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THE EMERGING OIL AND GAS SECTOR: POLICY CHALLENGES EITI WORKSHOP on Oil & Gas 18 TH JUNE, 2010 Kweku Boateng Ministry of Energy Ministry of Energy PRESENTATION OUTLINE

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ministry of energy

THE EMERGING OIL AND GAS SECTOR: POLICY CHALLENGES

EITI WORKSHOP on Oil & Gas

18TH JUNE, 2010

Kweku Boateng

Ministry of Energy

Ministry of Energy

presentation outline
PRESENTATION OUTLINE
  • Introduction
  • Sedimentary Basins
  • Discoveries & Acreage Position
  • Policy Goal
  • Policy Challenges
  • Future Policy Development
  • Conclusion
slide3

SEDIMENTARY BASINS

  • BASINS
  • Tano (western coastal & offshore)
  • Central (Saltpond) (central mostly offshore)
  • Accra/Keta (eastern coastal & offshore)
  • (Total offshore ~ 50,000 km² up to 3,000m bathymetry)
  • Onshore including Voltaian Basin (~106,000 km²)
slide4

SAHARA

Current Activity Map

petroleum activity in ghana
Petroleum Activity in Ghana
  • Discoveries In Ghana
    • West & Central Tano
    • Cape Three Points (CTP-1X)
    • North & South Tano Fields
    • West Cape Three Points (WCTP-2X)
    • Saltpond
    • Jubilee
    • Odum
    • Ebony
    • Mahogany Deep
    • Tweneboa
    • Sankofa
slide7

Jubilee Field Location

Half Assini

North West Tano

63km

132km to Takoradi

Mahogany-1

Odum 1

Jubilee Field

Mahogany-1 discovery well in Jubilee field is located 63 km (39 miles) from the Ghanaian coastline and 132km (82 miles) SW of the port city of Takoradi and is situated in the Tano Basin.

jubilee fields development plan
Jubilee Fields – Development Plan

Phased Production of Field

Phase 1 production starts in 4th Quarter 2010

Exploit 278 Million Barrel Reserve

120,000 Barrel/Day Oil Production

120 MMSCF/Day Gas Production

Drill 17 wells (9 production wells, 3 gas injection wells, 5 water injection wells)

Wells tied back via subsea infrastructure to FPSO moored in the Field

Phase 2 production starts in 2013

Additional infrastructure required

240,000 Barrel/Day Oil Production

240 MMSCF/Day Gas Production

Produced Gas will be piped to Shore or injected.

introduction project objectives
INTRODUCTION – PROJECT OBJECTIVES

Offshore loading to shuttle tanker

FPSO

Gas Re-injection

Water Injection

Production Cluster

Production Cluster

Wells tied back via subsea infrastructure to FPSO

  • Broader Objective
    • Establish a hub for the development of petrochemical industry in the long-term
    • Immediate Objective
    • Harness the associated gas for power generation
    • Gas infrastructure will enable the exploitation of the hither-to “Economically Stranded” North and South Tano Fields

