GNPC - Kosmos To Hit Bonanza

An Agreement among the Government of Ghana, the Ghana National Petroleum Corporation (GNPC) and Kosmos Energy of the U.S., has opened the way for the US-based oil independent, to soon smile all the way to the bank to recoup its investments and reap respectable returns.

The agreement was signed by Dr. Joe Oteng-Adjei, Minister for Energy for the Government, Ato Ahwoi, Chairman of GNPC for the national oil company, and Brian F. Maxted, Kosmos Chief Operating Officer, for Kosmos Energy, in Accra following the official Jubilee Field “first oil” celebration,’’ a release by Kosmos reveals.

The understanding among the trio, which includes assurance by Attorney-General, Mrs. Betty Mould-Iddrisu that Kosmos is “neither a subject nor a party to any criminal action” puts the company in a comfortable position to attract investment it has been seeking for some time now, to meet its obligations under its Ghana projects. With the Blackstone Group and Warburg Pincus, the major backers of Kosmos Energy, presiding over equity funds, which are generally invested on an average of five-year duration, Kosmos is expected to renew its intentions to sell off its holdings in Ghana sooner than later, as its sponsors seek the exit route.

Earlier attempts by the U.S. independent to sell to its compatriot giant, ExxonMobil, under an exclusive sale and purchase agreement at close to $4 billion, hit the rocks, after the national oil company vetoed the deal, leading to an eventual pull-out by ExxonMobil. GNPC had expressed interest in acquiring Kosmos’ stake at the time but would not put any offer on the table, insisting that the company back-tracked from what it described as a ‘flawed process.’ The current production status of the Jubilee Field, where Kosmos is technical Operator and has its prime stake, unlike in earlier times when it was under development, and therefore still carried potential risks, gives it a better attraction and therefore an appreciated value over its earlier status . Production commenced in the Jubilee Field on December 15, 2010 at 55,000 barrels per day, and is scheduled to peak at 120,000 by the second quarter of next year.

This has been given an additional boost by another discovery in Owo.

Moreover, even though any successor to Kosmos assumes other obligations of Kosmos in the Jubilee and other fields yet to be developed, with production now on-stream, it is now possible to calculate actual investments made by Kosmos thus far in the Jubilee Field and therefore easier to agree on a fairer price than in earlier times.

Continued squabbles with GNPC over accusations of data rights violations, attempts to sell its stakes to U.S. Oil giant ExxonMobil, without prior written consent, and a fine imposed on it by state environmental agencies, all brought Kosmos into a headlong collision with the national oil company and government. Even though details of their reason(s) for backing out of the deal were not made public, it was suspected that their exit was to pre-empt the outcome of a decision by a committee set up to look into all the issues of disagreement among GNPC, Kosmos, ExxonMobil, and Government.

HOLDINGS

Kosmos Energy, which is the Technical Operator for Development of the Jubilee Unit, holds a 23.491% interest, whilst Tullow Oil the lead partner and Operator has a 34.705% interest. A subsidiary of Anadarko Petroleum Corporation (NYSE: APC), Anadarko WCTP holds 23.491%, whilst GNPC, Sabre Oil & Gas Holdings Limited and the E.O. Group Limited, hold 13.75%, 2.813%; and 1.750% respectively. In addition to the Jubilee Field, the partners have two discoveries in Mahogany Deep and Odum wells within the WCTP block, and two others in the Deepwater Tano block, namely: Tweneboa and Owo.

West Cape Three Points Block Ownership Interest

Kosmos Energy holds a 30.875% interest in its WCTP Operated block, just as Anadarko, whilst Tullow Oil has a 22.896% interest, GNPC 10%, E.O. Group Limited 3.5% interest; and Sabre Oil & Gas Holdings Limited has a 1.854% interest.

Deepwater Tano Block Ownership Interest

Tullow Oil, with its 49.95% interest operates the Deepwater Tano block, which has Kosmos and Anadarko each holding 18% stake, with GNPC holding 10% stake whilst Sabre Oil & Gas Holdings Limited has a 4.05% interest.

