The Ghana-Cote d’Ivoire maritime dispute could affect Tullow Oil’s TEN fields as Cote d’Ivoire applies for stay of work on field pending dispute resolution
Cote d’Ivoire has requested that the international Tribunal of the Law of the Sea (ITLOS) order the suspension of all Ghanaian activities on the Tweneboah-Enyenra-Ntomme (TEN) field offshore Ghana. The two countries had agreed in January to allow the international court based in Hamburg, Germany, resolve the issue relating to a disputed water border where the TEN field on the Deep Water Tano license operated by Tullow Oil is located. The court is expected to hear the case of both parties in October 2016 with a verdict expected by the end of 2017.
However, Cote d’Ivoire on March 2 requested that the international court issue an order suspending all activities by Ghana on the disputed area until a final verdict is delivered. If granted the development of the TEN field, which is located just 21km from Tullow’s Jubilee field will be halted till a final judgement is delivered in 2017.
The TEN field project is a deep-water project lying offshore Ghana in the Deepwater Tano Block. The project comprises the development of several fields discovered in the past five years, namely the Tweneboah, Enyenra (formerly Owo) and the Ntomme fields. The fields hold a recoverable reserve of 371 million barrels of oil equivalent (mmboe) and could produce an estimated 100,000 barrels per day (bpd) at peak.
The TEN project reached 50 percent completion in January with first oil expected in the second half of 2016. The field is expected to raise Ghana’s production to almost 200,000bpd by 2018 when it peaks. The TEN field is expected to have an initial production of 25,000bpd rising to 100,000bpd in 2018.Tullow (49.95 percent) and its partners Anadarko (18 percent), Cosmos (18 percent), Sabre (4.05 percent) and GNPC (10 percent) have invested over $1.8bn since commencement of exploration and could spend another $1.8bn before the field comes on-stream.
If the Cote d’Ivoire request is granted, the effect on the TEN field partners and government of Ghana is likely to be quite damaging. Tullow oil recorded its first loss in 15 years in 2014 and cancelled final dividend payment to save cash. The completion of the TEN field project is therefore paramount to the company’s future cash flow.
The suspension of the project could potentially also have significant effects on the finances of the government of Ghana, who have recently secured a $1bn loan from the IMF. The revenue from the project is expected to help cushion Ghana’s financial position amidst high government debt and unstable currency that has plagued the country’s economy.
Analysts believe the impasse will not be beneficial to either party and dent investor confidence. ‘ In our opinion the suspension will not benefit either countries and is more likely to further dampen investors’ confidence regarding investment offshore West Africa,’ said an analyst with Ecobank. ‘If suspended the decision could hinder Ghana’s bid to fast-track its economic recovery. Tullow and its partners will also have to find other sources to fund finance charges on loans secured to cover their respective shares of Capex [capital expenditure]. Cote d’Ivoire is also likely to miss out on cash flow from the project should any portion of the field be allocated to the country by the international court,’ he added.
Tullow is, however confident that the international court will rule in Ghana’s favour. ‘Tullow’s advice from external counsel is that Ghana has a strong case under international law that the current boundary location, which follows and equidistance line, will be upheld by ITLOS in accordance with the Law of the Sea Convention to which both states are party,’ Tullow said in a statement. ‘Work on the TEN project continues and remains on schedule and on budget for first-oil in mid-2016,’ the statement added.