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FM AMEMBASSY ACCRA
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INFO RUEHPC/AMEMBASSY LOME 2182
RUEHCO/AMEMBASSY COTONOU 0822
RUEHOU/AMEMBASSY OUAGADOUGOU 0563
RUEHAB/AMEMBASSY ABIDJAN 0819
RUEHUJA/AMEMBASSY ABUJA 0795
RUEHOS/AMCONSUL LAGOS 1788
RHEHAAA/WHITE HOUSE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/USDOC WASHDC 0669

UNCLAS ACCRA 001565 
 
SENSITIVE BUT UNCLASSIFIED 
SIPDIS 
 
WHITE HOUSE FOR USTR LAURIE-ANN AGAMA 
 
E.O. 12958: N/A 
TAGS: EPET ENRG ETRD PGOV GH
SUBJECT: GHANA OIL AND GAS PRIMER - UPSTREAM OVERVIEW 
 
¶1. (U) SUMMARY: Ghana's offshore oil discovery was among the largest 
worldwide in 2007.  As a result of the 2007 find, Ghana attracted 
increased interest from international oil players seeking offshore 
concessions.  As the latest potential oil producer on Africa's 
western coast, the Government of Ghana commands increased strategic 
leverage in its petroleum agreement negotiations, and offers the 
regionally-unique context of political stability combined with 
above-average levels of democratically-accountable governance.  This 
cable is intended as a guide to policymakers on the current 
situation of the upstream oil and gas sector in Ghana.  END 
SUMMARY. 
 
PRIOR PRODUCTION EXPERIENCE: MODEST SCALE & SHADY DEALS 
--------------------------------------------- ---------- 
 
¶2.  (U) Ghana has been a small-scale producer of oil (the Saltpond 
field) since 1978.  A small Oklahoma firm, Agri-Petco, developed the 
Saltpond field which initially produced 4,800 barrels a day (from an 
estimated reserve of 5 million barrels of oil - all the gas from the 
site is flared.)  By 1985, production had dwindled to 580 barrels a 
day and the well was abandoned. 
 
¶3. (SBU) In 2000, the redevelopment of Saltpond was prioritized by 
the Ghana National Petroleum Corporation (GNPC).  The firm chosen 
for the work was Lushann Eternit Energy Limited: a local subsidiary 
of a Houston company, owned principally by a Ghanaian-American, 
Quincy Sintim-Aboagye.  An initial contract with GNPC for 
redevelopment and recapitalization of the facility allocated 60 
percent ownership to Lushann, and 40 percent to GNPC: this was 
rechristened the Saltpond Offshore Producing Company Limited 
(SOPCL).  Production at Saltpond resumed at the level of 500-700 
barrels a day.  In June 2004, the original agreement between Lushann 
and GNPC was updated to comply with newly promulgated national 
regulations on oil resources, including tariffs and royalties. 
 
¶4. (SBU) The image of the Saltpond Offshore Producing Company 
Limited suffered from allegations of corruption. Lushann's head, 
Quincy Sintim-Aboagye was alleged to be inappropriately connected to 
Tsatsu Tsikata, the former Chief Executive of the GNPC.  Tsikata had 
approved the Lushann deal and was accused by opposition politicians 
of selling the Saltpond assets below their market value.  In 2003, a 
shipment of 73,900 barrels of crude oil from the Saltpond field 
disappeared under mysterious circumstances -- it was later alleged 
to be the shipping company's exercise of a lien for non-payment of 
shipping fees exceeding USD 1.9 million.  In late 2006, an 
opposition Member of Parliament (Moses Asaga) questioned the 
government on accounting for the royalty payments received from 
Saltpond.  Evidently, Saltpond's revenues had never been accounted 
for in the national budget, raising the possibility that the 
revenues had been siphoned to private accounts.  In a recent meeting 
with econoffs, Asaga repeated these implications of malfeasance 
surrounding the management of Saltpond field. 
 
 
JUBILEE FIELD: LEADING GHANA'S BLACK GOLD RUSH 
--------------------------------------------- - 
 
¶5. (U) Ghana's "Jubilee Field" encompasses two offshore blocks that 
generated 2007's commercially viable new discoveries.  The first 
find was announced at West Cape Three Points in June of 2007 by 
Kosmos Energy, an American oil company.  The second discovery was in 
August 2007, by Tullow Oil (UK) at Deepwater Tano.  Geological 
analysis indicated that these adjacent discoveries were based on a 
common reservoir, which led to the decision to unitize the two finds 
and to create a combined, phased development plan. 
 
