Wholly Ghanaian-owned upstream petroleum company, Springfield Exploration and Production Limited, has rejected and described as unfortunate assertions made in media publications with regards to finding a viable and mutually acceptable solution to the unitization of the Sankofa and Afina oil fields.
According to Springfield, some of these publications are not only false but also contain some inaccuracies and innuendos. The foregoing has made it imperative for Springfield to respond and clarify its position and give the public a fair and accurate perspective to the unitization which the firm says is currently at halt due to the posture of ENI Ghana.
Springfield in a rejoinder to an article put out by norvanreports which had an exclusive interview with ENI Ghana in which the Italian firm gave some conditions that must be met before the unitization can move forward, rather accused the latter of being uncooperative to the unitization process.
Some of the issues raised by the managers of the Sankofa field which they thought needed attention before the unitization could go ahead was but not limited to the following; appraising the Afina wells, Cost/Liabilities of exploration, shareholding structure, verification of quantity of oil and others.
Also, one major accusation made against Springfield was their reluctance to disclose and share full data available on the Afina Oil field which should be contained in what is known as the Plan of Development PoD.
But Springfield in its statement sent to norvanreports said, “Springfield wishes to state that it has been and will remain willing, cooperative party to the unitization of the Afina-Sankofa fields. The oil firm has taken all the necessary steps to actualize a directive by the Energy Ministry in April 2020and has consistently pushed for an early resolution of all the challenges to executing the directive.”
The Ghanaian owned oil firm also added that it was not opposed to the unitization and cannot be accused of being the one delaying the process in anyway or form.
“Springfield welcomes ENI’s statement that it is not opposed to the unitization of the Afina-Sankofa fields as directed by the Government of Ghana. Accordingly, we hope that ENI translates its statements into action by coming to the table for productive discussions to enable the parties complete the unitization process,” Springfield’s statement said.
Thus, Springfield assured Ghanaians that, they were committed to a resolution to the matter at hand that would ultimately provide maximum benefits for all involved parties, especially the people of Ghana, further noting that it has on the other hand, been and remain cooperative to the unitization of the Afina-Sankofa fields.
It also stated that they hoped that ENI translates its statements of not being against the process into action by coming to the table for productive discussions to enable the parties complete the unitization process.
ENI Ghana, a subsidiary of Italian oil major – ENI SPA –in an email interview with norvanreports early last week, rejected suggestions and claims that the it is preventing moves by government to unitize its operations with Springfield, stating it 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), since the issued directive by the country’s Energy Ministry.
According to ENI Ghana, the company is fully committed to the unitization process which is evidenced by the submission of the company’s analysis on the unitization of the two oil fields regarding the optimization of the recovery of oil reserves in both fields.
ENI Ghana asserts that with its expertise in the execution of 130 unitization agreements around the world, it is confident that, its analysis and the resulting report will allow all involved parties to progress in discussions toward an agreeable, commercial solution of the matter.
Putting that aside, Springfield as earlier stated, averred that ENI Ghana in its interview with norvanreports, made mention of certain issues to which it wishes to give full clarifications to provide the public with a fair and accurate perspective to the ongoing scuffle between the two oil firms.
Read below Springfield’s response to the three issues raised by ENI in its interview with norvanreports;
- Unitisation Process:
It has been stated in some publications that “….unitization needs to follow an appropriate, shared work programme and evaluation process to assess the elements before taking decisions”. This is erroneous as it is not the position of the law. Any process or principle for unitization must ultimately conform with the laws of the nation, Ghana. Per the laws of Ghana, the sole requirement for the unitization of fields is when an accumulation of petroleum extends from the boundaries of one contract area into another. ENI’s own Plan of Development (PoD) confirmed the extension of the Sankofa field into the WCTP2 contract area. Springfield was advised by the Government of Ghana to drill a well to further confirm the extension of the Sankofa field into the WCTP2 contract area.Springfield, through the drilling of the Afina-1X well, confirmed the extension of the Afina field into the Sankofa field. The extension of the Sankofa field into WCTP-2 (Afina) has been confirmed by some Government institutions in their independent studies as well as in studies by internationally renowned companies utilizing standard geological and engineering methods accepted by the oil and gas industry. Thus, the requirement for unitizationunder the laws of Ghana has been fulfilled. Additionally, review of ENI’s data obtained by Springfield through the intervention of the Government of Ghana after the issuance of the unitization directive has further confirmed the straddling of the Afina and Sankofa fields. Any further activity or work programme beyond proving that the fields straddle is a post-unitization activitywhich would be carried out as part of the unit operations.
It has also been erroneously stated in certain publications that “….the unitization process for Afina and Sankofa field would entail an appraisal programme of the Afina area including (but not limited to) production and interference tests”. This isinaccurate. A key objective of appraisal activities is to delineate fields and know how far they extend. Thus, appraising a field would apply to the entire petroleum accumulation and not just a portion of it. With the Afina and Sankofa fields already established as a single unit, the drilling of Afina-1 fulfilled the appraisal objective as it proved that the Sankofa field extends further into the Springfield operated area. Afina-1, though an exploratory well for Springfield due to contractual obligations and the fact that it was the 1st well drilled on the WCTP-2 area, has fulfilled appraisal requirements by further delineating the Sankofa field into WCTP-2 and can be deemed as an appraisal well in the grand scheme of appraising the Sankofa hydrocarbon accumulation. Parallels can be drawn from the Hyedua Well, which was drilled by Tullow as an exploration well for the Deepwater Tano contract area and later reclassified as an appraisal well for the purposes of unitizing the Jubilee Field. In this regard, the Afina 1X Well can either be an exploration well or an appraisal well, depending on the context – it is an exploration well in the context of the WCTP 2 contract area, and an appraisal well in the context of the unitized field with Sankofa.
- Costs and Liabilities:
It has been stated in some of the publications that “…. each party must first pay its share of the costs of producing hydrocarbons from the unitized fieldin order to have a right to the oil produced and proceeds from the production”. This is a misrepresentation of the process. Past production from the unitized field must also be re-allocated to the Parties in accordance with their respective interests in the unitized field.As per industry practice, a reconciliation of past costs and past revenue from production will be conducted to determine the entitlement of the Parties to past revenue vis-à-vis past costs. Since Springfield is entitled to a significant participating interest in the unitized afina and sankofa field, a full-fledged audit has to be conducted to ascertain all past costs (opex and capex) incurred and all past revenues collected from the sale of hydrocarbons to date and apportion the costs and revenues to each party proportionately. After this reconciliation, if the cost is higher than the revenues then there will be an amount for Springfield to pay. However, if the opposite is true and the revenue is more than the costs incurred, there will then be an amount to be paid to Springfield by ENI & Vitol. It is imperative to note that this field has been in production for almost four (4) years already. Springfield is willing to follow this process to ensure each party is treated fairly. Going forward, after such reconciliation, Springfield will bear its pro-rata share of future costs and be entitled to its share of oil produced in line with standard industry practice.
This is in line with the international convention on unitisation that where there is pre-unitization expenditure and/or pre-unitization production in the Unit Area (whether by one or both Contract Groups), theUnitization and Unit Operating Agreement(UUOA) would seek to re-allocate and balancesuch costs and production from the unit area to the contractor groups in accordance with their respective shares in the unit. This set-off mechanism is clearly contemplated in the 2020 Model UUOA issued by the Association of International Petroleum Negotiators (AIPN).