Tullow commences US$4 billion investment programme

Tullow CEO, Rahul Dhir

Tullow Oil, the largest shareholder in and operator of Ghana’s two oldest oilfields – the Jubilee and Tweneboa, Eyenra, Ntomme (TEN) oilfields respectively – along with its partners, have commenced a 10 year investment programme that will see them put some US$4 billion into the expansion and upgrade of the two fields. The investments will significantly increase production of crude oil and natural, wet gas by accelerating the exploitation of already discovered hydrocarbon resources, raising the recovery rate at both fields and expectedly making new discoveries too. The new monies will also be used to improve the efficiencies of activities of the two fields, thus cutting unit production costs.

Tullow itself is expected to contribute some US$2.4 billion as its share of the new investment. The company has a 35.48 percent equity stake in the Jubilee field and 47.18 percent in the TEN Cluster field. The other equity holders are Kosmos (24.08 percent and 17.0 percent respectively); Andarko (24.08 percent and 17 percent respectively); Ghana National Petroleum Corporation (13.64 percent and 15.0 percent respectively); and Petro SA (2.73 percent and 3.82 percent respectively).

The first phase of what promises to be a busy decade began in April this year with the arrival of the Maersk Venturer ship, which has been contracted for four years. In 2021 it will be used to drill four wells – two production wells and one water injection well at the Jubilee field, as well as one gas injector well at the TEN Cluster field. The first two wells have already been drilled on schedule.

Rahul Dhir, chief executive of Tullow Oil has asserted that the ambitious ‘Value Maximisation Plan’ will deliver consistent revenue to the Government of Ghana and value to the nation. Tullow’s initial analysis suggests that the benefit to Ghana from this investment programme will be substantial, manifested through a combination of oil entitlements, government royalties, oil company tax payments and gas sales. This substantial benefit to Ghana highlights continuing contribution of the oil & gas industry to the development of both the global economy and local economies.

To be sure, the Jubilee and TEN partners are well prepared for the arduous task ahead. Tullow itself successfully closed a US$1.8 billion bond issuance a few weeks ago, and is using the proceeds to refinance a large chunk of its imminently maturing debt, thus freeing up cash flow to fulfill its impending huge new investment obligations.

Importantly, the Jubilee and TEN Cluster operator took advantage of the lull in global economic activity last year, instigated by the spread of the COVID 19 pandemic to improve operational efficiencies at both fields.

Uptime for production was increased to 98 percent last year from 93 percent in 2019 and this has since been improved further to 98.5 percent by the first quarter of this year. Similarly, water injection rate into the reservoirs has been improved from an average of 130 kbw per day between 2017 and 2019 to 180 last year and further to 210 by the first quarter of this year. The company is targeting a further improvement in the rate to 270 kbw before the end of 2021.

Thus, the impacts of the COVID-19 pandemic on Tullow’s operations have been managed safely across the business with no adverse impact on Ghana production.  Both fields in Ghana performed in line with expectations in 2020, with the Jubilee field averaging 83,600 barrels of oil per day gross and the TEN field averaging 48,700 bopd.

But production is expected to rise so substantially due to the impacts of the 10 year business development plan which has just commenced that Tullow and its partners are now preparing to construct a new FPSO to cope with the targeted increased throughput.

The FPSO to be put in place by 2023 would be located in the south east area of the Jubilee field.

The success of the 10 year business plan will be even more impactful for Ghana with regards to the production of raw gas processing at Atuabo so as to be used for feedstock for power generation.

Mr. Dhir points out that in addition to the world class oil resources, these two fields also have substantial gas potential which, if utilised, can ensure that Ghana’s power and industrial markets are supplied with cheap, domestic gas in line with Government priorities. Tullow and its Partners have already delivered 150 billion cubic feet (bcf) of Foundation Gas at no cost, with a further 50 bcf left to be provided on the same basis before Ghana will start having to pay for the gas being made available to it. Furthermore, Tullow and its Partners have also submitted a 10-year Firm Gas supply proposal to deliver over 500 bcf of low cost and reliable gas to Ghana for the long-term.

The gas export rate from the fields continues to rise, from 73 million standard cubic feet per day during the second half of 2019 to 110 by the second half of 2020. Currently gas production is averaging 134 mmscfd during the second quarter of 2021. Crucially this is being accompanied by increased gas processing capacity which reached 180 mmscfd by the first quarter of 2021.  The Tullow partners are counting on Ghana Gas to construct its second processing plant shortly to enable them step up gas supply significantly.

Not only is increasing gas production benefitting Ghana’s industrialization efforts; it is improving the efficiency of oil production too by enhancing the structural integrity of the reservoirs. Onshore gas demand is stabilising, facility reliability has improved and there is greater alignment with the Government of Ghana on projected off take. Overall, this has resulted in current off take levels of approximately 125 mmscfd. Gas processing and water injection capacities are both expected to be steadily enhanced through 2021 and beyond to deliver long term stable production

Increased gas off take is equally critical to Tullow’s energy transition ambitions as it responds to the interlinked challenges of climate change.   

 As a start, Tullow recently committed to being Net Carbon Zero by 2030: that means ceasing flaring from its operated FPSOs in Ghana, reducing the carbon footprint of its operations and offsetting the remainder of its carbon emissions. Indeed, routine gas flaring from both fields is expected to end by 2025. Natural gas is globally recognised as an important low carbon energy source.  Critically, natural gas production from Jubilee and TEN will further support the development of Ghana’s economy while minimising the climate impact.

All this is being done under the ambit of Ghana’s prudent focus on local content and participation. Mr. Dhir stresses that Local Content remains a vital part of Tullow’s work in Ghana. As part of the recently started drilling program, the contractors hired by Tullow and its Partners have committed to spend over US$27 million with indigenous suppliers and will employ in excess of 300 Ghanaians. Furthermore, fabrication work for the Jubilee South East project worth over $15 million will be carried out in Ghana, building on experience and expertise built up during the development of the TEN fields.  In all about half of the total capital expenditure under the business development plan will go into contracts awarded to indigenous contractors.

So far less than 500 million barrels of oil has been produced from some 2.9 billion adjudged to be lying within the resource areas of the Jubilee and TEN Cluster oilfields. Over the next ten years, a concerted effort will be made to unlock direly needed value for all the stakeholders in both fields. – Goldstreet


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