Spat over extra wells at Jubilee

Tullow Oil, operator of the Jubilee Field, has proposed drilling four additional infill wells -- one for production and three for water injection, in order to boost oil production.

An infill well is drilled between producing wells for the purpose of more efficient recovery of petroleum from a reservoir.

The B&FT understands that the Petroleum Commission has however kicked against the move, insisting that the Jubilee partners make good their commitment to do a full development plan for the Jubilee Field.

A full development plan would give a clearer idea of what the field contains, and what the most cost-effective way of developing it would be.

The condition on which government approved the Plan of Development (POD) for phase one -- which covers only a portion of the field -- was that Tullow and co would do a full development plan subsequently.

The B&FT understands that the oil companies fear a drop in production by 2016 that could significantly negate their stock prices, which have already been affected by their inability to hit the 120,000bpd optimal production level.

Production currently averages a hundred thousand barrels of oil per day.

The Partners are said to be pushing the idea at the Finance Ministry that the country risks losing substantial revenues if they are not allowed to drill the new wells.

Dr. Kwabena Donkor, Chairman of the Parliamentary Select Committee on Mines and Energy, however argues that the country will not necessarily lose revenue since the five-year capital allowance period given the Jubilee Partners runs out by the end of 2015.

When that happens the country stands to gain more revenue, since the companies’ taxable profit will increase, he said.

At any rate, he said, a simulation needs to be done on how much revenue the country stands to lose in case production drops, as against how much money it will gain when the capital allowance period expires.

If the new investment the partners are seeking to make in additional wells is approved, the capital allowance period is likely to be extended since they would have to recoup that investment as well.

Dr. Kwabena Donkor said the move by the Jubilee Partners will not optimise exploitation of the resource, and that the long-term interest of the nation should take precedence over any other consideration. He called on the Petroleum Commission not to compromise its mandate of ensuring optimal exploitation of petroleum resources.

“Our major interest is the optimal management of the resource and therefore the reservoir, so that Ghana’s long-term interest is better protected. It is better to have a plateau of revenue in extraction than have spikes,” he said.

Section 3(A) of the Petroleum Commission Act (821) states that the commission shall “promote planned, well-executed and cost-efficient petroleum activities to achieve optimal levels of resource exploitation for the overall benefit and welfare of citizens”.

Currently, the Jubilee Field has twelve production wells, eight water injection wells, and three gas injection wells.