Gov’t considering re-assigning dormant oil blocks

Ghana’s Offshore Activity Map (Source: GNPC)

… as some local exploration firms lack capacity to develop them

Reports indicate that government is taking steps to re-assign under-developed oil exploration blocks.

This decision is prudent as some joint ventures between Ghanaian exploration firms and their multinational oil counterparts given petroleum licenses to explore the blocks, have lacked the capacity and financial muscle to develop them primarily because the indigenous partners lack the requisite counterpart financing.

This is a matter for Ghanaian oil companies to be concerned about because the purpose of Petroleum Local Content and Local Participation, 2013, L.I. 2204, was designed to develop local capacities in the petroleum industry value chain and enable Ghanaians participate in the oil and gas sector.     

Government’s quest tore-assign less active blocks is a measure to consolidate the upstream petroleum sector in developing more oil fields to increase the country’s production of oil and natural gas.    

Currently, a total of 17petroleum exploration agreements have been signed between Ghana and oil production firms in the upstream sector, but only three fields have been developed. The active fields are Jubilee, Sankofa Gye-Nyame (SGN) and Tweneboa Enyenra Ntomme(TEN).

Excerpts from the public register of Petroleum Contracts (PC’s) indicate the inability of some oil exploration firms, primarily local ones who were brought in to fulfill local participations laws to develop the blocks.

For instance, Sahara Energy Fields Ghana Ltd holds 85 percent interest in a block in the Shallow Water Cape Three Points. However, since the block became effective in 17 July, 2014 following initial geological and geophysical studies, the contractor has failed to drill the obligatory explorations well within the initial exploration period which expired April 16th, 2016.

Subsequently, the contractor failed to honour an invitation from the Commission for a technical engagement during the second quarter of 2017.  

Meanwhile, despite the extension of a year contract in 2016, UB Resources Limited, with 70.47 percent working interest in the Offshore Cape Three Points South block, has not fulfilled any of the minimum obligatory work to date.

Work on South West Saltpond Oil Fields has also not commenced after an extension of 27 months in2016 to the initial exploratory period. This oil block is operated by Brittania-U Limited, having 76 percent interest.

Currently, it costs between US$30 million to US$70 million to drill one oil well and the probability is high that there is the possibility of not finding oil.

An anonymous source at the Ghana National Petroleum Company (GNPC) told the Goldstreet Business that“it was important insisting that Ghanaian oil companies hold at least 5 percent of the equity in the oil blocks. But how many Ghanaian companies want to risk such money in oil exploration?”, the source asked.  

By Dundas Whigham