Mar(k): Travel, Hiking, and "Doing Good"

musings on our life of travel and volunteering

Ghana Oil Production: An Update February 2012

with 3 comments

Introduction

Our last update was in July 2011, so we thought it time to see how things have progressed with the development of the Jubilee field (Ghana’s only oil production).

Background

Production from Jubilee commenced on 28 November 2010 and the Operator, Tullow Oil, was forecasting peak production of 120,000 barrels/day would be achieved by mid-2011 from the 9 production wells. Unfortunately, as is often the case, things have not gone to plan……

Production                                                                                                                                

According to Tullow, the field peaked at 88,000 barrels/day before declining to around 70,000 barrels/day at the end of 2012. The cause of the problem “has been identified as a technical issue related to the design of the well completions and is not expected to have any impact on field reserves and resources”. Apparently the screens put in the well to prevent sand ingress (a procedure known as “gravel packing”) are not performing as planned – perhaps due to blockage. Whatever the cause, Tullow have embarked on the side-track (redrilling of the bottom part of the well) and recompletion of 4 of the wells – a rather unfortunate outcome with an estimated cost of $100 million per well. Ouch!

The good news is that the water and gas injection systems are now working as planned and routine gas flaring has stopped.

In 2012, production is now expected to average between 70,000 and 90,000 barrels/day, depending upon the success of the 4 side-tracks and the number of new wells which start flowing during the year (see below).

Further Development

The Phase 1a development, consisting of 5 new producers and 3 additional water injectors, has been approved by the government. Drilling is expected to commence this month and take 18 months to complete. The total cost will be $1.1 billion.

And where does the money go…..

The Ghanaian government receives 13.75% of production from Jubilee. In 2011 this amounted to 3.93 million barrels which earned $444 million (note that the government also receives income tax levied at 35%).

To its credit, the government has passed the Petroleum Revenue Management Act which “provides a framework for the collection, allocation and management of petroleum revenue in a responsible, transparent, accountable and sustainable manner for the benefit of all citizens of Ghana”. The act specifies that up to 70% of the oil revenue can go to the annual budget and 30% to a “Stabilization Fund and a Heritage Fund”. A “Public Interest and Accountability Committee” has also been established to monitor the management of petroleum funds.

Good laws do not necessarily guarantee a successful outcome and whilst the government has been very open in its usage of petroleum funds to date (http://ghanaoilwatch.org/index.php?option=com_content&view=article&id=3&Itemid=4), civil society organisations in Ghana still harbor concerns including:

  • Prioritisation of budgetary expenditure – in particular ensuring equitable spending in the underdeveloped north of the country.
  • Correct allocation of revenue to the stabilization fund.
  • Using oil revenue as collateral to enter into risky loans.

It is in the impoverished north of the country, where we lived and worked, where the funds flowing from oil production are most desperately needed. Poverty levels in the most northern regions of Ghana are 3 times the national average; infrastructure is poor or non-existent and subsistence farming in the harsh sub-Saharan climate is the lot of most people. They deserve more in life.

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Written by Mar(k)

February 23, 2012 at 4:33 pm

3 Responses

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  1. They do indeed. Are you implying that the oil funds wont flow to the north of Ghana?

    Great post as usual..I always read your posts and learn something I never knew!

    Best,

    Ron

    ogdennepaltrip2011Ron

    February 24, 2012 at 5:32 am

    • Unfortunately yes. As in other West African countries there is a gross disparity between living standards and infrastructure in the north and south of the country due to decades of neglect. As you move from the South to the North, infrastructure decreases and poverty becomes more and more evident. Despite much talk, we haven’t seen any evidence that this is about to change.

      Mar(k)

      February 29, 2012 at 3:36 pm

  2. Really interesting piece on how oil is affecting the development of Ghana. We have recently set up in Ghana and Angola and are currently getting to know more and more about the region. There are many positive signs of growth that we have seen and entrpeneurial people with good ideas. Although I cannot comment on the North as unfortunately we too are based in Accra. We do fly to Tamale but no further north than that so far although we are constantly hoping to improve transport connections between remote areas of the country.


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