Why TOR Can't Have Jubilee Oil

By J. Ato Kobbie, Managing Editor

Contrary to expectations by many Ghanaians that as commercial oil starts flowing from the Jubilee Oil Field, the country’s oil refinery, Tema Oil Refinery (TOR) would automatically be taking its delivery of the country’s crude oil needs from Ghana National Petroleum Corporation (GNPC), before the rest is exported, that may not be in the country’s interest.

According to industry experts, in order for crude oil from the Jubilee Field to maximize its true technical value and also for the partners and the country to optimize their benefits, through the price, the product must first be exposed as much as possible to the international oil market, where it would be assessed by many refineries and competent buyers for about a year.

It is through the marketing of crude oil on the international market that crude oil from various fields have proved their ‘mettle’ in terms of quality and get quoted by international energy information authorities such as Platt’s, Bloomberg, and Reuters, among others.

The Business Analyst gathered however that interim arrangements have been made that would ensure that while Tema Oil Refinery (TOR) would be supplied some of the crude oil from Jubilee field, with arrangements to exchange Jubilee crude oil on the international market to meet some of the domestic needs.

Under the petroleum agreements which govern Ghana’s oil fields, a provision for domestic supply obligation requires that oil produced would be made available to meet the country’s domestic requirements.

The relevant provision, Article 15 of the petroleum agreement requires under clause ‘1’that GNPC and the state supplied to meet domestic crude requirements. It continues in ‘15.2’ however that where crude supplied by GNPC and the state is insufficient to meet domestic requirements, other partners supplied the shortfall through GNPC.

It was envisaged therefore that crude oil from Ghana’s producing fields would be supplied to meet the country’s demands including meeting the capacity of the country’s local facilities, such as TOR and the thermal plants of the Volta River Authority (VRA) and other needs, including petrochemicals TOR’s facility has a capacity for refining 45,000 barrels of crude oil per day, while the shortfall in products is imported. Ghana’s current domestic consumption, based on derivatives of crude oil stands at close to 100,000 barrels per day.

With the Jubilee field producing 120,000 barrels per day under the first phase, supplying to meet the total local needs would have meant leaving only about 20,000 barrels daily for export, which would be insignificant and uncompetitive on a market that has Nigeria currently supplying over two million barrels per day.

First Oil from the Jubilee Field is scheduled for December 15, 2010 making the field one of the fastest to be produced within a period of three-and-a-half years from discovery.

The commissioning event, which would be hosted by President John Evans Atta Mills, is expected to be telecast live to both local and international audience.

Tullow Ghana Limited, is the Operator of the Jubilee Field, holding the highest stake of 34.7046%, with Kosmos Energy (Technical Operator) and Anadarko, each holding 23.4913%. GNPC holds 13.7500%, whilst Sabre Oil and Gas and the E.O. Group, hold 2.8127% and 1.7500% respectively.

Each partner’s holdings would determine how much oil it carries away after the deduction of production and field development costs, which would be spread over time.

The Ghana Revenue Authority (GRA) has declared the Jubilee Field a customs area and has since November 29, 2010 deployed Customs Officials on board the vessel to monitor oil flow.

Under phase one of the phased production of the Jubilee Field, the floating production, storage and offloading (FPSO) Kwame Nkrumah MV 21 vessel, starts production at 50,000 barrels of oil per day, to peak at 120,000 bpd together with gas at 120mm scf/day.

Already, 16 wells have been drilled and tied back via subsea infrastructure to the FPSO.

FPSO Kwame Nkrumah has a production and processing capacity of 120,000 barrels of oil and 160 million cubic feet (mmcf) of gas per day, with storage capacity of 1.6 million barrels of oil. The field is to be exploited in a water depth of approximately 1,300-meters, using the FPSO.

A gas processing complex has been earmarked for Bonyere in the Western Nzema Area of the Western Region, utilizing gas from the Jubilee Field, to form the basis of an industrial complex.

Commercial oil was discovered in the Jubilee Field successively in 2007 by Kosmos Energy (Mahogany 1 well) and Tullow Oil (Hyedua well) in their operated fields respectively. The Business Analyst, businessanalystgh@yahoo.com