Gov’t must act on ENI/Springfield unitisation now – IES

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The state cannot continue to watch on as Eni Ghana and Springfield Exploration and Production Limited continue to disregard a directive to unitise their Afina and Sankofa fields, the Institute for Energy Security (IES) has advised.

In a statement, it said the country stands to lose greatly if the unitisation is not expedited; hence, government and Parliament’s Select Committee on Mines and Energy must act urgently to protect the state’s interests.

“While the country sits unconcerned and watches the two oil companies delay in effecting the country’s own directive, the state stands to lose heavily in the form of a significant drop in operational and capital costs for the unitised fields, as well as increases in royalties, taxes, Additional Oil Entitlement (AOE), fees and levies,” the IES statement read.

The IES statement comes on the back of the two oil firms’ failure to unitise the Sankofa field belonging to Eni and Springfield’s Afina, as directed by former Energy Minister John Peter Amewu in an April 2020 letter.

The directive follows previous engagements and analysis of post-drill data by the Petroleum Commission (PC) and Ghana National Petroleum Corporation (GNPC), which confirmed that the Afina discovery in the WCTP-2 and Sankofa field in the OCTP contract areas were one and the same. That is to say the Sankofa Cenomanian Reservoir extended into the WCTP-2 contract area.

The purpose of executing the Unitisation & Unit Operating Agreement (UUOA), IES reiterated, is to give full effect to government’s directive to unitise the Afina and Sankofa fields, and the subsequent imposition of terms and conditions for unitisation of the Afina discovery and the Sankofa field.

Consequently, and in accordance with the law, the minister directed Springfield and Eni to begin the process leading to unitisation, and to furnish him with a draft UUOA within 120 days of his letter. “Until government prevails on ENI and Springfield to obey the laws of the country, they shall continue to act in violation of the country’s laws and petroleum regulations,” the energy think-tank lamented.

IES further added that even though the minister’s directive was founded on Ghana’s laws and international best practices, one year on the two oil companies are yet to abide by the directive by signing the UUOA to give full effect to it – a clear manifestation of disrespect and disregard for Ghana’s laws. If unitised, the statement said, it will not only prevent physical economic waste but also protect correlative rights – fair shares – of the parties to the contract areas.

Unitisation, to IES, will also lead to maximum economic benefits for the state and to the parties involved in production of the unitised accumulation. These benefits would be derived from, among others, the sharing of development infrastructure – thus lowering the costs of production through economies of scale and operating efficiencies, and ultimately improving economic returns. “Unitisation is intended to maximise the ultimate recovery of petroleum from the fields, according to the best technical or engineering information.

“The Institute for Energy Security (IES) finds that the positions presently held by ENI and Springfield on government’s directive for the two to unitise their respective oil fields has created an impasse. The Institute finds that while Springfield’s position aligns with government’s claim of evidence of common reservoir, the ENI holds the view that there is no existence of hydrocarbon communication between the two contract areas based on data available to them.

“The IES is of firm belief that a workable agreement is still possible. On that score, government and the Parliamentary Select Committee on Mines and Energy must intervene and help the parties to engage, analyse their respective data, and to engage in a constructive negotiation,” the statement added.

However, being a partner to both the OCTP and WCTP-2, it said, government is well-placed to be the catalyst of a fair resolution for the impasse between Springfield and ENI.

“As an interested party to the two fields, and a custodian of the country’s mineral resources, government can still play the role of a mediator to help the two companies overcome the resistance to a workable solution. It is imperative that government immediately finds a solution to this impasse. Undoubtedly, the longer this unitisation delays, the more revenue the country loses. Consequently, the IES wishes to respectfully ask government to inform the nation how it intends to immediately resolve this issue,” the statement concluded.

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