¶6. (SBU) Estimates of the total volume of oil in the Jubilee field 
vary. The initial, conservative statements of proven recoverable 
resources indicated 170 million barrels, with upward estimates (at 
lower confidence levels) exceeding 1 billion barrels.  By May, 
Tullow announced proven reserves at 500 million barrels, while 
suggesting unproven reserves could be as high as 1.8 billion 
barrels; these same estimates were cited by Anadarko in a November 
earnings call with investors.  In a closed meeting with econoffs, 
technical staff from the Ghana National Petroleum Company stated at 
a 95 percent confidence level that recoverable reserves from Jubilee 
were in the vicinity of 800 million barrels. 
 
 
UNITIZATION DISPUTE DELAYS PRODUCTION SCHEDULE 
--------------------------------------------- - 
 
¶7. (U) Unitization is the industry standard practice for sharing 
ownership of a common oil reservoir that spans two license areas. In 
the case of the Jubilee Field, the following ownership shares were 
agreed to: 
- For the West Cape Three Points Block, Kosmos and Anadarko both 
hold a 30.875 percent interest; Tullow has 22.896 percent; the E.O. 
Group has 3.5 percent; and Sabre Oil and Gas has 1.854 percent. 
- In the Deepwater Tano license area, Tullow retains a controlling 
49.95 percent share; Anadarko and Kosmos both have 18 percent 
shares; Sabre Oil and Gas has 4.05 percent. 
- In both licenses areas, the Ghana National Petroleum Corporation 
(GNPC) has a carried 10 percent interest. 
¶8. (U) The Jubilee partnership agreed that Tullow would be the 
Jubilee field operator.  Anadarko was given responsibility for the 
development plan, and Kosmos for subsea work.  The development plan 
for the deepwater reserves contemplates the use of a Floating 
Production, Storage and Offtake (FPSO) vessel connected to undersea 
well-head systems. 
¶9.  (SBU) By mid-August, a disagreement arose within the Jubilee 
partnership regarding the geographic scope of the first phase of 
development.  One company asserted that one of its test wells was 
not necessarily connected to the main jubilee reservoir.  The other 
partners disagreed: at stake was the applicable fiscal regime for 
that specific well site. The final resolution will likely be an 
agreement to not include that contentious test well within the first 
phase of development.  Nonetheless, we anticipate the issue could be 
revisited based on subsequent test wells and geographic analysis. 
 
¶10.  (SBU) The original Jubilee project schedule envisioned the 
submission of the unitization agreement and development plan by 
September of 2008.  This did not occur, due to the delay caused by 
negotiating the final unitization agreement.  Second, the GNPC 
appeared to favor a fast-track approval process and took the 
position that the Minister of Energy had the legal authority to 
authorize the unitization agreement.  The partnership consensus has 
been that the unitization agreement should be ratified by 
parliament, since parliament granted the original license 
concessions which are modified by the unitization agreement. 
COMMENT: The delay means that the unitization agreement and 
development plan will have to be approved by the next government, 
following December's elections.  END COMMENT. 
 
¶11. (SBU) Based on the delays in concluding the unitization 
agreement and development plan approved, GNPC confided to econoffs 
that the earliest possible production from Jubilee will be in the 
final quarter of 2010, if there are no further delays. COMMENT: Post 
estimates that production will likely not occur prior to 2011. END 
COMMENT. Once Jubilee is fully online, an Embassy source within the 
partnership suggested a daily production rate in the range of 
200,000 and 300,000 barrels.  Gas production from the Jubilee field 
is estimated at a multiple of 1000 cubic feet of natural gas per 
barrel of extracted oil. 
 
 
BEYOND JUBILEE: DEEP WATER FEEDING FRENZY 
------------------------------------------ 
 
¶12. (SBU) At least three of the Jubilee partners have license areas 
outside the unitized Jubilee area: Tullow, and Kosmos, partnered 
with Anadarko.  Anadarko has sought additional license areas (beyond 
its partnership with Kosmos) but has so far been unsuccessful [to be 
reported SEPTEL]. In Tullow's 'Tano Shallow' block a discovery was 
announced on November 20: Tullow estimates that its 'Tweneboa' field 
may have as much as 800 million barrels of oil resources.  In this 
area, Tullow and Norway's Interoil both have a 31.5 percent 
interest, Al Thani Ghana, a Qatari firm has 22.5 percent, Sabre Oil 
and Gas has 4.5 percent, and GNPC has a 10 percent carried interest. 
 
