Wednesday, January 23, 2013

Ghana oil finds: small beans for Eni, big deal for Ghana


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Italian oil giant Eni SpA has confirmed a discovery of around 450m barrels at its Sankofa East field 50km off the coast of Ghana, boosting the west African nation’s overall oil reserves.

About 150m barrels of Eni’s find will be immediately recoverable, according to the company, which says the result “confirms the commercial standing” of its Ghanaian prospects. Plans for exploitation of the reserves are now underway. It’s small beans (relatively) for a company of Eni’s size, but big news for the budding Ghanaian oil industry.

Eni, Italy’s largest energy company, has reserves of more than 7bn barrels of oil equivalent and already pumps just under 500,000 boe a day in sub-Saharan Africa. So its Ghana discovery barely budged the company’s share price.

Stuart Joyner, an oil and gas industry analyst at Investec, told beyondbrics: “West Africa is a relatively small area for them, but growing in significance. The bulk of their operations are still very much in the heartlands of north Africa, Italy and the North Sea, but in west Africa they’re attempting to grow and are quite aggressive investors in buying acreage and assets.”

Based on previous Ghanaian discoveries, he believes the field will take 5 to 7 years to reach full production.

For Ghana however, this is a big deal. Proven reserves as of January 1, 2012, according to the US government’s Energy Information Administration, stood at only 660m barrels. Most of this was in the offshore Jubilee field, which began production in 2010 and is currently pumping around 110,000 barrels a day. According to Tullow, the British oil company which owns a 49.95 per cent in the Jubilee project, there are 500m barrels of proven reserves in the field.

So, even counting only Eni’s 150m barrels of recoverable reserves, the confirmation of Sankofa East ups the national total of recoverable reserves by more than 20 per cent, and adds a major new player to the mix in the national oil industry.

The government hopes that eventual proven reserves will come to several billion barrels, Joyner says. New president John Dremadi Mahama has pledged to use the revenues from the oil industry to drive Ghana’s development, and overcome poverty in the country where, despite rapid economic growth, around half the population live on less than $2 per day.

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