Tema (Ghana)
Two spectacular oil discoveries earlier this year offshore Ghana - the Mahogany-1 the Hyedua wells – have suddenly thrust this previously low-profile deepwater territory firmly into the international investment limelight.
These two discoveries suggest Ghana is only just beginning to yield its true hydrocarbon secrets, and appraisal drilling may confirm these are fields of world-class significance. (Analysts are already speculating that this is now an oilfield in the 1 billion barrel range).
The added significance of the finds lies in Ghana’s relative political stability, with a multi-party democracy, a free press and an independent legal infrastructure based on the English common law system.
Political and geographic background
Ghana is situated on the West Coast of Africa bordered by Togo in the east, Burkina Faso in the north, Cote d’Ivoire in the west and the Atlantic Ocean to the south. With a population of 22.1 million (World Bank, 2006) Ghana is divided into ten administrative and commercial regions, with Accra as its capital.
Although Ghana’s political history has been turbulent, with ten civilian and military governments since it gained independence from Britain in 1957, democratic governance was restored in 1992 with a new constitution. Parliamentary and presidential elections which took place in December 2000 saw John Kufuor inaugurated as President in a smooth and exemplary transfer of power. He was also returned to power in the December 2004 elections for his second and final term.
Since 2001, the Kufuor administration has achieved some success in stabilising the macro-economy, and the government is seen as business-friendly and keen to promote private investment. The tax system is well-ordered and relatively advanced and, since the introduction of a free-market economy, tax barriers have been coming down offering an investor-friendly tax environment.
It is recognised that the attraction of foreign investment, expertise and new technologies are central to Ghana’s aspirations to not only be a major player in the region but ultimately a world hydrocarbon supplier by maximising their offshore deepwater reserves.
Oil history
The discovery of oil and gas reserves is not a new phenomenon for the country.
Hydrocarbon exploration in Ghana originally began in the 1970s, with seven wells drilled in the Cape Three Points Sub-basin (Eastern Côte d’Ivoire Basin) during the 1970s and 1980s, and exploration of the Tano Sub-basin (Western Côte d’Ivoire Basin) in the early 1980s.
Yields from these wells at that time were economically marginal and following a general global and domestic downturn in exploration activity at the end of the 1980s and early 1990s, the government of Ghana reacted to this trend by introducing legislation and frameworks for new Petroleum Agreements to encourage inward investment.
All petroleum operations are now governed by the Petroleum Law of 1984, which sets out the policy and framework for participants in the industry. All petroleum found in its natural state within Ghana is deemed to be national property and is to be developed on behalf of the state.
The Minister for Energy and Mines represents the State in its regulatory capacity, with the Ghana National Petroleum Company (GNPC) established in 1984 as the state oil company. The GNPC is empowered to undertake petroleum operations in any acreage declared open by the minister either on its own or in partnership with foreign investors. Companies who wish to gain rights to exploration and production can only do so by entering into a Petroleum Agreement with the Republic of Ghana and GNPC. The GNPC holds an interest-free 10% carried stake in all licenses.
For the first time deepwater acreage licences were awarded in the mid-90s to rekindle the interest of international investors and foreign oil companies and to encourage new exploration in these uncharted waters.
Recent drilling successes
The new oil discovery at the Mahogany-1 exploration well was struck by Anadarko Petroleum Corporation on the deepwater Kosmos Energy’s West Cape Three Points Block, while Ireland’s Tullow Oil announced the findings of its nearby Hyedua-1 well in the adjacent Deepwater Tano licence.
The successful development of deepwater reserves has become the most important source of new oil production across West Africa. This deepwater find (believed to hold anything from 400 million to 800 million barrels) showed there are still chapters to be added to the West African oil story.
Potentially, these finds could be brought on stream by about 2011. Planning is already underway to appraise the joint accumulation, starting with the acquisition of 910 square km of new 3-D seismic across both concessions. Up to three additional appraisal wells are also being lined up for later this year.
Although the latest find does not quite make Ghana “the new Nigeria”, it has thrown the door wide open for the continued exploration of the country’s deepwater blocks. The successive oil finds mean the area is now a very lucrative prospect particularly for UK-based companies with proven technologies and services.
