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Tullow Ghana MD decries govt’s decision to ditch free Jubilee gas for take or pay Sankofa gas

  • SOURCE: Citi | Richard Annerquaye Abbey
  • Oil production in Ghana’s Jubilee fields is in grave danger after the government stopped taking associated gas from the field forcing the operators to reinject the gas into the wells of the country’s premier oil field.

    The lead partner of the field, Tullow, had been reinjecting the accompanying gas which comes with the oil before the Ghana Gas Plant was built.

    After the completion of the gas plant, the Jubilee Partners offered the associated gas to the government at no cost to avoid reinjection which threatens the integrity of the wells and hinders optimal oil production.

    But somewhere along the line, challenges with gas from the West Africa Gas Pipeline meant that critical gas needed to fire up power plants was very much needed, and the Offshore Cape Three Points project operated by Eni came in handy.

    The previous government initially entered into a take or pay contract that bought the Eni gas for US$10.15/MMBtu (in 2018 US Dollars) which has subsequently been revised to about US$7.89/MMBtu — although the government still paid US$28 million monthly for gas it has no immediate use for.

    “But the problem that the Jubilee partners are having is that the Ghana Gas Processing Plant is not taking our gas. They are taking the gas from Eni because there is a take or pay contract that obliges them that if they don’t take, they will still pay.”

    Speaking at a press interaction on Friday, the Executive Vice President of Tullow Oil Plc and Managing Director of Tullow Ghana, Kweku Awotwi, explained that not only is the current arrangement expensive for the country, but threatens oil production at the Jubilee field.

    “It is an odd situation the country finds itself because that take or pay is quite expensive, because take or pay tends to be, and our gas, which is associated gas, is actually free for the government as against US$7.89/MMBtu cost of gas from Eni,” he said.

    “This is why we are being forced to reinject that gas. Ghana Gas processing plant has a capacity of about 150 MMScfd in terms of processing per day. We can produce over 200 MMScfd of gas and Eni can produce over 180 MMScfd; already you can see where the constraint is coming from. Today, Ghana Gas is taking 80 MMScfd of our gas and 80 MMScfd of Eni gas; it does mean that all the other gas we produce, is reinjected.”

    “This is not just harming our reservoir, it is also limiting our production. We are hoping that next year, Ghana Gas will take more of our gas so that we reinject less and protect the reservoir,” Mr. Awotwi stated.

    Increasing gas consumption

    A few months ago, the Karpowership was moved from its base in Tema to the Western region to tap into the large unevacuated gas produced by the Atuabo Gas Processing Plant.

    Apart from that, a transmission line that can carry gas from the Western region to the Tema enclave, where a number of power plants operated by Independent Power Producers (IPPs) are located, is largely underutilized.

    It is widely believed that there could be a significant reduction in the cost of producing electricity which will ease the burden on consumers if the government is able to utilize the gas produced by Jubilee partners which comes at no cost.

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