Two of Africa’s newest oil powers should share the economic benefits of hydrocarbon production but the contrasting approaches of their respective governments may yield differing outcomes for the two countries.
The eternal debate over whether oil production is a blessing or a curse for African countries has re-emerged with the new generation of oil and gas producers. Managed well, hydrocarbon production can provide a welcome source of revenue to boost a national economy and strengthen a nation. Yet when misused, it can provide fertile ground for financial and political corruption, leaving a nation worse off than before the oil was discovered. Ghana appears to be thus far doing everything by the book but the jury remains out on Uganda.
Accra has tried to be as open as possible about everything at every stage of the upstream development process. The first phase of the country’s first major oil and gas venture, the Jubilee Project, has now come on stream; and a string of new discoveries has been made.
However, Kampala has involved itself far more in investor affairs and fewer details of financial transactions between the Ugandan government and oil companies have been published. As a result, oil is taking longer to flow and potential new investors seem reluctant to commit themselves.
The Jubilee Project is operated by Tullow Oil (36.50%), with partners Anadarko Petroleum (23.49%), Kosmos (23.49%), state owned Ghana National Petroleum Corporation (GNPC) (13.75%) and Sabre Oil & Gas (2.81%).
A total of 70,000 barrels a day (b/d) is produced in Phase 1 of the project but this is below expectations of 120,000 b/d due to reduced productivity on a number of wells and the consortium is currently working to solve this. It is hoped that production can be increased to 250,000 b/d at a later date when Phase 2 is implemented.
All oil and gas production is piped to a ship known as a floating production storage and offloading (FPSO) vessel. The FPSO Kwame Nkrumah, which was purpose built for use on the scheme, allows tankers to take on oil directly from the site and also handles the associated natural gas that is piped onshore. Ten hydrocarbon fields have been discovered in Ghana since the first find, Mahogany, in 2007, and about 75% of the 55 wells that have been drilled have yielded oil or gas. In line with that ratio, four of the five wells drilled on the Jubilee Project’s West Cape Three Points and Deepwater Tano blocks over the past 12 months have yielded hydrocarbons.
A total of 32 of these wells have been drilled by the Tullow-led consortium, yielding the Jubilee, Teak, Mahogany and Akasa fields, plus the TEN structure, which incorporates the Tweneboa, Enyenra and Ntomme fields. Plans for the development of several projects are being drawn up by the investors for consideration by the government of Ghana. Following drilling during the first half of this year, the consortium estimates reserves on the TEN fields to be between 200m and 60m barrels of oil equivalent, divided 70% oil and 30% gas or other non-oil hydrocarbons. Another FPSO will be deployed on the project, while a tender for the front-end engineering and design (FEED) contract is under way, with the entire scheme planned with spare production capacity in mind.
In July, the Wawa well uncovered yet more hydrocarbons close to Jubilee. Tullow’s exploration director, Angus McCoss, said: “Wawa 1 was the first of three important remaining exploration wells to be drilled in the second half of 2012, to close out the exploration phase of the Deepwater Tano Licence. It found light oil and gas condensate … and demonstrates once again that liquid rich hydrocarbons are pervasive in this prospective licence.” A string of other companies are now investing in the country, including Kosmos, Hess Corporation, Hunt Oil, Afren and Norsk Hydro Oil and Gas.
As with Tanzania and Mozambique, the government of Ghana is keen to ensure that its wider economy benefits from oil and gas production. In July, Sinopec of China secured a $750m contract to develop Ghana’s National Gas Processing Project, which involves transporting and marketing associated gas from the Jubilee field. It triumphed over competition from Gail India and the National Gas Company of Trinidad and Tobago, probably because the Chinese government offered funding and agreed to accept repayment in the form of a long-term oil supply contract. Chinese firms are also involved in developing a range of other energy projects in the country, including thermal power plants and the Bui hydro scheme.
Uganda is in a very similar position to Ghana. It has no history of oil production but its economy has grown steadily over the past 20 years and could now benefit from an injection of oil revenues if properly handled.
Tullow and former partner Heritage Oil made significant discoveries on blocks 1, 2 and 3A in the Lake Albert Rift Basin in the northwest of the country. With new partners China National Offshore Oil Corporation (CNOOC) and Total of France, Tullow now plans to move from exploration to production in the area.
Output of at least 200,000 b/d is expected and possibly much more. Most wells drilled on the blocks have discovered hydrocarbons. More than 20 wells are planned, including on the Ngiri Field, while the Omuka and Raa wells will be first to be drilled to the west of the River Nile in Uganda. However, first oil production in Uganda has been delayed again, this time to 2017, apparently because of government inaction or uncertainty.
It has taken Kampala a long time to sanction each stage of the process, including the sale of Heritage Oil’s stake to Tullow. In addition, Tullow signed deals to on sell 33% stakes in the three Lake Albert Rift Basin blocks to Total and CNOOC in March last year but it took almost a whole year for the deal to be approved by the government.
Relations between Tullow and the government have also been affected by allegations in Parliament by some Ugandan MPs that the company bribed senior ministers. Tullow strenuously denied the claims, wrote to the Parliament’s speaker to express its dismay over the claims and stated that documents used to support the claims were crude forgeries.
The Ugandan Parliament launched an investigation into the claims and interviewed a delegation from Tullow in April. Little more has been heard about the matter but such difficulties have not been encountered in Ghana. Indeed, Tullow has published its petroleum agreements and deeds of assignment for the two blocks with the approval of the Ghanaian government. Such transparency is to be welcomed across the oil industry, in Uganda and Nigeria as elsewhere.