You are here: HomeNews2022 10 04Article 1635464

Business News of Tuesday, 4 October 2022

Source: thebftonline.com

Ghana's crude oil production on a 3-year downward spiral

File photo of an oil rig File photo of an oil rig

The country recorded 25.8 million (bbls) of crude oil in the first half-year of 2022 from its three offshore producing fields – Jubilee, Tweneboa Enyera and Ntomme (TEN) and Sankofa Gye Nyame (SGN), a reduction of about 1.9 million barrels from the previous year’s production.

Jubilee recorded 14.9 million bbls, being 57.6 percent of the total production, whereas SGN produced 6.5 million bbls representing 25.4 percent and TEN recorded 4.3 million bbls, being 17 percent.

This represents a 6.9 percent reduction from first-half 2021 production, and the third consecutive reduction in year-on-year (yoy) crude oil production volumes since the natural resource started commercial production.

According to the Public Interest and Accountability Committee (PIAC) in its latest report, the decrease was a result of reduced production on the TEN and SGN fields – which recorded a decline of 34.3 and 21 percent respectively.

Meanwhile, crude oil production increased in the Jubilee Field by 16.6 percent.

PIAC noted that despite the decline in crude oil production during the period under review, a surge in prices resulted in government realising more revenue, US$731.9million; more than its set target.

However, it will be recalled that a March 2022 report commissioned by PIAC first indicated that production from the Jubilee Field started declining in 2016 from a peak of 102,498 barrels of oil per day (bopd) in 2015; whereas TEN started declining in 2019 from a peak of 64,541 bopd in 2018. But SGN production was projected to decline in 2021 from a peak of 51,232 bopd in 2020.

Also, while total production from Ghana’s three fields peaked in 2020, the report said it is forecast to last for at least three years – after which production will continuously decline if nothing is done by way of new in-fill developments on these existing fields or new fields coming on-stream.

The reasons for the decline were attributed to technical challenges such as poor well performance resulting in production losses; for example, from the Jubilee and TEN fields.

It also included the delayed commissioning of gas processing and export infrastructure (gas management challenges), and stalled field developments as no new field has gone into production since 2017 – despite the operators of some fields hitherto publicly announcing curtailment of investments for new exploration and developments due to the oil-price slump (2014-2017; and 2020-2021), COVID-19 pandemic and the energy transition.

Ghana has signed eighteen petroleum agreements/contracts (PAs) since 2004 covering its offshore basins; namely the Accra-Keta cretaceous basin (Eastern), Saltpond (Central) palaeozoic basin, and Tano-Cape Three Points cretaceous basin (Western).

Of these, only three producing fields – namely Jubilee, TEN and SGN – continue to account for petroleum revenues.

“A declining industry undermines growth, diminishes revenue expectations for Ghana, and makes redundant the stock of skilled labour in the industry that Ghana has rapidly built over the decade,” the report stated.

In response to these developments, the Africa Programme Officer of Natural Resource Governance Institute (NRGI), Denis Gyeyir, said it demonstrates the slowness of exploration activity on the upstream oil blocks.

“It also partly reflects developments in the energy space, with many international oil companies (IOCs) halting new exploration activities while exploring and redirecting investments to cleaner options in the renewable energy space.

“Ghanaians must be worried only as far as government does not put in place mechanisms to deal with the reduced interest in exploration, outline plans for renewable energy development, and measures to deal with a potential reduction in revenues when crude oil prices decline on the international market,” he stated.

However, he observed that the high price of crude oil on the international market has masked the full effects of reduced crude oil production. This, he said, should offer a window of opportunity for government to take steps to reverse the declining trend.

Also, the Africa Centre of Energy Policy (ACEP) said while Ghana has said it wants to aggressively explore these resources even before Energy Transition (ET) fully kicks-in, it is worrying to note that not much is being done to make it realisable.

Among other concerns, ACEP in a report earlier in the year reckoned that several companies have been awarded blocks while they remaining inactive. The upstream oil and gas sector’s limited activity undermines its contribution to government revenue and general economic growth. The year-on-year decline in production signals an urgent need for policy and regulatory reforms to encourage investment in the sector

Join our Newsletter