Operator of Ghana’s Jubilee Oil Fields, Tullow Oil, and its partner, Kosmos, have revised down the estimated cost for integrating the field with nearby discoveries into the Greater Jubilee to US$1.9 billion.
The revision was captured in a new Plan of Development (PoD) that the two companies hope the government will approve before the year ends.
The amount is required to integrate the Teak, Hyedua and Mahogany discoveries into the Jubilee Fields production and floating vessel to help extend the field’s lifespan and increase its commercial reserves.
Tullow Ghana’s Director of Exploration and Development, Nana Appia Kyei, explained that the revised PoD was resubmitted last month after an earlier one, which pegged the cost of unitisation at US$2.3 billion, was rejected by the government for being “too expensive.”
The gas price quoted in that December 2015 PoD was also thought to be “unfavourable” to the national gas aggregator, the Ghana National Petroleum Corporation (GNPC), Nana Kyei added.
“The government said we are not happy with the gas price, we are not happy with the cost of the development itself and then the rig you are going to use to develop is too expensive. Those were the main concerns,” he said.
As a result, the government requested the two companies to withdraw the PoD and take a second look at the costs, which, although investments, will be recouped as capital gains once full development is completed and commercial production commences.
former Head of the Petroleum Unit at the Ghana Revenue Authority (GRA), Mr Dela Klorbi, said the push for cost reduction was necessary, to ensure that the country maximises earnings from the field when production starts.
“That money they will use for the development will be treated as capital gains and they will recoup it. Now, if the costs are high, it means the profits will be small too and that will limit the amount you get in taxes,” Mr Klorbi, who retired last year, said.