Ghana, one of Africa’s democratic standard bearers, is a relative newcomer to the oil sector. Having surpassed oil development’s teething problems, it has remained highly committed not to scaring foreign investors away and keep existing covenants intact. While the nation’s energy outlook is improving, significant challenges remain.
This year saw Ghana propel to an upward curve, leaving behind the travails of 2015 and 2016, not only because new projects are coming online (currently only three offshore fields are producing), but also because Accra has managed to peacefully resolve its maritime boundary dispute with Côte d’Ivoire. The 2016 presidential election also produced little to no change in Ghana’s energy policy, further consolidating the country’s appeal in investors’ eyes. Still, struggles abound, and the example of nearby Nigeria provides an illuminative case in how things can, when underestimated, go wrong.
Late September, the International Tribunal for the Law of the Sea (ITLOS) found that Ghana did not violate Côte d’Ivoire’s sovereign rights by distributing E&P licenses in waters it deemed its own. As all Ghanaian oil production is currently located offshore and very close to the Ghana-Côte d’Ivoire maritime boundary, the judicial proceedings have effectively blocked the development of several promising oil and gas fields. Since both Côte d’Ivoire and Ghana agreed to comply with the ITLOS decision, energy companies already present in the region can now push forward with projects that had been on hold for three years. Now appraisal works are expected to continue at Hess’s Cape Three Points block, as well as on the Erin Energy-controlled Shallow Water Tano block, while Tullow will resume drilling at the Tweneboa-Enyenra-Ntomme (TEN) block.
Concurrently, oil production at already exploited fields is expected to ramp up rapidly, surpassing a government-anticipated average of 123,416 barrels per day (it has already moved beyond 160,000 barrels per day). Jubilee, Ghana’s currently-largest oil field with recoverable reserves amounting to 1.2 billion barrels of oil, is still performing below its pre-2015 levels (now around 89,000 barrels per day) as a result of last year’s force majeure which saw the turret mooring system of its FSPO damaged.
The repairs are expected to take place in Q1 2018, after which Jubilee will be able to reach its 120,000 barrel per day peak. Late October, the Ghanaian Government approved Tullow Oil’s Jubilee Full Field Development Plan, thereby paving the way for a future production increase to 150,000-160,000 barrels per day.
Oil production at the Tullow-operated 240 MMbbl TEN field started in August 2016, with gas production expected to follow up in early 2018 (peak of 40-50 MMCf/d). Charting a similar development course, ENI started oil production May 2017 at the 0.5 BBbl Offshore Cape Three Points (OCTP) project, which is bound to plateau at 85 000 barrels per day, while gas production commences in Q1 2018 (peaking at 180 MMCf/d).
Two gas plants were built specifically for the purpose of receiving offshore-produced gas. Gas from OCTP will be supplied via a subsea pipeline to the Sanzule gas receiving facility; from there onward it will feed Ghana’s national grid, while gas produced at Jubilee and the TEN fields reaches the Atuabo gas processing plant onshore, located approximately nine miles west to Sanzule.
Ghana’s legislative framework is lighter when it comes to gas production (the state take is less than 50 percent, whereas in the case of oil it is around 70-75 percent) and it’s for a specific reason: Ghana’s power supply is notoriously problematic.
Ghana historically relied on Nigerian gas to complement its energy supply matrix, supplied via the West Africa Gas Pipeline (WAGP). Following 10 contentious years of exploitation due to frequent non-payment issues and supply shortages, WAGP’s role is bound to be reduced to minimum. The reason is simple: domestic gas supply will render Ghana self-sufficient in a few years’ time, which will also allow Accra to account for hydro generation shortcomings (remarkably volatile, generally the Akosombo hydro plant generation has been falling since 2012).
Yet even here, Ghanaian officials will face manifold problems, including the fact that 20 percent of generated electricity is still lost through transmission and distribution. Also, some parts of Ghana form electricity enclaves and the gas supply boost will not reach them; here, the government has opted for LNG. In return for signing a long-term LNG supply contract (1.7 million tons per year), Gazprom agreed to build a regasification terminal at Tema, a thermal power enclave. The aforementioned developments will prove instrumental in dramatically improving the lives of Ghanaians, as firewood still makes up at least a third of Ghana’s primary energy consumption, perpetuating the country’s household air pollution problem.
Unconventionally for African countries, Ghana has been meticulously fine-tuning its regulatory framework, leading to palpable improvements in efficiency and transparency. It had made headway on updating its obsolete 1984 petroleum legislature, like establishing the National Petroleum Commission in 2011 (previously, the GNPC handled both production and regulation), while the 2015 Petroleum Revenue Management Bill has increased the traceability of oil revenues that flow through government agencies.
This is not to say that the process has been without difficulties or that most major hindrances have been cleared. Political obstructionism in energy-related matters is a regular feature. The adoption of the Right to Information bill (which would allow individuals to gain insight into the government’s allocation of oil revenues) has been delayed for five years now. Graft remains a widespread issue. The general direction is irreproachable.
Future drilling results might cool down the potentially emerging oil hype, so Ghana’s oil bounty might in fact be overestimated. Drilling results east of Jubilee and the Tano Basin drilling have been largely disappointing—LUKOIL’s Deepwater Cape Three Points block turned out to possess only commercially unviable reserves of oil, in geologically much more complex strata, forcing the Russian company to abandon the project.
A new major discovery would provide a new invigorating boost to Ghana’s E&P activities. No significant discoveries have been made since 2012 and exploratory drilling activity has been very limited, partly due to the international boundary litigation. Still, the last four years saw an influx of minor, relatively unknown companies to Ghana’s offshore blocks, while the 2008-2012 period saw ENI, Hess, Tullow Oil, LUKOIL and others taking an active interest.
On balance, Ghana is well-placed to deliver on its promises. Authorities seem to stick to the no-nonsense approach, buttressed by presidential elections entailing no sharp shifts in policy. Physical safety, a burning topic in Nigeria, is not an issue; excluding the Shallow Water Tano block, all of Ghana’s offshore fields are at least 50-60km away from shore, significantly minimizing the risks of sabotage actions and other disruptions to production. The situation would have been completely different if oil majors had developed fields onshore within the reach of the populace.
Although the first onshore exploratory well in Ghana dates back to 1898, no commercially viable fields have been found since. Its offshore, however, abounds in both oil and gas, and Jubilee, TEN and OCTP are by no means the end of the story. Ghana’s medium density, low-sulphur crudes will find their place on the global market, just as Ghanaian gas will meet its end user at home.
By Viktor Katona