Oil producers Eni Ghana Exploration and Production Limited and Springfield Exploration and Production (SEP) Limited are yet to unitise their Sankofa and Afina fields, despite a government directive requiring them to do so a year ago.
In April 2020, the Ministry of Energy in a letter signed by former Minister Peter John Amewu directed the two firms to unitise their fields. The decision resulted from a series of engagements and analyses of post-drill data, which showed that the Afina discovery in the WCTP-2 belonging to Springfield and Eni’s Sankofa field in the OCTP contract areas were one and the same.
A year after the unitisation directive, energy think-tank Institute for Energy Security (IES), says information available to it indicates that Eni and Springfield are yet to sign the Unitisation and Unit Operating Agreement (UUOA) to give full effect to government’s directive. It adds that it finds the non-compliance with the order shocking and disappointing, given that it was issued in accordance with law and in the best interests of all the parties, including the state.
“The IES counts the delay in unitising the OCTP and WCTP-2 as a loss of opportunity for the country to reap maximum benefits from its petroleum resources due to the economic incentives associated with unitisation of oil and gas fields,” its Executive Director, Nana Amoasi VII, said in a statement to the B&FT.
Section 34 (1) of the Petroleum Exploration and Production Act, 2016 (Act 919) provides that: ‘Where an accumulation of petroleum extends beyond the boundaries of one contract area into one or more contract areas, the minister in consultation with the Petroleum Commission may, for the purpose of ensuring optimum recovery from the accumulation, direct the relevant contractors to enter into an agreement to develop and produce the accumulation of petroleum as a single unit’.
Having established that the ministry’s directive was in accordance with the laws of Ghana and international best practices, he said it is puzzling why Eni and Springfield are yet to sign the UUOA to fully complete unitisation of the fields so as to enable the state derive the much needed revenues.
Nana Amoasi VII, who is a seasoned energy sector expert and traditional leader, explains that the rationale behind Act 919 is to prevent physical economic waste; as well as to protect correlative rights – fair shares- of the parties to the contract areas. “Unquestionably, unitisation is a proper and generally accepted measure in the oil and gas industry to prevent waste. It is acknowledged as the best method of producing oil and gas efficiently and fairly.”
He said unitisation, which mean to merge, is a common practice globally; and that the Institute’s review of unitisation laws in other countries show the majority of countries including Ecuador, Azerbaijan, United Kingdom, Egypt, Brazil, Nigeria, and Ecuador have enacted laws and regulations governing unitisation processes which are very similar to Ghana’s.
In all these cases, he said, the practice is usually for voluntary unitisation, with government having the power to enforce processes for unitisation if voluntary unitisation fails. In international practice, the universal trigger for requiring unitisation is geological – where a petroleum reservoir is found to extend underneath contiguous contract areas, giving the different parties rights over the common reservoir.
“It is an established fact that unitisation leads to maximum economic benefits for all the parties involved, including the state,” he said, listing sharing of development facilities, which naturally drives down costs – and ultimately improves economic returns and ensures a significant reduction in operational and capital costs; and increase in royalties, taxes as well as Additional Oil Entitlement (AOE), fees and levies, among the benefits of unitising.
The Institute therefore said it was imperative government updated the nation regarding progress made on its unitisation directive to Springfield and Eni, as part of its accountability on petroleum resource management to citizens.