 
¶13. (U) In late 2007, the pan-African oil company Afren obtained the 
controlling share in the Keta Block from Oklahoma's Devon Energy. 
This past month, Afren sold a 20 percent share in Keta to Japan's 
Mitsui.  Afren retains a 68 percent interest in Keta, with GNPC at 
10 percent and Gulf Atlantic Energy with 2 percent.  Afren estimates 
its current prospects at Keta at the level of 325 to 642 million 
barrels of oil. 
¶14. (U) Swiss oil trading, transport and exploration firm Vitol was 
awarded the "Offshore Cape Three Points" block in March of 2006 and 
"Offshore Cape Three Points South" block in August, 2008, which is 
an extension to the south of the first block.  During 2007 Vitol 
conducted seismic analysis of its block, and planned to begin 
drilling in late 2008.  Hess reports that it has a 100 percent 
interest in Ghana's 'Deepwater Tano Cape Three Points' block, which 
it acquired in July 2006.  However, we understand this to mean that 
Hess has no other private partners in the block, since the petroleum 
agreement was reported to include GNPC.  Hess began drilling its 
initial wells in the fourth quarter of 2008. For the 'Deepwater Cape 
Three Points' block, Russia's Lukoil (56.66 percent owner) has 
partnered with Houston-based Vanco (operator) which holds a 28.34 
percent interest in the petroleum agreement; GNPC has a 15 percent 
carried interest. 
¶15. (SBU) Near the Saltpond field, GASOP Oil Limited was awarded a 
petroleum agreement in 2006. GASOP is a Nigerian firm, and is 
reported by commercial intelligence sources as a subsidiary of 
Nigeria's Omega Maritime and Energy Limited owned by the 
brother-in-law of Nigeria's Rivers State Governor, Peter Odili.  No 
recent exploration or drilling activities by GASOP have been 
reported.  Another Nigerian firm Oranto Petroleum International 
Limited and their Ghanaian partner, Stone Energy Ghana Limited, 
received a license for the "Offshore Saltpond Contract Area" block 
in July 2008. 
 
¶16. (SBU) The latest entrant to Ghana's offshore exploration milieu 
is Norwegian billionaire Kjell Inge Roekke, whose construction and 
engineering conglomerate Aker ASA, which recently secured the "South 
Deepwater Tano" block.  Aker, with an 85 percent stake will be field 
operator.  The agreement includes a 5 percent carried interest for a 
private local firm, Chemu Power [to be reported SEPTEL], and a 10 
percent interest for the GNPC.  The company is reported to have a 
USD 30 million seismic testing plan that it will begin in early 
¶2009. 
 
 
GAS SECTOR: GRABBING AT VAPORS 
------------------------------ 
 
¶17. (SBU) The Ministry of Energy has developed a draft plan for a 
gas collection pipeline and drying plant, at an estimated cost of 
approximately USD 1 billion.  According to an industry contact who 
reviewed the plans, the Government's proposed gas collection system 
exceeds current requirements.  For example, the plan is reported to 
have a double set of pipes: one set for collecting gas to an onshore 
facility for drying and downstream transport, and a separate 
pipeline for sending gas back offshore for reinjection to wells. A 
more economized system would allow for direct re-injection of needed 
gas, and one pipeline delivering excess gas to the shore. 
 
¶18. (SBU) The current lack of transparency regarding the 
Government's plans for gas collection and associated financial 
mechanisms concerns private sector actors.  If the government-owned 
system collects all gas production, the firms will not be in a 
position to decide autonomously how much they need for re-injection 
(to maintain pressure within the oil reservoir).  Separately, it is 
not evident what pricing mechanisms will apply to the gas produced 
-- which by law cannot be flared. 
 
 
COMMENT 
------- 
 
¶19. (SBU) Managed effectively, the oil and gas sector offers the 
possibility of catapulting Ghana to middle-income status over the 
next 20 years.  A key concern remains ensuring that the process for 
awarding offshore concessions and negotiating petroleum agreements 
is done transparently, and in a manner that does not discriminate 
against U.S. firms.  SEPTEL reporting will discuss downstream 
factors and political and regulatory vectors in the oil and gas 
sectors. 
 
TEITELBAUM