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| Fig. 1: A platform in the Jubilee Oil Field. (Source: Wikimedia Commons) |
Petroleum development in Ghana begun during the turn of the 20th century. In the early 1900s, both the Tano and Keta basins had small-scale oil developments, and the Saltpond field has been in production since the 1970s. The government sold licences to different international companies for offshore oil exploration and production in 2004. In July 2007, Tullow Oil and Kosmos Energy discovered oil in commercial quantities in the western region of Ghana, and named the area Jubilee Field (see Fig. 1). Ghana became a full-blown commercial oil and gas producer with the discovery of the offshore Jubilee field - estimated to hold 700 million barrels of oil (MMbbl) and 800 billion cubic feet (Bcf) of gas. Development of the production site started right away and in December 2010 oil production was officially launched.
Since the Jubilee field reached first oil in 2010, there have been the development of two subsequent new offshore projects in Ghana. Production of the the first project, the Twenneboa, Enyenra, and Ntomme (TEN) fields, with an estimated 240 MMbbl and 396 Bcf of gas, started in August 2016. The second project, the Sankofa, Gye, and Nyame fields, with an estimated 500 MMbbl and 1.45 trillion cubic feet of gas, started production in May 2017. [1] Ghana's petroleum industry has seen a steady rate of development, despite the low price of crude oil since 2014/2015 and a maritime border dispute affecting the Tano blocks. Currently, there are plans to develop more fields. In October 2017, the government approved of a development plan for the Greater Jubilee field to start drilling the Mahogany and Teak fields, increasing Ghana's production levels by an estimated 60 MMbo and 100 Bcf of gas. [1]
The Republic of Ghana, located in West Africa recently joined the ranks of Sub-Saharan African oil-producing nations, with its discovery of offshore oil deposits and the subsequent commencement of the explorations and development of these deposits. Ghana is however a small producer, with the current average output of 103000 bpd. For comparison, Nigeria and Angola produce about 1.867 million bpd and 1.754 million bpd, respectively. Ghana ranks ninth in Africa, in terms of oil production. [2] Despite the drop in international oil prices, in recent years, Ghana's oil and gas industry sustained growth at a steady pace - unlike many other oil producers on the continent. With the onset of oil production grew the hope amongst Ghanaians that the revenue generated from the various oil fields would catapult the country into the next economic league. However, as evidenced by several cases from other oil-producing nations, the production of oil could be either a curse as a blessing. [3]
Ghana's discovery of oil, and the lower breakeven price of developing in Ghana, has made the nation a magnet for Western oil companies such as Irish company Tullow Oil, American company Exxon Mobil, and the Norwegian company Aker Energy (currently in the process of buying out Hess Corporations business in Ghana), to mention a few. With some companies having as much as a 50% stake in the fields they operate in and a breakeven price lower than $35 per barrel, companies can quickly build up in Ghana at a very solid profits, with the potential for the companies to make a lot of money. [4] The development of the petroleum industry has been key to reviving growth in Ghana's economy. The trading of crude oil gains much-needed foreign exchange, and development of the domestic gas industry should help resolve Ghana's electricity shortage.
According to Article 257(6) of the 1992 Constitution of the Republic of Ghana, "Every mineral in its natural state in, under or upon any land in Ghana, rivers, streams, water courses throughout Ghana, the exclusive economic zone and any area covered by the territorial sea or continental shelf is the property of the Republic of Ghana and shall be vested in the President on behalf of, and in trust for the people of Ghana." The government of Ghana however sold the right for the exploration, development and production of different offshore blocks in 2004. Currently, the Jubilee partners are Tullow Oil Ghana (35.48%), Kosmos Energy (24.08%), Anadarko (24.08%), GNPC (13.64%), and Petro SA (2.73%). The TEN fields are operated by Tullow Oil Ghana (47.18%) with partners Kosmos Energy (17%), Anadarko (17%), GNPC (15%), and Petro SA (3.82%). Currently, the Jubilee partners are Tullow Oil Ghana (35.48%), Kosmos Energy (24.08%), Anadarko (24.08%), GNPC (13.64%), and Petro SA (2.73%). The Sankofa field (also known as the Offshore Cape Three Points Integrated oil and gas development project) is operated by Eni (44.44%) with partners Vitol (35.56%) and GNPC (20%). [1]
The development of Ghana's offshore oil industry has been plagued by a many challenges, despite the steady growth it has enjoyed. The Kosmos Energy corruption investigations and the maritime border dispute between the Republics of Ghana and Ivory Coast are two examples of the aftermath of the rapid development of Ghana's petroleum industry.
