US$4bn Needed To Develop New Oil Discoveries

Tullow Ghana Limited, operator of the Jubilee Field, says it will cost partners US$4billion to develop the Tweneboa, Enyenra, and Ntomme field discoveries, known as the �TEN� project. The exact reserves of the new fields will require further appraising; however, its commerciality has been established. �We are looking at these discoveries as one project. This project has great prospects in terms of reserves and resources, and the quality of the crude,� Gayheart Mensah, Head of Investor Relations and Communications, Tullow Ghana, told Business and Financial Times. �We�re hoping to get approval of the development plan by close of this year. The actual production will start by 2015. �This project is completely different from the Jubilee Field we are trying to develop. The shareholding is different from the Jubilee Field, but same partners. The partners are sharing the cost according to the various interests that oil companies have in the project,� said Mensah. He disclosed that Tullow has initiated moves to award a contract for a new Floating Production Storage and Offloading (FPSO) vessel for the �TEN� project. Though he declined to give more details about the new FPSO, B&FT has learnt that it will have a maximum capacity of 125,000 barrels of oil per day. �The Jubilee Phase1A Plan of Development is still awaiting government approval and drilling is scheduled to start in early 2012, with initial production commencing in the second quarter,� said Mensah. He hopes Jubilee will achieve its target production of 120,000 barrels per day in the first quarter of 2012, once wells are reworked. The Jubilee Field, Tullow�s largest project, is pumping about 80,000 barrels of oil a day -- with recent output rates below expectations due to mechanical issues related to well-designs. The field was due to reach a plateau rate of 120,000 barrels a day in August 2011. The Jubilee Field began production late December 2010 and has enabled Ghana, best-known for gold and cocoa production, to become an oil producer. The resource paradox: early fault-lines While Ghana's oil-fuelled economy is now forecast to grow as much as 16 percent this year, the highest rate in the world, economists are warning there remain serious risks that the current boom will not be beneficial to most Ghanaians. At a recent event in Washington focused on Ghana�s future, Chris Jackson, a Senior Economist with the World Bank, said: �We have got oil, (so) we have got the potential implications of Dutch-disease with exchange rate appreciation and the damage that that can do to the non-oil booming sectors.� Jackson gave the example of export-crop farmers, whose goods such as pineapple or cocoa will become more expensive and less competitive globally. Ian Gary, an oil-expert with Oxfam America, also expressed concerns that new laws which took years to craft are being ignored -- such as saving current oil profits to absorb future shocks in world oil prices. �Instead of putting the surplus into a savings account -- the way the revenue management Act called for -- these were put directly into the budget for spending this year. �Another issue that has arisen is the US$3billion loan from China for infrastructure, and that loan violates the provisions of the revenue management act. The revenue management act allows oil to be used as collateral for loans up to 10 years, but this would be a 15-year loan,� Gary said. Economists are also worried about the so-called oil curse, whereby large oil revenues lead to an abandonment of other economic sectors, environmental degradation, conflict and large-scale corruption. David Throup, with the Centre for Strategic and International Studies, said Ghana's current political structure may not be suitable to ensure a fair distribution of oil wealth. �It is a highly centralised political system with an excessively strong presidency. The president is the centre of all patronage, and I think the pervasiveness of patronage-politics in Ghana does corrode political institutions,� Throup said. The panelists stressed next year's scheduled presidential election -- with control of a bigger economy at stake -- could be, in their words, fierce. They also warned the oil-boom has not led to much job-creation so far, with estimates of more than 80 percent of young people in urban areas still working in the informal sector.