The attention of Springfield Exploration and Production Limited (Springfield), has been drawn to various print and electronic media publications on the topic of the unitization of the Afina and Sankofa fields with statements attributed to Eni Ghana Exploration and Production Limited as well as to ACEP, PIAC and IES. These publications contained some inaccuracies and innuendos which have made it imperative for Springfield to issue this press release to clarify the position and give the public a fair and accurate perspective.
Springfield wishes to state that it has been and will remain a willing, cooperative party to the unitization of the Afina-Sankofa fields. Springfield has taken the necessary steps to actualize the said directive and has consistently pushed for an early resolution of all the challenges to executing the directive. Indeed, from April 2020 when the directive was issued, talks have been ongoing amongst various government institutions on one hand and Springfield, with Eni being the only uncooperative party. Springfield also wishes to clarify on the following specific issues stated in the publications:
- Unitisation Process:
It has been stated in some publications that “….unitization needs to follow an appropriate, shared work programme and evaluation process to assess the elements before taking decisions”. This is erroneous as it is not the position of the law. Any process or principle for unitization must ultimately conform with the laws of the nation, Ghana. Per the laws of Ghana, the sole requirement for the unitization of fields is when an accumulation of petroleum extends from the boundaries of one contract area into another. ENI’s own Plan of Development (PoD) confirmed the extension of the Sankofa field into the WCTP2 contract area. Springfield was advised by the Government of Ghana to drill a well to further confirm the extension of the Sankofa field into the WCTP2 contract area. Springfield, through the drilling of the Afina-1X well, confirmed the extension of the Afina field into the Sankofa field. The extension of the Sankofa field into WCTP-2 (Afina) has been confirmed by some Government institutions in their independent studies as well as in studies by internationally renowned companies utilizing standard geological and engineering methods accepted by the oil and gas industry. Thus, the requirement for unitization under the laws of Ghana has been fulfilled. Additionally, review of ENI’s data obtained by Springfield through the intervention of the Government of Ghana after the issuance of the unitization directive has further confirmed the straddling of the Afina and Sankofa fields. Any further activity or work programme beyond proving that the fields straddle is a post-unitization activity which would be carried out as part of the unit operations.
It has also been erroneusly stated in certain publications that “….the unitization process for Afina and Sankofa field would entail an appraisal programme of the Afina area including (but not limited to) production and interference tests”. This is inaccurate. A key objective of appraisal activities is to delineate fields and know how far they extend. Thus, appraising a field would apply to the entire petroleum accumulation and not just a portion of it. With the Afina and Sankofa fields already established as a single unit, the drilling of Afina-1 fulfilled the appraisal objective as it proved that the Sankofa field extends further into the Springfield operated area. Afina-1, though an exploratory well for Springfield due to contractual obligations and the fact that it was the 1st well drilled on the WCTP-2 area, has fulfilled appraisal requirements by further delineating the Sankofa field into WCTP-2 and can be deemed as an appraisal well in the grand scheme of appraising the Sankofa hydrocarbon accumulation. Parallels can be drawn from the Hyedua Well, which was drilled by Tullow as an exploration well for the Deepwater Tano contract area and later reclassified as an appraisal well for the purposes of unitizing the Jubilee Field. In this regard, the Afina 1X Well can either be an exploration well or an appraisal well, depending on the context – it is an exploration well in the context of the WCTP 2 contract area, and an appraisal well in the context of the unitized field with Sankofa.
- Costs and Liabilities:
It has been stated in some of the publications that “….each party must first pay its share of the costs of producing hydrocarbons from the unitized field in order to have a right to the oil produced and proceeds from the production”. This is a misrepresentation of the process. Past production from the unitized field must also be re-allocated to the Parties in accordance with their respective interests in the unitized field. As per industry practice, a reconciliation of past costs and past revenue from production will be conducted to determine the entitlement of the Parties to past revenue vis-à-vis past costs. Since Springfield is entitled to a significant participating interest in the unitised afina and sankofa field, a full fledged audit has to be conducted to ascertain all past costs (opex and capex) incurred and all past revenues collected from the sale of hydrocarbons to date and apportion the costs and revenues to each party proportionately. After this reconciliation, if the cost is higher than the revenues then there will be an amount for Springfield to pay. However, if the opposite is true and the revenue is more than the costs incurred, there will then be an amount to be paid to Springfield by ENI & Vitol. It is imperative to note that this field has been in production for almost four (4) years already. Springfield is willing to follow this process to ensure each party is treated fairly. Going forward, after such reconciliation, Springfield will bear its pro-rata share of future costs and be entitled to its share of oil produced in line with standard industry practice.
This is in line with the international convention on unitisation that where there is pre-unitization expenditure and/or pre-unitization production in the Unit Area (whether by one or both Contract Groups), the Unitization and Unit Operating Agreement (UUOA) would seek to re-allocate and balance such costs and production from the unit area to the contractor groups in accordance with their respective shares in the unit. This set-off mechanism is clearly contemplated in the 2020 Model UUOA issued by the Association of International Petroleum Negotiators (AIPN).
Springfield as the only independent wholly-Ghanaian company to operate a deepwater asset, is in a unique position to encourage participation of other independent Ghanaian and African companies in Ghana’s upstream sector. Thus, Springfield is committed to a resolution to the matter at hand that would ultimately provide maximum benefits for all involved, especially the people of Ghana. In this regard, Springfield welcomes ENI’s statement that it is not opposed to the unitization of the Afina-Sankofa fields as directed by the Government of Ghana. Accordingly, we hope that ENI translates its statements into action by coming to the table for productive discussions to enable the parties complete the unitization process.