Government Discloses Full Details Of Petroleum Deal With ExxonMobil
Government has been giving details on what went into agreement between Ghana and Oil exploration giant ExxonMobil.
This follows criticism by some civil society groups on why government did not open the oil block it extended to Exxon Mobil to public tender.
According to government it took the decision not to open the deep water Cape Three Point block to public tender because the nature of the area required an oil exploration firm that has the most sophisticated technology and the financial muscle to prospect for oil in commercial quantities.
This was after two other global firms had some challenges in exploring for oil because of the nature of the Deep Water Cape Three Point Block.
On 30th April 2015, the Government of the Republic of Ghana, represented by then Minister for Petroleum and Ghana National Petroleum Corporation (GNPC) entered into Memorandum of Understanding (MoU) with ExxonMobil Exploration and Production Ghana (Venture) Limited for acquisition of Petroleum Exploration and Production rights over the DWCTP Block.
Pursuant to the terms of the MoU, the parties agreed to negotiate in good faith a Petroleum Agreement, with exclusivity period of seven months.
The Ministry of Energy in a publication in the Daily Graphic said, “The reasons for inviting ExxonMobil for direct negotiation are based on value proposition for Ghana.”
- ExxonMobil is the world’s largest Integrated International Oil Company with daily production of 3.921 million BOE (barrels of oil equivalent) and with a revenue stream of $218.6 billion as at 2016. ExxonMobil has the track record of delivering project on time and within budget which is very good for the country. The reasons for inviting ExxonMobil for direct negotiation are based on proposition of Ghana. These are as follows:
- Critical success factor: In any Petroleum Basin such as Ghana is the attraction and retention of International Oil Company (IOC) such as ExxonMobil with the relevant technical expertise and sound financial capability with access to both capital and project finance.
- Ghana’s offshore basin falls geologically within the West Africa transform margin, which is highly fragmented and has much of its potential in Ultra Deep Water. The fragmented nature requires that in order to fully understand the transform margin, IOCs need to take positions in multiple countries, and on both sides of the Atlantic (West Africa and South America were connected in geological time).
For instance exploration success in Guyana is relevant to better understanding Ghana’s geology, therefore ExxonMobil exploration success in Payara license in Guyana will positively impact exploration success in DWCTP Block.
- The setting in Ultra Deep Water as results in high drilling cost, therefore increased emphasis on full regional technical understanding prior to drilling is essential, therefore ExxonMobil’s regional geological understanding will reduce drilling cost.
- Ultra-Deep Water exploitation is beyond the reach of current technology, therefore IOCs with strong Research and Development capability such as ExxonMobil are needed to develop future technology to unlock UDW exploitation potential.
- Exploration in Ghana’s Tano Basin to date has led to the discovery of one petroleum system, Jubilee, and all subsequent discoveries form part of the same petroleum system. A thorough basin wide approach is needed to discover Ghana’s other petroleum systems that will replace oil production from the current petroleum system (Jubilee/TEN/Sankofa etc), which will enter decline in the next five (5) years. The majority of recent awarded acreage (2014) is targeting minor/smaller discoveries within existing petroleum system.
- Ghana is one of the few African oil producer countries without the presence of a super major and ExxonMobil entrance into Ghana would validate the country’s hydrocarbon potential. Government’s policy is therefore to bring into Ghana a Super Major like ExxonMobil.
ExxonMobil entering into Ghana at current global and local environment is a good indication that, Ghana has a good investment climate which will positively impact the country’s credit ratings.
The Deepwater Cape Three Points (DWCTP) Block has been relinquished twice by Vanco Energy and Lukoil which has increased the risk profile of the DWCTP Block.
The DWCTP Block lies in water depth ranging between 2,000 to 4,000 meters and is located approximately 150km offshore Ghana.
It is one of the ultra-deep water blocks which severely tests the limits of modern technology and would take Research and Development to optionally develop and exploit any discovered resources.