Agreement

The news of a settlement among the Government of Ghana, GNPC and Kosmos Energy came last Monday after the parties had reached an agreement bordering on data exposure, Kosmos’ debt facility and its corporate structure as well as a spillage that attracted a ministerial committee inquiry.

Kosmos Energy announcing the amicable resolution on Monday, cited “several issues that have existed among” themselves, Government and GNPC, referring to ‘settlement regarding data, as well as matters related to Kosmos’ debt facility and its corporate structure.’

The release said ‘Additionally, the Attorney General of Ghana has formally confirmed that Kosmos will not be the subject or party to any criminal or judicial actions in Ghana for events prior to such confirmation.” It continued that “Separately, Kosmos and the Ministry of Science, Environment and Technology have agreed to a solution with respect to the accidental mud discharges offshore earlier this year, whereby Kosmos would support the Ministry’s efforts to build capacity in the environmental sector.

“With first oil from the Jubilee Field flowing and these issues behind us, the government, GNPC and Kosmos have reaffirmed their positive and forward-looking relationship,” the release quotes Brian Maxted.

“We anticipate significant on-going capital investment in Ghana as we seek to expand and develop our oil and gas discoveries on the West Cape Three Points and Deepwater Tano licenses. This agreement with the Ghanaian government and GNPC validates our business strategy of investment in Africa. With the cooperation and support of host nations, we can maximize hydrocarbon resource potential for the benefit of the people,” Maxted added.

FIRST OIL

The Jubilee Partners, comprising of Tullow Oil, Kosmos Energy, GNPC, Sabre Oil and Gas Limited and the E.O. Group, inaugurated First Oil from the Jubilee Field, Offshore south-west Ghana, on December 15, 2010 marking the beginning of commercial oil production.

Commissioning First Oil on the day, President John Evans Atta Mills, paid tribute to former presidents Kwame Nkrumah and his two immediate predecessors, Jerry John Rawlings and John Kufuor as well as the Jubilee partners, for their contributions to getting Ghana to first oil.

He however, singled out Tsatsu Tsikata, former Chairman and Chief Executive of the national oil company, who steered the affairs of the corporation through the 1990s when the country attracted a lot of international oil companies, whose exploratory work contributed immensely to the oil find.

“Production of Jubilee’s light sweet crude began only 42 months after field discovery, under an accelerated timetable represents one of the shortest cycles for any deepwater floating production and storage and offloading (FPSO)-based oil project of this scale in ultra-deep water,” Kosmos Energy has stated, an observation shared by other industry experts .

The Jubilee Field was discovered in 2007 and with Kosmos Energy as the Technical Operator for Development, it led the Integrated Project Team (IPT) ‘responsible for the subsurface drainage plan and for managing the planning, design, procurement, fabrication, installation, hook-up and commissioning of surface and subsea facilities, including the FPSO.’

Kosmos Energy’s first exploratory well, Mahogany-1, in the WCTP hit oil. “We are extremely pleased to have achieved this milestone for the Jubilee Field safely and on such an accelerated timetable,” was Maxted’s remarks on the First Oil day, adding that “Kosmos, along with our partners in the Jubilee Field, including Tullow Oil plc, Anadarko Petroleum Corporation, Sabre Oil & Gas, the E.O. Group and the Ghana National Petroleum Corporation, supported by the government of Ghana, most notably the Ministry of Energy, have together delivered the fast-track development of this national resource and created significant economic wealth for the people of Ghana and local economies.

The IPT oversaw the design and conversion of the FPSO “Kwame Nkrumah” in Singapore’s Jurong Shipyard and its installation in the Jubilee Field when the vessel arrived in Ghana last June.

FPSO Kwame Nkrumah M.V. 21, is capable of processing 120,000 barrels of oil per day, 160 million standard cubic feet per day (MMSCFD) of gas and storing up to 1.6 million barrels of stabilized crude. It is also capable of treating and injecting 232,000 barrels of water per day for reservoir pressure maintenance and compression, and reinjecting or exporting 160 MMSCFD of gas.