ENI Ghana an Exploration and Production company which is also a subsidiary of Italian oil major has rejected suggestions and claims that the oil giant is preventing moves by government to unitize its operations with wholly Ghanaian-owned Springfield’s Afina discovery.
The firm which has described the claims as false has asked Ghanaian to ignore the many unreliable and ungrounded data circulating, which risk confusing the minds of the public.
In an exclusive interview with norvanreports, Mr Giuseppe Valenti, Managing Director of ENI Ghana said the company since the announcement of unitization, has been working with it partners – Vitol, GNPC and others – to find a viable and mutually acceptable solution to the unitization of its Sankofa field in the offshore Cape Three Points (OCTP) contract area with that of Springfield’s Afina discovery in the West Cape Three Points (WCTP2).
Mr Valenti, told norvanreports that, ENI is leveraging on its expertise in the execution of 130 unitization agreements around the world with more than 5 of it in Nigeria which is next door to Ghana, has submitted to the Ministry of Energy its analysis on the unitization of the two oil fields and believes the cooperation and data sharing of all parties to see if the project will be commercially viable or not is very important.
The cooperation he believes should help quicken the process to finding a viable solution regarding the optimization of the recovery of oil reserves in both fields.
“We are confident that the analysis and the resulting report will allow the parties to progress discussions toward an agreeable, commercial solution of the matter,” he averred.
Contrary to assertions in the media, Mr Valenti disclosed to norvanreports that, ENI Ghana is only requesting that, in the interest of all parties, an appropriate, shared work program and evaluation process to assess the factors or elements that necessitate a unitization is followed.
An instance of the evaluation process Mr Valenti said, “ENI will need an appraisal program of the Afina area including (but not limited to) production and interference tests in order to understand the potential benefit that a unitization of the Sankofa field and the Afina discovery”.
Institute for Energy Security (IES) has led the charge for the government through the Ministry of Energy to quickly complete the unitization of the Afina and Sankofa fields.
According to a study which was conducted by the Institute for Energy Security (IES), they stted that the unitization will lead to maximum economic benefits of some $8.4 billion to the state as opposed to the $2.065 billion to be derived in the incidence of a no-unitisation of the Afina and Sankofa fields.
Benefits to the State in the incidence of a unitization will be in the form of significant reduction in operational and capital costs of the unitised fields, as well as increases in royalties, taxes, additional oil entitlement (AOE), fees and levies.
But data from the oil major ENI and available to norvanreports shows that the government is earning so much from the Sankofa field which is expected to cost the partners over $10 billion to fully develop.
Per the data the OCTP project Operator ENI and partners have invested so far 6 B$ with a total estimated full life expenditure of 10.6 B$ (including EXPL, CAPEX, OPEX, ABEX, as per PoD), the largest single investment in Ghana, with a total expected revenue of $8.1 Billion pertaining to GoG (as per PoD).
This includesfiscal take –$2.8 billion, royalties –$1.6 billion and GNPC entitlement –$3.7 billion. (All figures reported are taken from PoD approved by GNPC, Ministry of Energy and Parliament and as of today Government of Ghana enjoyed a cash flow of $625 million.
ENI over the months has insisted that Unitization is appropriate when “a hydrocarbon accumulation straddles a contract area boundary; hydrocarbons from one contract area can migrate into the other contract area; hydrocarbons are commercially producible on both sides of the contract area boundary, and the hydrocarbon accumulation can be developed as one unit for an optimum petroleum recovery and operational efficiency.”
The question which is on our mind here at norvanreports is, does Springfield meet the above industry standards and most importantly does the Afina field meet commercialization?
Government’s directive for the execution of a Unitization and Unit Operating Agreement (UUOA) between ENI Ghana and Springfield, came on the back of a discovery by Springfield that the Sankofa Cenomanian Reservoir of the offshore Cape Three Points (OCTP) contract area belonging to ENI Ghana, extended into the Afina field of the WCTP2 contract area.
Consequently, Springfield requested that the then Minister, Peter Amewu, to in accordance with the law, direct the WCTP-2 contractor parties and OCTP contractor parties to commence unitization discussions.
The law, per Section 34 (1) of the Petroleum (Exploration and Production) Act, 2016 (Act 919) and the Petroleum (Exploration and Production) (General) Regulations, 2018 (L.I 2359), states that, “where an accumulation of petroleum extends beyond the boundaries of (straddles) one contract area into one or more contract areas, the Minister in consultation with the Commission may, for the purpose of ensuring optimum recovery of petroleum from the accumulation of petroleum, direct the relevant contractors, to enter into an agreement to develop and produce the accumulation of petroleum as a single unit.”
The directive for the execution of a Unitization and Unit Operating Agreement (UUOA) by the two oil companies issued in April 2020, has however still not been undertaken a year later.
This is said to be due to an ongoing impasse between the two oil companies over the UUOA, which seems to have forced the hand of government to impose certain terms and conditions for the UUOA of the two fields.
But government has however, been advised by the IES to be cautious on how it handles the issue as it could lose millions of dollars if the matter should end up at the International Court of Arbitration.
Data on Sankofa Field
ENI Ghana’s Sankofa field in the OCTP has;
- Reserves of 500 million barrels of oil in place, and 40 billion m3 (270 million barrels of oil equivalent) of Non-Associated Gas.
- Sankofa reserves have been proven through multiple appraisal wells that assessed the potential production from original discovery. These reserves represent the base for the development and production plan that defines the amount of investment needed to put those reserves in production, and from which revenues for the different parties are estimated.
- OCTP project Operator and partners have invested so far 6 B$ with a total estimated full life expenditure of 10.6 B$ (including EXPL, CAPEX, OPEX, ABEX, as per PoD), the largest single investment in Ghana, with a total expected revenue of 8.1 B$ pertaining to GoG (as per PoD):
- fiscal take – 2.8 B$
- royalties – 1.6 B$
- GNPC entitlement – 3.7 B$
- All figures reported are taken from PoD approved by GNPC, Ministry of Energy and Parliament.
- As of today Government of Ghana enjoyed a cash flow of 625 M$.
- OCTP project has met all deadlines set with record time-to-market, 3 months ahead of schedule, (PoD approval 12/2014, first oil 05/2017), delivered consistently hydrocarbons in line with PoD approved scheme honouring contractual obligations.
- Overall cumulated oil production is 50 MMbbls as of April 2021. (Total Condensate production 6.74 MMbbls (including SNKE-2A); non associated gas (NAG) production 120.01 Bscf (without SNKE-2A); total NAG production 144.46 Bscf (including SNKE-2A)
- The performance of Eni on Sankofa field and its reliability are insightful of the reliability of the initial hypothesis made on reserves and investment needed, and reflect the reliable approach consistently applied through the world according to best industry standard.
- The project allows Ghana to save ~45% of energy cost or 1.2B per year and it represents a stable energy source to fuel power sector for over 20 years.
- OCTP’s gas production and treatment have been both consistently exceeding daily nominations and adapting to frequent change of demand on a daily basis, covering other sources’ shortfalls.
- This flexibility toward demand is only possible in a dedicated non-associated gas project such as OCTP, and it is combined with the extreme reliability of the ORF facility (99+% uptime, versus 95% high performance industry benchmark).
- The Sankofa field has the capacity to increase gas production to 260 MMScfd and potentially further to 300 MMScfd.
- The ability to consistently supply gas with high level of flexibility, to increase production to nearly double current production and the optimal performance of the ORF facilities confirms Eni Ghana’s ability to support the development of Ghana’s energy sector.