While production from Ghana’s Jubilee Field has been cut short from 120,000 barrels of oil per day (bopd) to an average 80,000 bpd due to such challenges, similar issues have slowed neighbouring Cote d’Ivoire’s daily output from 50,000 bopd to an average of 37,000 bpd.
Years of drilling from some of Cote d’Ivoire’s active wells have weakened their pressure levels, making it difficult for those aging wells to pump enough crude on daily basis.
The Director-General of Petroci – the national oil company of Cote d’Ivoire, Mr Daniel Gnangni, told a group of Ghanaian journalists on study tour in Abidjan, Cote d’Ivoire, that sand had also seeped into some of the wells to block the perforators, thereby reducing the flow of oil onto the floating, production, supply and offloading (FPSO) vessel.
Mr Gnangni’s interaction with the journalists formed part of a training programme on oil, gas and mining organised by the Revenue Watch Institute (RWI) in collaboration with Penplusbytes, a local ICT training organisation.
As a result of the difficulties, Cote d’Ivoire has not been able to attain its 2011 and 2012 daily production target of 80,000 bpd.
The country’s daily output has been averaging at 10,000 and 80,000 bopd since it started commercial production from offshore oil fields late 1980s.
Its daily output was 50,000 bpd in the early 2000s but fell to an average of 35,000 and 40,000 bpd since January this year on the back of the technical challenges that Mr Gnangni said were limiting free flow of oil from the wells.
The result has been a contraction of projected government revenues from oil and a strain on national budget and the economy at large.
“Oil gives financial benefits to the state and producing below target means we are not earning the amount we projected from oil,” Mr Gnangni said.
He, however, declined to mention the exact amount the government was missing as a result of the shortfall in production.
Information on the Cote d’Ivoire’s oil sector is scanty as most officials shy away from discussing issues on oil.
Petroci’s DG said the company and its operating partners were exploring solutions to the technical difficulties in a bid to raise daily production levels to appreciable levels and help rake in more revenues from the sector for government.
In addition to improving the pressure levels of the aging wells and freeing the chocked wells of sand, Mr Gnangni said Petroci was hopeful of discovering new fields to help make-up for the shortfall.
“We are exploring for new wells and we are hopeful that we will soon get to where we want to get to,” he said.
Here in Ghana, the situation is quite similar as the lead Jubilee Field operator, Tullow Ghana, has attributed the field’s inability to attain the peak production target of 120,000 bpd to technical challenges including sand seeping into the wells to choke the perforators.
Those technical difficulties have slowed daily output since late 2010, when commercial oil production started in Ghana.
The field has since then produced at an average of 75,000 to 90,000 bpd, making it difficult for government to realise its revenue targets from oil.
The government earned GH¢666.2 million in 2011, about GH¢583.8 million less than the GH¢1.25 billion revenues that it had budgeted from oil in that year.
The Public Interest and Accountability Committee (PIAC) said in its 2011 annual report that the revenue shortfall could partly be blamed on a corresponding shortfall in production levels.
“Actual production was lower than forecast production due to underperformance of the oil wells resulting from ‘technical challenges’ in the oil fields,” the report said.
Although the Minister of Finance and Economic Planning (MoFEP), Dr Kwabena Duffuor, said that the revenue shortfall was mitigated by a contrary sharp rise in non-oil revenues in the 2011 financial year, Dr Joe Abbey of the Centre for Policy Analysis (CEPA), said in a telephone interview that earning less than projected would always have a negative impact on budget deficit.
“If you budgeted for high revenues (from oil) only to get less than expected, then the likelihood is that you will end up with a larger deficit than expected,” he said.
The budget deficit was 4.0 per cent of GDP in 2011 but is projected to widen to 6.7 per cent at the end of this year.
With the fluctuations in daily production still on going in the two countries, Dr Abbey said both governments could be expected to earn less than estimated from their respective oil sectors in 2012.