9

oil gas policy
OIL & GAS POLICY
  • Steps to guide the entire petroleum industry, both direct and ancillary, with policy and legal frameworks.
  • The Policy Goal: is to become a net exporter of Oil & Gas and a major player in the global petroleum industry, through the development and management of the nation’s petroleum resources and revenue streams in a transparent and environmentally responsible manner for the benefit of every Ghanaian, now and in the future.
  • Scope: In terms of scope the policy addresses two main areas:
  • The guiding principles for governmental monitoring of petroleum operations; and
  • The regulatory and legal framework for petroleum operations. It provides ground-rules for monitoring of the operations of petroleum companies and the government’s role in relation there to.
policy strategic objectives
Policy Strategic Objectives
  • Encourage Exploration & Development
  • Provide a fair government take as well as an acceptable return for the energy companies
  • Develop national technology & expertise in petroleum operations –(take over operations?)
  • Create conditions that are initially attractive, so that risk capital is provided
  • Maximize the development of hydrocarbons to advance economic conditions in country (exploit market chain)
  • Safeguard the environment
policy challenges
POLICY CHALLENGES
  • Institutional & Governing Structure
  • Resource Management
  • Economic Challenges
  • Supply Chain Contract & Local Content
  • Environmental Management
  • Downstream Processing
  • Energy Security
  • Geopolitics
current framework for managing upstream petroleum industry in ghana
CURRENT FRAMEWORK FOR MANAGING UPSTREAM PETROLEUM INDUSTRY IN GHANA
  • Ghana National Petroleum Corporation Law, 1984
  • (PNDC Law 64)
  • Petroleum (Exploration and Production) Law, 1984
  • PNDCL 84
  • Petroleum Income Tax Law, 1987, PNDCL 188
  • Model Petroleum Exploration and Production Agreement

The Petroleum Upstream is regulated by the following legislation;

regulatory framework
Regulatory Framework
  • Ghana National Petroleum Corporation Law 1984
  • (PNDC Law 64)
  • PNDCL 64 established the Ghana National Petroleum Corporation (GNPC) as a statutory body from the then Petroleum Department under the Ministry of Fuel and Power in 1983. This was to provide the requisite institutional framework to manage the country’s petroleum resources, i.e., Exploration and Production activities. GNPC started operations in 1985.
regulatory framework16
Regulatory Framework
  • Petroleum (Exploration and Production) Law, 1984
  • PNDCL 84
  • PNDCL 84 established the legal and fiscal framework for the conduct of Petroleum Exploration and Production activities in Ghana.
  • Petroleum Income Tax Law, 1987, PNDCL 188 Petroleum Income Tax Law, PNDCL 188 was enacted in 1987. It provides for a separate tax regime for petroleum exploration and production in Ghana.
regulatory framework17
Regulatory Framework
  • Model Petroleum Exploration and Production Agreement

Out of these pieces of legislation, the Model Petroleum Agreement was synthesized. The Model Petroleum Agreement serves as a basis on which all Petroleum Agreements are negotiated.

existing institutional arrangements
Existing Institutional Arrangements

Key Institutions Involve:

  • Ministry of Energy: Provides the Policy Guidelines and regulate the subsector.
  • MOFEP/IRS: provides tax regime, collects petroleum revenues and provide guidance on revenue utilization.
  • Attorney General Department: responsible for the legal regime, laws and regulations
  • GNPC: responsible for managing the petroleum resources in Ghana and facilitates the exploration and development of petroleum resources. GNPC also enforces regulation enshrined in Law 84 on behalf of the Ministry of Energy
  • EPA ;: enforces environmental regulations
  • EC: technical regulation of natural gas
  • PURC: economic regulation of natural gas
  • NPA: regulation of downstream transportation, distribution and marketing of petroleum products
deficiencies of existing institutional arrangements
Deficiencies of Existing Institutional Arrangements

The greatest deficiency is the lack of regulations/legislative instruments to give effect to the provisions of the Laws (Section 32 of PNDCL 84).

GNPC as a de factor Regulator and an Operator

Many regulators in petroleum sub sector

Inappropriate signals to investors

regulatory framework21
Regulatory Framework

Proposed Framework

Going forward;

  • Petroleum Production & Exploration Bill 2010
  • Petroleum Regulatory Authority Bill 2010
  • Ministry of Energy will retain policy formulation, direction, supervision.
  • A new and strengthened National Petroleum Authority (NPA)/PRA will manage and regulate the entire petroleum industry (initially). Scope will be enlarged from current downstream regulation to include upstream and midstream.
regulatory framework22
Regulatory Framework

Proposed Framework – cont.

