The country’s oil sector has received a major boost with the signing of a major petroleum agreement between the Government of Ghana and one of the world’s biggest oil companies, Exxon Mobil Corporation (ExxonMobil) of the United States of America (USA).
The agreement, which is subject to parliamentary ratification and the first after the historic judgement in favour of Ghana at the International Tribunal of the Laws of the Sea (ITLOS), will allow Exxon to acquire exploration and production rights for the Deepwater Cape Three Points (DWCTP) block — the Tano Basin in particular.
The Minister of Energy, Mr Boakye Agyarko, signed for Ghana, while the Vice-President for Africa, ExxonMobil, Madam Pamela Darwin, initialed for the global oil giant.
This agreement comes at a time when the World Bank, in its World Economic Outlook, has projected that crude oil production for 2018 will reach 53.25 million barrels (145,887 barrels per day (bpd)), up from the original forecast of 51.18 million barrels.
The increase in the output projection for 2018 is due primarily to a revised 2017 TEN projection from 50,000bpd to approximately 54,000bpd and the 2018 Sankofa Gye Nyame (SGN) projection from 35,441bpd to 43,000bpd, all expected to rake in US$669.41 million for the country.
It is expected that with the entry of ExxonMobil, Ghana is likely to reach daily oil production above 200,000bpd in the short term and even twice the figure in the middle to long term. The impact is also likely to be heavily felt in the country’s Gross Domestic Product (GDP) growth.
In a deal which strongly affirms the government’s openness to the international investor community, ExxonMobil is expected to carry out the work programme as operator and holds 80 per cent interest, while the Ghana National Petroleum Corporation (GNPC), acting on behalf of the government of Ghana, holds 15 per cent interest. Per the terms of the agreement, ExxonMobil will work with the government to identify a Ghanaian company to potentially hold up to five per cent of the interest.
Exploration activities, including the acquisition of seismic data and analysis, are expected to commence later in the year.
The DWCTP block, located 57 miles (92 kilometres) off the coast of Ghana, measures approximately 366,000 acres (1,482 square kilometres) in water depths ranging from 5,085 to 9,350 feet (1,550 to 2,850 metres).
The direct negotiation between ExxonMobil and Ghana was without public tender but carried out in accordance with Section (10) Subsection (9) of the Petroleum (Exploration and Production) Act 2016 (Act 919), which explained that the reasons for inviting ExxonMobil for direct negotiation are based on value proposition for Ghana.
It was also be in accordance with principles of good governance, transparency and accountability.
The DWCTP block was relinquished twice by Vanco Energy and Lukoil and that has since increased its risk profile.
The block is described as one of the ultra-deep water blocks which severely tests the limits of modern technology and will take research and development to optimally develop and exploit any discovered resources.
A petroleum basin such as Ghana’s attracts and retains international oil companies (IOCs) such as ExxonMobil, which has the relevant technical expertise and sound financial capability, with access to both capital and project finance.
Ghana’s offshore basin falls geologically within West Africa’s transform margin, which is highly fragmented and has much of its potential in ultra-deep water. The fragmented nature requires that in order to fully understand the transform margin, IOCs need to take positions in multiple countries and on both sides of the Atlantic (West Africa and South America were connected in geological time).
For instance, exploration success in Guyana is relevant for better understanding Ghana’s geology and, therefore, ExxonMobil’s exploration success in Payara in Guyana will positively impact exploration success in the DWCTP block.
The setting in ultra deep water results in high drilling cost and, therefore, increased emphasis on full regional technical understanding prior to drilling is essential. So ExxonMobil’s regional geological understanding will reduce drilling cost.
Ultra deep water exploitation is beyond the reach of current technology and, therefore, IOCs with strong research and development capability, such as ExxonMobil, are needed to develop future technology to unlock UDW exploitation potential.
In his comments prior to the signing, Mr Agyarko said: “This agreement continues a trend of improving the country’s strategic partnerships with international oil companies,” adding: “The terms of the agreement are among the best, compared with petroleum agreements signed in the past.”
He said the team had been encouraged that ExxonMobil would build local capacity, leave a long-lasting legacy and deploy state-of-the-art technology and infrastructure for the benefit of Ghana.
“It is the sincere wish of the government that ExxonMobil would replicate such investments and introduce fresh innovations within Ghana,” he added.
The Chief Executive Officer of the GNPC, Dr K.K. Sarpong, who had been acknowledged for making a significant contribution during the negotiation process, said: “This agreement to be executed is innovative in addressing the shortcomings identified in previous agreements. Two key examples are the introduction of the Development Loan Agreement and the Default Loan Agreement.”
These, he said, were innovations aimed at securing GNPC’s financing arrangements during the development to give comfort to the contractor party.