West Cape Three Points Block To Attract Better Terms

By J. Ato Kobbie, Managing Editor

The wish by many that Ghana’s oil blocks undergo competitive bidding to maximize their values to the country is soon to become a reality, as the petroleum agreement licensing out the West Cape Three Points (WCTP) block to Kosmos Energy comes to an end this month, with some international oil companies (IOCs) already positioning themselves to bid for it.

The country derives its principal benefits under petroleum agreements, from its earnings through royalties and additional oil entitlements, during production of crude oil.

The petroleum agreement covering WCTP was signed on 22nd July, 2004, for a seven-year period. Article 4 of the agreement provides that, at the end of the period, the contractor (Kosmos) automatically relinquishes areas that are not deemed to be ‘Discovery, Development or Production areas, except where a force majeure (an act of God) had altered the time frame.

Sources close to an ongoing tripartite discussion among the Ministry of Energy, Ghana National Petroleum Corporation (GNPC) and Kosmos Energy, indicate that the WCTP block Operator, has not been able to meet all of its obligations under the agreement regarding its discovered areas.

The Contractor is, however, to hold on to discoveries over which it has an approved appraisal plan or where commerciality has been declared, a plan of development.

Odum, Mahogany East, Teak 1, Teak 2, as well as Banda, are some of the discoveries that have been made within the WCTP block.

Sources say while appraisal on the Odum discovery has been completed, with some of the other areas having plans under discussion, there is no plan yet for the Banda discovery.

“We and the other block partners have a right to negotiate a new petroleum agreement with respect to these undeveloped parts of the WCTP Block, but we cannot assure you that any such new agreement will either be entered into or be on the same terms as the current WCTP Petroleum Agreement,” Kosmos had reported to the US Securities and Exchange Commission (SEC) in its filing on January 13th this year.

The Business Analyst has gathered that, already some IOCs, including one of the big players in the industry, Chevron, are trotting along the sidelines, positioning themselves to put up a fight for that block, in a competition that appears likely to earn Ghana the best of offers yet for its oil fields.

What appears to be keeping these interested companies at bay is their inability to access seismic data covering the block and allied ones, which is necessary to inform them about what value to place on it.

Under the confidentiality provisions of the petroleum agreement and also under the terms of the Petroleum Exploration and Production Law, PNDC Law 84 of, 1984, Kosmos Energy, and GNPC, the parties to the agreement, are to agree on terms for disclosing data covering the block to third parties.

Other partners with stake in the WCTP block are Tullow Oil, Anadarko, Sabre Oil and Gas, and the EO Group.

The terms of the WCTP petroleum agreement has been described as over generous by analysts, with a WoodMckenzie report revealing an inferior fiscal terms when compared with the Tullow-operated Deepwater Tano Petroleum Agreement, in a manner that leaves Ghana worse off by billions of dollars over the lifespan of the Jubilee Field.

Kosmos Energy operates the WCTP Block with 30.875% interest, the same as Anadarko, with Tullow Ghana Limited having 22.896% interest, whilst GNPC increased its holdings from 10.0% to 12.5% on commerciality, with the EO Group having 3.5%,whilst Sabre Oil and Gas Holdings has 1.854% working interest.

Kosmos is also a partner with 18% interest in the Tullow Ghana Limited operated (49.95%) DT Block, which also has Anadarko WCTP (18%), GNPC (10%), and the Sabre Oil and Gas Holdings Limited (4.05%) as partners.

Under an Unitisation and Unit Operating Agreement (UUOA) signed among the Jubilee Partners on July 13, 2009 with the Ministry of Energy, GNPC and the partners in the two blocks, the discovered fields have been jointly developed to optimize resource recovery.

Tullow Oil became the Unit Operator, with Kosmos Energy as Technical operator. The Jubilee field is currently producing crude oil at a little over 70,000 barrels/day and straddles the two WCTP and DT blocks. The field is expected to peak at 120,000 barrels per day by the end of the third quarter of this year.

In June 2007, the Mahogany-1 well, which was Kosmos’ first exploration well within its WCTP block discovered oil in large commercial quantities. Two months later, in August, the Hyedua-1 well, drilled just across the block in Tullow Oil’s Deepwater Tano block also struck oil in sizeable quantities. The two fields were unitized in 2008 for joint development as the Jubilee Field, after successful appraisals.

The contract for the construction of the floating production, storage and offloading vessel Kwame Nkrumah MV 21 for the Jubilee Field was awarded in 2008 and arrived in June 2010. Technical Production commenced from the field started on November 28, 2010 and the Jubilee Field was officially commissioned for First Oil on December 15 of the same year.

Vigorous promotional activities embarked on in the 1990s by the national oil company, GNPC, after close to a century of erratic exploration activities in Ghana’s oil fields, paid off with the arrival of many IOCs that embarked on a vigorous exploration work during that period.

Companies currently at various stages of activities in Ghana’s oil fields include, Afren Plc, Anadarko, Challenger Minerals, Eni, E.O. Group, Hess Exploration, Kosmos, Lukoil Overseas, Lushann Eternit, Mitsui Group, Oranto, Sabre Oil, Stone Energy, Tap Oil, Tullow Oil, Vanco Energy, and Vitol Upstream.

J.atokobbie@yahoo.com