Looking past the slowdown in GhanaAugust 14, 2020
Frederick A. Sam, president and CEO of Freddie Jordan Oil Company, and Jordan Mathia, the company’s vice-president and co-founder, talk to The Energy Year about how the company’s services business has been impacted by the Covid-19 pandemic and low oil price and where it sees opportunities coming up. Freddie Jordan Oil Company is an indigenous oil and gas services company.
How has the Ghanaian oil and gas industry coped with the challenges of the crisis?
Frederick A. SAM: Activity currently is very low. The oil price has had an impact on eve-ry company. The industry here is very slow now, as the government concentrates on deal-ing with Covid-19. In the past three months, we only had one or two contracts. Eni and Tullow Oil are the only companies operating now in Ghana. Unfortunately, Aker Energy was supposed to start field development operations, but as a result of the oil price, and the Covid-19 pandemic resulting in lockdown they have suspended these plans.
We have TGS as our partner in the seismic space and we had planned to do some seismic work in the Keta Basin, but now we do not know. Now, that sector has slowed down and unfortunately we were not given the green light to do that seismic work. For us, it is not a good indication at all. I think that when activity is slow, that is the time for companies to do exploration because it is cheaper.
With regards to our contracts coming up, because of Covid-19 these are not moving at the pace at which they should. It is all stagnant. However, we all know that after a depression there is always a boom. How soon it will come, we don’t know, but I hope very soon.
Jordan K. MATHIA: Recently Springfield E&P made an exciting hydrocarbon discovery drilling the Afina-1 well. This discovery straddle into Eni’s acreage, they are supposed to undergo a unitisation process. When that starts, it will give some leverage to Springfield to determine where to start field development and production. They can either tie up to Eni’s infrastructure, for example. That will probably become the third producing development we have in Ghana.
Aker Energy released a memo indicating that, they will come back to develop the Pecan Field. It doesn’t make economic sense today developing an offshore hydrocarbon assets at USD 10 per barrel. Recently, they appointed a new CEO, which means the company is gearing up to do something new like coming up with a concept which will be resilient to cyclical trend in the oil and gas industry.
A phase development strategy of the ultra-deepwater Pecan field could be a solution. We might then have a fourth oil-producing asset coming up. But the price of oil will remain the determining factor in decisions.
The whole industry here is young and many of those who acquired an asset have not been drilling the mandatory wells as quickly as they should. This is probably because they were cash-strapped and were waiting for people to farm into them, to get some more financing and operator-ships and have the operations started. Let’s see what happens when the oil price gets into the USD 40s and 50s; we might see a new dynamic here. Li-censing rounds are badly needed in Ghana to ensure more blocks are acquired and developed.
What opportunities do you see looking ahead?
JKM: Coming to other things we are engaged with, we have a Scottish partner in well management and engineering. Once drilling starts coming back, we will definitely get work in that area.
But we are using this time to propose virtual training to GNPC. We have offered them some free courses, and they are testing the modules. We are also using this time to consolidate with partners on a farm-in opportunity, which is something we can do regardless of Covid-19.
FAS: The opportunities are still there but my perception is that the opportunities in the Ghanaian jurisdiction are limited because if you have only two oil majors, Tullow and Eni, the barrels we pump per day are not enough to generate a lot of opportunities. So in general, opportunities in the Ghanaian oil space are not as interesting as those in other big markets. And there are not many major, serious local companies that are doing good business.
What would be your message to investors considering coming to Ghana once the storm is over?
FAS: Ghana is a friendly country with lovely people – a good place to invest. Investment laws are very friendly. Working through the red tape is sometimes challenging, but you can always get things done with peace of mind. The political aspect is sometimes a bit slow. For example, I have been trying to collaborate with the Ministry of Energy to help get a licensing round going. If you want to drive your oil sector, you must be able to offer data so IOCs can come and look at the opportunities.