  • The role of GNPC as de facto regulator, albeit on behalf of the Ministry of Energy as well as a participant in petroleum operations as a National Oil Company will be removed.
  • GNPC will play the important role of the entity managing State participation in hydro carbon exploration.
  • Amendments would be made to the NPA Act, 2005, Act 691 and PNDCL 84 to give effect to the new roles.
amended npa act
Amended NPA Act

23

Scope expanded to include Regulation of Upstream and Midstream activities (licensing and other regulatory matters)

All natural gas regulatory mandates of Energy Commission and PURC (may be) added to NPA/PRA mandates

draft regulations
Draft Regulations

24

  • To satisfy regulatory requirements of PNDC Law 84 primarily as follows:

- Petroleum Upstream and Midstream (Licensing) Regulations proposed

- Petroleum Upstream and Midstream (Exploration, Development and Production operations) Regulations proposed

  • Other relevant regulations to be prepared
  • Relevant provisions taken from Ghana Upstream Petroleum Authority Bill and other sources
resource management
Resource Management

Issues/Challenges

  • Measures to enhance resource recovery/Depletion Strategy – diverse short-run objective of Oil Companies vs. the long-run objective of the State
  • Reservoir protection
  • Value Creation
  • - Gas utilization strategies
  • - Gas processing for power and allied industries.
  • Avoid Gas flaring: environmental benefit, resources benefit, financial benefit under Kyoto Protocol & industrial development
  • Develop and produce hydrocarbons in a sustainable manner
  • Identify and protect hydrocarbons reserves for future exploitation
  • Sustaining the Exploration Momentum
resource management cont
Resource Management cont.
  • Due diligence in the evaluation of Plan of Development (PoD)
  • Well defined economic and technical model for rate of resource extraction
  • Concern for future generation and environment
  • Zero Gas Flaring Directives
  • Development of Gas infrastructure
  • Improvement in the regulatory environment
  • Periodic reviews of the conditions for entering and participating in the market to sustain interest in exploration and production
economic challenges
Economic Challenges

Issue/Challenge

  • Efficient Operations
  • Minimising cost
  • Cost Recovery
  • Equity Participation
  • Contribution to National Revenue: Royalties, Corporate taxes, Surface Rentals, Carried Interests, AOEs
  • Revenue Management
  • Revenue collection and auditing.
    • Mitigating the “Oil Curse”.
    • Revenue utilisation.
    • Avenues of lasting benefit to the nation.
    • Development of expertise and know-how.
economic challenges cont
Economic Challenges cont

Actions/Strategies:

  • Petroleum Revenue Management Bill
  • Extension of EITI to the Oil & Gas sector
  • Collection and custody of petroleum related revenues
  • Relatively tighter fiscal terms
  • GNPC monitoring of exploration, development and production activities/costs through JMC & JTC
  • MoE/GNPC review of quarterly reports of E&P activities
supply chain contract logistics local content
SUPPLY CHAIN CONTRACT, LOGISTICS & LOCAL CONTENT
  • Issues/Challenges:

Capacity Building For Local Content Dev.

  • Capacity to
    • Participate
    • Regulate
    • Operate and
    • Service the industry
  • Skills shortage
    • Training institutions
    • Operating environment
    • Challenges with poaching and retention
supply chain contracts local content
Supply Chain Contracts- Local Content

Action & Strategies

  • The Ministry has put in place a comprehensive Ghana Content Development Strategy.
  • Government’s “Ghanaian Content” vision is to transform the oil and gas industry into the economic engine for job creation and national growth by developing in-country capacity and indigenous capabilities. In this way a greater proportion of the work will be done in Ghana with active participation of all sectors of the economy and ultimately Ghana will be positioned as the hub for service delivery within the West African sub region and beyond.
supply chain contracts local content cont
Supply Chain Contracts- Local Content cont.

