Many observers would have noticed a recent brief from Bloomberg about the
investment prospects for Ghana?s offshore oil sector.
From the very start IMANI has been somewhat less sanguine about
developments in the nascent industry (see previous commentary on our
Despite the highly optimistic forecasts now and in the past, it is
important to note the following facts:
1. Oil production in the flagship Jubilee field is actually falling.
What was initially considered an adverse revision of production figures by
Tudor Pickering Holt is now turning out to have been merely conservative.
Production volumes have broken through the psychologically alarming 60,000
barrels a day floor several times this year. On some days, production
barely exceeds 50,000 barrels. A graph of the output trajectory since the
onset of production in late 2010 points to a new ?dangerous normal? of low
production for Jubilee. Average annual production may stay around 60,000,
and we actually expect the new floor to inch close to 45,000 by mid-2013.
2. Tullow has announced the likely onset of oil production from new
wells being commissioned for phase 1a of the Jubilee plan of development
by end 2012. These new wells are expected to help stabilize production
levels and lift them to the optimistic plateau volume of 120,000 barrels
3. Once again, these projections are highly optimistic and should be
treated with caution. The development activities being undertaken for
phase 1a follows the same strategy of ?speed to first oil?, ?excessive
confidence in cutting-edge but still maturing techniques?, and ?tight
drilling blueprint/schedules? that characterized the phase 1 program of
the Jubilee plan of development.
4. We expect the lift in production volumes to be marginal in the wake
of phase 1a completion. We expect a 2013 timeline for phase 1a to start
making significant contributions to total production volume. We expect
production to rise above 80,000 barrels for a period and then beginning
5. Generally, the results from Jubilee mirror the performance of other
offshore projects in West Africa, for instance in Cote d?Ivoire and
Cameroon, where optimistic timelines and production levels have failed to
materialize over the long-term.
6. We do not believe to be credible projections of production hitting
the 250,000 barrels per day level in the medium term.
7. We also note that finding costs for Ghana?s oil sector appear
outsized in comparison with similar projects elsewhere. Both on a
preliminary proven reserves and daily production basis, capital
expenditure in the Jubilee field appears to suggest a fundamental lack of
competitiveness that requires additional study.
8. While aggressive marketing of the sector?s prospects can enhance
its attractiveness to investors, there is also a continuing concern about
credibility. Chronic optimism might over time prove counter-productive as
sophisticated investors dig in.
IMANI Center for Policy & Education (www.imanighana.org)