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Jubilee Fields unitisation to cost US$1.9bn

  • POSTED ON: August 22, 2017
  • SOURCE: Graphic
  • CATEGORY:

Jubilee Fields operator, Tullow Oil, and its partner, Kosmos, have revised down the cost estimate for integrating the field with nearby discoveries into the Greater Jubilee to US$1.9 billion.

The revision was captured in a new Plan of Development (PoD) that the two companies hope the government will approve before the year ends.

The amount is needed to integrate the Teak, Hyedua and Mahogany discoveries into the Jubilee Fields production and floating vessel to help extend the field’s lifespan and increase its commercial reserves.

Tullow Ghana’s Director of Exploration and Development, Nana Appia Kyei, told the GRAPHIC BUSINESS on August 18 that the revised PoD was resubmitted last month after an earlier one, which pegged the cost of unitisation at US$2.3 billion, was rejected by the government for being “too expensive.”

The gas price quoted in that December 2015 PoD was also thought to be “unfavourable” to the national gas aggregator, the Ghana National Petroleum Corporation (GNPC), Nana Kyei added.

“The government said we are not happy with the gas price, we are not happy with the cost of the development itself and then the rig you are going to use to develop is too expensive. Those were the main concerns,” he said.

As a result, the government requested the two companies to withdraw the PoD and take a second look at the costs, which, although investments, will be recouped as capital gains once full development is completed and commercial production commences.

A former Head of the Petroleum Unit at the Ghana Revenue Authority (GRA), Mr Dela Klorbi, said the push for cost reduction was necessary, to ensure that the country maximises earnings from the field when production starts.

“That money they will use for the development will be treated as capital gains and they will recoup it. Now, if the costs are high, it means the profits will be small too and that will limit the amount you get in taxes,” Mr Klorbi, who retired last year, said.

Savings

Beyond taking a second look at the gas price, Tullow’s Director of E&P said the decline in crude oil prices came in handy; it combined with other factors to make it possible for the companies to shave off a total of US$400 million.

“Now, costs have come down; we are almost there in terms of getting a gas price that GNPC, which is the national gas aggregator, can have a market for and once these are okayed (by the government), we can then go ahead to start with the development,” he said.

The approval from the government is needed to pave the way for the two companies to begin processes towards connecting the Mahogany and Teak discoveries into the existing Jubilee Fields.

A key part of that process is tendering for a rig, which Mr Kyei said was currently in motion.

Impact on petroleum earnings

Known as the Greater Jubilee Fields Full Development (GJFFD), the unitisation of the current Jubilee Fields, where production averages 110,000 barrels per day (bopd), with the Teak, Hyedua and Mohogany discoveries will help create a bigger reservoir of petroleum resources.

This should help maximise oil reserves in the fields by 100 million barrels while extending its production lifespan.

Once approved, Tullow and Kosmos would be expected to drill extra wells within the fields to help realise the full potential.

Currently, 26 of the 28 wells are in production but Tullow said its estimate showed that the field held more reserves than the 28 wells could help produce.

“We want to drill more wells in Jubilee itself to help realise the full potential. At the moment, we have an idea what we can do initially but we think we can do more than that depending on the outcome,” he said.

Although Nana Kyei declined to go into details on the prospects of the unitisation, he said more wells would be drilled at the Mohogany for extra production that could then be tied back to Jubilee Fields.

Seprate licenses

The Mohogany and Teak areas are outside the Jubilee Fields ring-fenced area but closer to Jubilee Fields, which is the country’s maiden commercial field.

Discovered in 2007, the Jubilee Fields straddles the West Cape Three Points (WCTP) and the Deep Water Tano licences, which are held separately by Kosmos and Tullow Ghana respectively.

Following the discovery, the two partners made extra four drillings in Hyedua 1&2 and Mahogany 1&2.

The drillings, which were five kilometers apart, revealed that the Jubilee Fields extended to such areas, making it a commercial discovery.

This prompted the government to ask the two companies to develop Jubilee but undertake full appraisals to discover the full extent of the field.

Those appraisals have now concluded that the nearby reserves could be integrated into the Jubilee Field and produced through the current FPSO Kwame Nkrumah.

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