From the onset of the discovery of the Jubilee field in 2007, Kosmos Energy had a series of troubling experiences working within Ghana's new petroleum industry. EO group, a Ghanaian petroleum company founded by two Ghanaian nationals living in the US, contacted Kosmos and proposed Kosmos undergo explorations of Ghana's offshore waters. The EO group brokered Kosmos entrance into the Ghanaian market and helped the Texas company gain the rights to operate in the Cape Three Points block in the Western Basin, worth an estimated US $4 billion. In return, Kosmos gave the EO Group a 3.5 percent stake in the Jubilee field. As part of the deal, Kosmos was also to cover the initial cost for the EO Group to participate in exploration and development.
The owners of the EO Group, who mediated Kosmos's relationship with the Ghanaian government, had close political affiliations with the government in power at the time. After the 2008 elections, the ruling party lost to the opposition. The opposition, now in power, has questioned the legitimacy of the Kosmos deal and how the deal had been struck. It has launched a corruption investigation into Kosmos's entry to Ghana through its relationship with the EO Group. The government of Ghana suspected that E.O. Group had used its access to officials in the former government to gain a hold on the offshore oil block and win more favourable terms for itself and Kosmos. Both the Ghanaian government and the US Department of Justice were involved in the criminal investigations. Kosmos halted operations for a while, with the intention of selling its stake in the Jubilee field to ExxonMobil. In August 2010, Kosmos stated that they were halting the proposed sale, and would instead be going on with their plans for the development with the Jubilee partners. The Ghanaian government and Kosmos reached a truce agreement in December 2010.
The maritime border dispute between Ghana and Ivory Coast occurred as a result of a longstanding disagreement between the two nations about the direction of the azimuth line that divides the exclusive economic zones, territorial waters, and parts of the continental shelves of the two neighboring countries. The TEN fields, are located in Ghana's Western Basin on the border with Ivorian area that Ivory Coast claimed as part of its exclusive economic zone in September 2011. The two countries embarked on a series of bilateral negotiations which turned out to be fruitless. Ghana then reached out to the International Tribunal of the Law of the Sea (ITLOS) in November 2014 for intervention in the dispute. The Ghanaian government requested that the tribunal determine the precise geographical coordinates of the maritime boundary between the two countries. Ivory Coast on the other hand, insisted that there had not been a formal or implicit agreement on the location of the maritime boundary between the two countries, and as such, the maritime boundary was still to be delineated. In April 2015, the tribunal also found that Ghana did not violate Ivory Coast's exclusive sovereign rights and that the TEN fields were in Ghana's exclusive economic zone. Thus, the tribunal made an interim ruling in Ghana's favor, giving Ghana the go-ahead to could continue developing the TEN fields, under the condition that drilling of new wells in the disputed area be halted. To prevent future disputes, the tribunal also determined a border that placed the TEN fields on the Ghanaian side. Even though a peaceful resolution was reached in Ghana's favor for the 3-year-long dispute, the case revealed how generally unprepared the institutions in charge of such matters in Ghana were at that time. The case also showed how rushed the industry's plans to develop both the Jubilee and TEN fields were.
It is really extremely difficult to predict the future of oil in Ghana. Even though the Ghanaian government is executing useful measures to control the oil industry, there is a lot of uncertainty about the reliability of the companies developing the fields and the amount of revenue to be gained from the fields. This is compounded by the fact that Ghanaians have high hopes for the impact that the development of the petroleum industry will have on the national economy in terms of job creation and revenue generation. It is left to be seen whether the expectations for job creation within the petroleum industry can be realistically met - though it seems unlikely. The Ghanaian government however, owes it to its citizenry to make sure that revenue generated from the development of its oil fields is put to the best use with transparency to ensure that it does indeed lead to economic growth and development, improving the quality of lives of the people of Ghana.
© Edwina Owusu-Adjapong. The author warrants that the work is the author's own and that Stanford University provided no input other than typesetting and referencing guidelines. The author grants permission to copy, distribute and display this work in unaltered form, with attribution to the author, for noncommercial purposes only. All other rights, including commercial rights, are reserved to the author.
[1] M. Skaten, " Ghana's Oil Industry: Steady Growth in a Challenging Environment," Oxford Institute for Energy Studies, WMP-77M, April 2018.
[2] M. M. Bigg, "Ghana Could be Africa's Number Four Oil Producer by 2020 - Report," Reuters, 21 Sep 16.
[3] M. Broad, "Ghana's Oil Boom: Blessing or Curse?" BBC News, 3 Jun 09.
[4] O. P. Skonnord, "Aker Energy Buys Hess Ghana Business, Expects First Oil in 2021," Reuters, 19 Feb 18.
