Kosmos Partners (energy) 07/02/08
GHANA will earn $836 million annually from oil revenue when initial production begins at the fields of Cape Three Points.
Making the announcement at a press briefing in Accra, the Managing Director of the Ghana National Petroleum Corporation (GNPC), Mr Moses Oduro Boateng, said the amount would be earned from Ghana’s share of 38,209 barrels of crude oil a day out of the total 100,000 barrels per day to be produced.
The rest of the production would go to the country’s foreign partners in the exploration.
Ghana’s share was calculated on an assumed long term price of $US60 a barrel amounting to US$2,292,540.00 per day which would translate to US$836,777,100.00 per annum’.
Mr Boateng was reacting to a publication in an Accra-based newspaper which said Ghana would earn $584 billion annually from the oil discovery at Cape Three Points.
He said a daily production of 200,000 barrels of crude was achievable within five years after commencement of production and that could give the state a total revenue of approximately US$1.6 billion per annum.
‘In addition to the revenue due to the state from the fiscal arrangements in the petroleum agreement, petroleum operations especially development and production operations have the potential of transforming the economy through the participation of indigenous businesses.
For instance, he explained that the petroleum agreements provides for the use of Ghanaian goods and services in all phases of petroleum operations in so far as they were of quality and quantity comparable to industry standards and were priced competitively.
That he stated was popularly known in the oil industry as ‘local contents’ which could be defined as the quantum of composite value added or created in the Ghanaian economy through the utilisation of Ghanaian human and material resources for the provision of goods and services to the petroleum industry within acceptable quality, health, safety and environmental standards in order to stimulate the development of indigenous capabilities.
Touching more on the discovery, Mr Boateng said that the production of the oil would be done in phases.
Asked when Ghana would see the first oil, he said there was not a definite answer to that question because more wells would have to be drilled in addition to the Mahogany and Hyedua wells which were all drilled last year.
He said it took two to three months to drill a well adding that it also took time to acquire equipment for production because one had to join a queue in placing an order for equipment on the international market.
Mr Boateng further stated that it took 18 months to construct a gas pipeline adding that there was the need to construct one because the oil discovered had high gas content which could be of immense benefit to the country.
He said everything was on course and assured Ghanaians that Kosmos Energy and its partners were working earnestly to make it possible for early production of oil.
He further explained that exploration was a very risky business with a success rate of one out of 10.
Mr Boateng pointed out that the drilling of a single well cost between $60 million to $100 million and said most companies have had to invest thrice or more of such huge amounts only to find nothing.
In view of the high cost involved in exploration activities, Mr Boateng said the government could not afford to invest in such sector adding that ‘that is why we are encouraging more companies to invest in our oil industry’.
He said the government benefited from about 38 per cent in taxes and royalties among others from the activities of Kosmos Energy and other oil companies operating in the country.
Mr Boateng said that the oil discovery was a good thing for Ghana adding that ‘we can make it a blessing instead of a curse.’
Kosmos Energy (Ghana) Limited, the discoverer of the oil at Cape Three Points and its partners would need about $5 billion to fully develop the fields to pave the way for production of oil.
Due to the cost involved in drilling and the time frame needed for the acquisition of equipment, Kosmos Energy and its partners would develop the discovered oil fields in phases.
The company’s partners are Tullow Oil, UK, Anadarko Petroleum Corporation, Texas, Sabre Oil, UK, E.O. Group, Ghana and the GNPC.
Explaining the role of the GNPC further, the Director of Exploration, Mr Thomas Manu, gave the assurance that the GNPC was playing its supervisory role to the letter.
For instance, he said GNPC required oil companies to undergo competitive bidding anytime it needed to acquire new equipment.
He said the GNPC also took part in tender processes and the award of contracts as well as the responsibility of scrutinising, approving or rejecting annual budgets of oil companies operating in the country.