Actions/Strategies

  • Development of Comprehensive Local content Framework to ensure:
  • Critical vocational training and small and medium sized enterprise support programs.
  • Transparent & independent regulatory oversight
  • Preference for local industry and workers that also sets standards for sustainable commercial success
  • Procurement process- preference for Ghanaian goods and services
  • Support education & research programs of a number of tertiary institutions that have commenced or intended to commence programs in petroleum related disciplines
  • International cooperation with foreign entities in the petroleum industry.
  • Sound legal framework to include technology transfer clauses in petroleum and petroleum related agreements with international petroleum companies.
logistical challenges
Logistical Challenges

Issues/Challenges

Inadequate port facilities at Takoradi main harbour to handle heavy equipment and materials for the oil field operations. Space for the oil activities is a problem at the main harbour.

Lack of civilian air base at Takoradi to handle efficient oil field operations.

Inadequate helicopter services in Ghana to cater for the oil field operations

logistical challenges collaborative efforts
Logistical Challenges: Collaborative Efforts

Actions & Strategies

Collaborative Efforts

Plan to build a dedicated port separate from the Takoradi main harbour to handle the oil activities.

Local Content Policy

In the interim, the Navy has been very collaborative in supporting the oil industry with the use of the Naval Base for Supply vessels supporting the offshore operation.

At times some of the support vessels have to go outside Ghana for supplies of drilling materials and special equipment.

scope of ghana s oil gas sector 2010 jubilee
Scope of Ghana’s Oil & Gas Sector - 2010Jubilee

Heavy Lift Vessel

Supply Vessel

Cargo Barge

Crew boat

Tug

view of ongoing activities in sekondi harbour
View of ongoing activities in Sekondi Harbour

1.) Takoradi port – vessel berthing & mud plant

downstream processing
. Downstream Processing
  • Issues/Challenges
  • Limited capacity to develop leverage Nation’s revenues through downstream processing and increase the spectrum of products ranging from commodities to speciality products with potential applications in a large range of industries.
  • Managing Stakeholder Interest
    • Different interests and strategies
    • Size of businesses
    • Investment horizons
    • Private vrs Public
    • Corporate vrs National
    • Balancing the act
downstream processing cont
Downstream Processing Cont.

Actions/Strategies

  • Establish the process and infrastructure required to transform the raw oil & gas from the “crude” state to the saleable or consumable state.
  • Zero Flaring Policy
  • Secondary Gas Development Policy,- EC Regulations
  • Jubilee Field Gas Project at Bonwire
  • Western Region Industrial Estate
  • TOR Expansion program – to enhance downstream processing
  • Export Oriented Oil Refinery
  • BOST storage & infrastructure projects
environmental management health safety and community issues
Environmental Management, Health & Safety, and Community Issues

Issue/Challenges: how to ensure that the country receives maximum benefits from its petroleum sector development initiatives without compromising the integrity of the ecosystem and well being of the people by:

  • Promoting sound and responsible environmental practices in the exploration and development of petroleum resources
  • Undertaking appropriate measures to prevent, control and minimize pollution in the oil and gas industry
  • Undertaking appropriate measures to prevent destructive practices against the ecosystems
  • Instituting and implementing an environmental quality control programmer by requiring prior environmental impact assessments of all new investments in petroleum resource development
  • Developing mechanisms for proper consultations and partnership with communities for proper environmental management
environmental management health safety and community issues cont
Environmental Management, Health & Safety, and Community Issues cont
  • Health and Safety
  • Preventing oil spill
  • Gas flaring/venting
  • Good disposing of drilling fluids
  • Safeguarding the use of radioactive source
  • Controlling the Pollution Levels
  • Fishing interference
environmental management health safety and community issues46
Environmental Management, Health & Safety, and Community Issues

