by Etwienana Nana Yaw Asante

There is an energy transition on going with changing trends in energy investments with a greater move into renewables as compared to investments in fossil fuels. There has been significant reduction in fossils with Reduced IOC’s investments in Hydrocarbon’s productions at at time of depleting resources in much developed countries globally.

The west has largely developed their economies and countries with profits from oil and gas and having depleted much of their fossil resources are seeking to convince emerging countries to forgo any development of their newly found stranded hydrocarbons and reach out to them for grants, aids and debts to invest in Renewables. It might interest one to know that Developing and emerging countries make up on 3% of carbon emissions as per IEA, 2019. Hydrocarbon demand is expected to see steady increment over the next three to four decades. It is reasonable to project that prices for hydrocarbons will soar higher with producing countries standing to gain more from their assets when developed. For example, the demand in growth in fossil fired vehicles is expected to surpass reduction in in demand from electric vehicles.

The demand growth for per million barrels is expected to hit 5 million barrels by 2031 as indicated in Lambert energy advisory July 2021 report. By 2030 the global liquid demands is expected to hit 108 million barrels as forecasted by RYSTAD energy, 105 million barrels by the IEA, 105 million barrels by OPEC and a general average of 106 million barrels. It is also forecasted that the reduction in demand from electric cars will reduce the demand for fossils/Hydrocarbon by 4 million barrels by 2030. This demand loss attributed to electric vehicles can be mitigated by growing appetite for ASIA.

There is the energy transition and a general decline in production of oil with instances where Shell was ordered to cut carbon emissions by a Dutch Court. Majors such as the aforementioned are moving away with examples such as

1. BP decreasing oil and gas production by 40% in a decade

2. Shell not investing in any new exploration projects after 2025 and becoming a net zero carbon emission company by 2050.

3. ENI spinning off its oil and gas operations in west Africa and Middle east into new JV’s to reduce its debts and fund its transition into renewables.

The implications of the transitioning of major oil and gas companies and producing countries into renewables will mean that there will be lack of capital to invest as well as a severe impact on National Oil companies of emerging countries due to their lack of operating capacity with Ghana being part of this pack. The Government of Ghana can solve this by aiding GNPC to accelerate its desire towards operatorship. The last Oil and Gas production that took place in Ghana was the ENI Ghana/Vittol Sankofa Gye Nyame fields in 2017 with no new additions since then.

Ghana’s issue has been the award of Multiple Oil blocks with limited activity. There are around Eighteen (18) petroleum agreements with the only PA signed from 2017 to 2021 being the botched Exxon Mobil PA. There are however only Three (3) producing fields – Jubilee, TEN, SGN. We have made some significant discoveries namely Aker, AGM, Springfield, ENI Block 4 (2 fields). There are however Eleven (11) with limited or no activity.

The discovered fields are
• DWTCTP-Aker (Pecan Southeast) – 2018
• SDWT-AGM (Nyarkom)-2019
• WCTP Block 2-Springfield (Afina) -2019
• CTP Block 4-Eni Ghana (Akoma) -2019
• CTP Block 4-Eni Ghana (Eban)-2021
Terminated ones are
• CTPS (UB Resources)-2015
• Southwest Saltpond (Britannia-U)-2014
• Keta Delta (Swiss Africa)- 2016
• Shallow Cape Three Points (Sahara)-2014
• DWCTP (Exxon)-2018
The active Ones are
• West Cape Three Points (Kosmos)-2004
• Offshore Cape Three Points (Eni)- 2006
• Deepwater Tano Cape Three Points (Hess Exploration /Aker)- 2006
• Deepwater Tano (Tullow)-2006
• SDWT(AGM)-2013
• ESWT (Base Energy)-2015
• Deepwater Cape Three Points West (Eco Atlantic)- 2015
• Central Tano (Amni)-2014
• WCTP Block 2 (Springfield)-2016
• OSWT (GOSCO)-2015
• East Keta (GOSCO)-2015
• Cape Three Points Block 4(Eni)-2016
• East Cape Three Points (Medea)-2013

The Production per field from 2010 to 2021 for Crude Oil & Condensate Annual Production shows that
• Jubilee production started declining in 2016.
• TEN productions started declining in 2019
• Production from SGN also started declining in 2021
• Total production started declining from 2020.

For the existing oil fields, its expected to see decline in oil production going forward. After 2023, production levels will begin to decrease as oil production is expected to decline. The decline in production in the country can be attributed to technical challenges, no new field since 2017 & a general lack of investment for new developments due to Energy Transition – e.g. ExxonMobil in Ghana and Mauritania.

Ghana needs to adopt a phased approach in its quest for NOC operatorship by reaching a standalone operatorship with very minimal government support by 2040. This phased approach will require government to intervene in the immediate future and support strongly GNPC’s desire to achieve it set goals. If planned well, Ghana can achieve a moderate government position by 2030.

AKER & AGM
These fields have Contingent resources of 720 million barrels (confirmed) & Substantial prospects in the two blocks especially SDWT. If phased well we should expect First Oil from Pecan Phase 1A and 1B by 2025 & 2028 respectively and pecan phase 2 by 2032. The phased development t of these fields will stop the decline in production. The development strategy should use a number smaller FPSOs. This approach is more robust to oil price volatility with breakeven of around US$32/bbl.

The structure should include indigenous Ghanaian companies , LUKOIL, AGM Petroleum Ghana Limited and GNPC Explorco taking a center stage in the investments to fund this. Aker has substantial deepwater Experience and Technology with Operator in the Aker BP Fields – 220,000 bbpd from one field & More than 100,000 bbpd from other fields. It has Strong operator capacity in deep-water operations. There have also been good discoveries in the Pecan and Nyankom and some detailed work done showing a total of 700 mmbbl. With this strategy, GNPC Excplorco will be able to use deep water technology to develop targeted fields and other fields in the Ghanaian basin.

It will be appropriate for Ghana to focus on building deep water capacity as most of Ghana’s oil is in deep waters. Aker’s holding interest in the two fields, should trigger it to provide financing for the FPSOs. Financial Obligation of GNPC Explorco to First Oil in Pecan Phase 1A should rotate around Acquisition Price in addition to Cost to First Oil in Pecan Phase 1A being its financial obligation. GNPC Explorco’s share of cost to First Oil in Pecan Phase 1A agreed by the partnership is US$350 Million. It is expected that, Total Capex to First Oil in Pecan Phase 1A hovers around US$1.45 Billion with Aker will remain the largest financier of Pecan Phase 1B Field. GNPC financial obligations to the PECAN 1A should be staggered over 5 years to soften the blows to its balance sheet.

There are several benefits to this decision on the AKER/AGM fields by GNPC. GNPC gets to build Operator Capacity at a Critical Time in History. There will be some Substantial foreign exchange inflows estimated around US$27 billion in nominal terms. There will be little or no Tax Pressure and GNPC Largely in charge of Local Content. Job Creation will be key in this with 1000’s of jobs to be created. GNPC Explorco inherited a pre-acquisition development cost amounting to US$965 million as at 30th June 2021 as a tax advantage (Capital Allowances). This strategy will enable GNPC and Ghana to, not only face the emerging Energy Transition in a well-prepared manner, but also create significant value for Ghana.