Tullow, government to conclude 200 MMcf/d gas supply deal

Tullow Ghana is confident of reaching a gas commercial deal with government that will see the company supply a minimum 200 million cubic feet of gas per day (MMcf/d) over the next 13 years.

The company has been supplying foundation gas to the state at no cost since it began operations in Ghana. The free 200 billion standard cubic feet (bcf) of gas is forecast to come to an end at the end of this year based on current forecasts.

Given that those foundation volumes will expire soon, the company is now seeking to commercialise its gas from the Jubilee and TEN Fields – estimated at around two trillion (tcf). Based on this forecast, Tullow Ghana’s Managing Director Wissam Al Monthiry said his outfit can supply 200 MMcf/d over the 13-year period.

“We have identified significant gas prospects on what we have been producing so far as associated gas from Jubilee; somewhere in the range of two tcf of gas that may be available from TEN and Jubilee.

“Our goal is to commercialise those volumes and bring them to use for to benefit the country, be it in the power or manufacturing sectors,” Mr. Al Monthiry told the B&FT.

He revealed that positive discussions are ongoing with government for a deal to supply the gas at a fee, which will be the lowest among all available options to the country when the foundation volumes expire.

An agreement will pave the way for new capital investment into facilities and pipelines to carry the resource.

It will also lend credence to government’s commitment to developing and effectively utilising domestic hydrocarbon resources for economic transformation.

“These are new, untapped resources that will require approvals from government to develop, drill wells; build facilities to bring the gas to market, to onshore – and then be able to get them through pipelines to their end users, be it in power or manufacturing. So there are investment requirements,” Mr. Al Monthiry added.

Gas remains crucial to Ghana’s industrial aspirations. For instance, thermal power plants – gas powered plants, account for the largest share of the country’s power generation, representing 66 percent with hydro accounting for 33 percent. However, a large portion of Ghana’s thermal needs come from imports.

The country’s ability to develop its domestic gas resources, according to many market watchers, could springboard the economy into an era of sustained energy security and industrialisation.

If holistically harnessed, the country could also become a net gas exporter by taking advantage of the energy crisis faced by the European Union bloc.

In the global energy transition process, gas is seen as the future of the oil industry as it is considered a cleaner energy source relative to other fossils.

Racing against time

The deal was first mooted earlier this year in the oil firm’s last annual report. As explained by Tullow Ghana’s MD, reaching an agreement before end of this year is of the essence.

“Our priority is coming to an agreement that commercialises it, and our concern is that if we don’t get to a place of agreement, certainly by the end of this year, then that leaves a large volume of gas uncontracted, unagreed for – and leaves the country with the need to access much more expensive gas.”

The need to reach a deal before end of the year, he explains, is also underpinned by the fact that these are new resources which require new investments into facilities and pipelines. A deal will therefore pave the way for these capital commitments to take place in time to ensure continuous gas supply.

“There’s a lot of issues at play,” he said while responding to a question on the progress of discussions with government.

“There are multiple parties in the mix beyond the Ministry of Energy. There’s the Ghana National Petroleum Company, there’s the Ghana National Gas Company. There are also some private companies that have gotten involved in the mix, particularly downstream.

“But I think we all, including Tullow, need to push harder to make sure that we get it over the line and get an agreement.

“And I think I would be speaking for anyone from government by saying that all these stakeholder considerations have slowed things down. But we don’t want that to get in the way of government and Ghanaian consumers accessing the lowest-cost gas available.

“So it’s a positive response, but I think all of us including Tullow need to push harder to make sure that we get it over the line and get an agreement.”

In the worst-case scenario, he said, it will deny government and Ghanaian gas-consumers access to the lowest-cost gas available.

Such a situation could also send a bad signal to other investors looking to explore opportunities in the country’s petroleum upstream industry.