Business News of 2014-01-17

Gas project derails oil production

The Jubilee partners have finally admitted, albeit diplomatically, that the delay in completing the gas infrastructure project is hampering oil production at the Jubilee Field.

Tullow Oil, operator of the field, has revised to 100,000 barrels of oil per day production forecast for 2014, putting a damper on the target production rate of 120,000 barrels per day.

Reports had suggested earlier that the field was on track to hit the target.

Average production at the end of 2013 was pegged at 110,000 barrels per day.

The revised forecast, according to a release from Kosmos Energy -- one of the Jubilee partners, is not related to reservoir performance and well-productivity but to challenges with the handling of gas.

Measures to “ameliorate the situation in the best interest of all stakeholders” are being discussed with Ghanaian authorities, it said.

“The new forecast primarily stems from the recently completed third gas injection well that started up in the fourth quarter of 2013 and provided minimal relief,” the release said.

“Additionally, delays in restoring full water injection during 2013 further compounded the gas-handling challenges. Restoration of full water injection was achieved late in the fourth quarter,” it added.

Tullow Oil is reported by the Irish Times to have said that interim options to export the gas from the field are “being discussed” with the authorities in Ghana.

Due to environmental concerns and the pressing need for gas locally, the government refused to sanction the flaring of associated gas when oil production started at the Jubilee Field. Instead, it came up with the gas infrastructure project, which is meant to evacuate the gas through a pipeline to a processing plant at Atuabo in the Western Region for power generation.

The completion of the project, which began early in 2012, has however been postponed several times -- due largely to funding challenges, with the latest completion date put around late 2014.

Operators of the field have often parried concerns that in order to save the oil reservoir from possible damage, they may be forced to flare the gas.

“I think you are putting too much emphasis on the delay of the gas. I want to see the gas come to shore primarily because it is a cheap form of energy for the people of Ghana,” Brian Maxted, then CEO of Kosmos Energy, told journalists in May 2013.

He insisted then that they had enough options to ensure oil production is not jeopardised, saying: “We are going to continue oil production for the next 20 to 25 years at Jubilee, and we will find the solution to the gas one way or another -- and those solutions go way beyond when the gas infrastructure will be on stream and operational”.

Kosmos’ latest press release said, however, that the achievement of the revised production forecast “is contingent on the timely resolution of these matters” in reference to the gas project.

Source: B&FT
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