Actions/Strategies

  • Provide an appropriate institutional and regulatory framework for environmental management of the petroleum sector
  • Create, strengthen and build capacity of institutions
  • Review and harmonize existing environmental laws and regulations and enact new laws where necessary, to address petroleum related activities
  • Ratify relevant International Maritime Organization (IMO) and related treaties and their domestication into national legislation.
  • Establish/strengthening an institute with the objectives of promoting standards of safety, health and environment in petroleum sector in Ghana.
environmental management fishing activities cont
Environmental Management: Fishing Activities cont
  • The presence of seismic vessels and drilling rigs attract fish due to potential food source, noise, heat and light.
  • Most of our fishermen therefore have always tried to do fishing close to such installations.
  • Fishing activities have caused the seismic vessels and drilling rigs lots of mechanical downtime with issues such us thruster seizure from trapped nets.
environmental management fishing activities cont48
Environmental Management Fishing Activities cont

There is the threat of fishermen ramming their canoes into risers and anchor lines causing damages. These accidents could cost thousands of dollars.

There are others who tie their canoes to the anchor lines or the stern of the drilling rigs even when well testing is taking place on the rig.

The lives of these fisher folks are always in danger near the installations. There could be accidents such as capsizing if their canoes or canoes catching fire during welltesting. The distance from shore and the water depth at the location create challenges for them.

A slow response could mean lost of lives to these fisher folks who do not use life vests.

what do we do about it
What Do We Do About It?

Actions/Strategies:

  • The Ghana Navy in collaboration with Oil Companies are helping in warding off the fisher folks to help secure the drilling activities and the production facilities, thereby protecting both the facilities and lives.
  • Even though community education is being done, there the need for patrolling of the area. The presence of Naval officers on board the patrol boats strengthens the authority of the patrol crew.
energy security
Energy Security

Issue/Challenge:

  • The petroleum industry is a capital intensive venture that involves facilities and installations that are vulnerable and susceptible to criminal actions. The industry therefore requires adequate security to ensure sustained supply of outputs at desired levels and to promote investor confidence.
  • .
securing our hydrocarbon resources possible security threats
Securing Our Hydrocarbon Resources – Possible Security Threats –

Oil thefts on the high seas by organized criminals.

For example the disappearance of the M/T Asterias from the Saltpond field location in 2003 is an incident we should prepare ourselves for the impending oil production from the jubilee field.

Piracy and hostage taking on high seas.

Militant locals who may disrupt onshore installations under the pretext of securing more oil wealth for their communities

Deliberate attempt to sabotage the offshore pipelines and other assets.

Possible collision of fishing vessels with the FPSO

Local Militants

energy security cont
Energy Security cont.

Actions/Strategies

Policy Goal: To create a safe, secure and enabling environment to facilitate the exploration, exploitation and distribution of oil and gas in Ghana, and to promote investor confidence

  • Create and ensure a safe and secure environment to facilitate the exploration and exploitation of petroleum resources in Ghana
  • Consider, create and equip a national coastguard force to patrol, protect and monitor the security and safety of the nation’s coastal waters, petroleum installations and offshore facilities
  • Resource and build capacity within the Ghana Navy and Air Force to provide surveillance over the country’s waters and monitor activities at sea
  • Establish a Maritime coordination centre to collaborate with the relevant agencies to ensure a safe and secure maritime environment
  • The Ghana Navy, in collaboration with the offshore oil and gas industry players, are training officers to protect the offshore oil infrastructure to safe guard the 500m excusive zone and also to prevent oil theft on the high seas.
  • In the National Oil Spill Response Plan, the Navy has the role of On- Scene-Coordinator.
  • Technical Security Committee on Oil & Gas
geopolotics
GEOPOLOTICS
  • Immigration – Congestion, social tension and vices
  • Regional tension
  • Political promises
  • Expectation management
conclusion
CONCLUSION
  • There are obvious challenges that confront the Oil & Gas Industry today. These also present great opportunities. When harnessed properly these opportunities could be transformed into sustainable development for all stakeholders and Ghanaians in particular
conclusion58
Conclusion

Can Ghana prepared for the challenges ahead?

Provided we are willing NOT to do it the usual Ghanaian way, (Good Policies, No Action):

The answer will be, Yes, We Can, Insha Allah