaring would continue —
considering the environmental harm it causes. Around
40mcf/d is estimatedwill be flared until the plant opens.
Residents living within the oil production vicinity
are troubled about how it would affect their health and
vegetation — pointing to the gas-flaring problems in the
Niger Delta.
“The real constraint is not the reservoir, it is the gas
export scheme,” said Paul MacDade, Chief Operating
Officer at Tullow. “We do not have the gas export facility
to push the gas onshore, so we are injecting it and that
is really our bottleneck at the moment.”
Another option on the table is to reduce output from
Jubilee, but this has financial implications for the govern-
ment and the oil companies.
Dutch disease
Economists are warning that Dutch disease is looming in
Ghana’s economy in the light of oil revenues from Jubilee,
thereby jeopardizing investment in non-oil sectors and
leading to their contraction. Ghana is a leading exporter
of cocoa and gold.
In October last year, Mohammed Amin Adam,
Executive Director at the Africa Centre for Energy Policy
(ACEP), an African energy policy think-tank, highlighted
that Ghana’s oil and gas sector, which had low linkages
with the economy, had outpaced cocoa as the second
largest export.
AECP said oil exports reached a value of $2.8bn, due
to increasing production, compared with $1.4bn from
cocoa, attributable todeclining global commodityprices,
adding: “We strongly believe the effects of the Dutch dis-
ease cannot be discounted.”
Senior Economist at the Institute of EconomicAffairs,
Dr J K Kwakye, has called upon the Ghanaian government
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