- Says Sankofa to deliver US$8.1bn revenue to state
Eni Ghana is not against the prospect of jointly developing its Sankofa field with Springfield’s Afina discovery, the Italian company has said.
Its Managing Director, Giuseppe Valenti, said the company is in dialogue with relevant authorities – Ministry of Energy and Petroleum Commission and partners Ghana National Petroleum Corporation (GNPC) – to find a mutually acceptable solution that enables the country to capitalise on Springfield’s Afina discovery.
The oil producer also said the Sankofa field alone will deliver revenue in excess of US$8.1billion to the state during its lifespan per its plan of development with government. Of the amount, US$2.8billion represents government’s fiscal stake; royalties – US$1.6billion; and US$3.7billion as GNPC entitlement, it said in reaction to what it describes as unreliable and ungrounded data on expected revenues to the state being circulated within the media. “In principle, we are not opposed to unitisation,” says Mr. Valenti.
His comments come in the wake of a recent study by the Institute for Energy Security (IES), which claimed that the state will generate only US$2.06billion in revenue from Eni’s Sankofa field. The study also said the state stand to gain US$8.4billion if Eni and Springfield, which owns the Afina discovery, unitise their operations as proposed by government in an April 2020 letter.
The IES subsequently urged government to compel the two firms to expedite the unitisation, a year on after its directive, in order to protect the country’s interests.
Mr. Valenti however said the timing for finding a viable solution should be driven by goodwill of the parties to share data and cooperate. He also explained that the process needs to follow an appropriate shared work programme and evaluation process to arrive at a decision in the interest of all parties.
Among other things, Mr. Valenti stated that unitisation can only occur after an appraisal programme has been done on the Afina area. This includes but is not limited to production and interference tests, which he said are critical because they help to understand the potential benefit that a unitisation of the Sankofa field and Afina discovery could deliver.
“We have recently been able to work on the data – thanks to intervention by the Ministry of Energy, and delivered our analysis in the direction of finding a viable solution regarding potential optimisation for the recovery of oil reserves,” he said.
Ideally, unitisation is appropriate when: hydrocarbon an accumulation straddles a contract area boundary; hydrocarbons from one contract area can migrate into the other contract area; hydrocarbons are commercially producible on both sides of the contract area boundary; and if hydrocarbon accumulation can be developed as one unit for optimum petroleum recovery and operational efficiency.
More importantly, he said, parties to a unitisation agreement must all be in a position to contribute to the costs and liabilities deriving from the development and production of hydrocarbons, related facilities and other expenses. “In order to have a right to the hydrocarbons produced and in proceeds from the production, each party must first pay its share of the costs of producing hydrocarbons from the unitised field.”
He also revealed that his outfit has so far invested US$6billion in the Sankofa field, with an additional US$5billion to be invested during the field’s life.
This, he noted, requires that every decision taken is backed by data in order not to jeopardise the huge sums invested. “We are confident that the analysis and resulting report will allow the parties to progress discussions toward an agreeable, commercial solution of the matter,” he added.
Springfield, when contacted for views on the said IES study and the reason for delay in executing the unitisation directive by government, declined to comment.
Over 130 unitisation and pre-unitisation deals
According to him, ENI has over the years, executed more than 130 unitisation and pre-unitisation agreements around the world; including in Nigeria, Australia, Algeria, Angola, USA, Italy, and Mozambique. He said the company is leveraging this experience to ensure that its interests and those of all other parties are protected.
Eni’s Sankofa field, located in Offshore Cape Three Points (OCTP), has reserves for 500 million barrels of oil in place and 40 billion m3 (270 million barrels of oil equivalent) of non-associated gas, and is owned by Eni Ghana and Vitol.