Randi Cruz ExxonMobil

A key consideration in our investment decision is the attractiveness of the underlying geology.

Randi CRUZ Managing Director EXXONMOBIL EXPLORATION & PRODUCTION GHANA (DEEPWATER)

A positive outlook for investment in Ghana

February 6, 2020

Randi Cruz, managing director of ExxonMobil Exploration & Production Ghana (Deepwater), talks to TOGY about the country’s attractiveness to international investors, the feasibility of the government’s production targets and the state of local content development. ExxonMobil E&P Ghana holds the rights to explore the Deepwater Cape Three Points block.

How do international investors view Ghana’s business environment?
I would say that, overall, the view is positive. This is due to political stability in Ghana, as well as the desire to attract investors and create a reliable and stable business environment for development and growth. There is long-term predictability, and the government offers growth incentives for long-term investments. From an industry perspective, beyond the appropriate subsurface, Ghana has favourable geological conditions that the upstream oil and gas sector looks at during early stages of exploration.
With the 2007 discovery of the Jubilee field, there was an expectation that Ghana would grow rapidly with sustained development in the industry. ExxonMobil’s petroleum agreement [PA] for the Deepwater Cape Three Points block was ratified in April of 2019. The sustained and substantial efforts of the Ministry of Energy deserve commendation, as does the commitment they have shown to examining the reasons why the recent 2018-2019 licensing round did not attract as much investment as expected.
Following the outcome of the last licence round, the Ministry of Energy has engaged openly with the industry throughout last year, asking stakeholders for feedback on what was needed to make the industry more attractive and sustainable. I see this as a very positive step forward. We have open channels of communication with the government and the ability to be part of the discussion on how to make a positive impact in the business environment.

What is the industry’s relationship like with the Ghanaian government?
As an investor, we need to have a good relationship with government entities to ensure we understand and comply with laws and regulations impacting our business. ExxonMobil has strong alignment with our co-venture partners GNPC and GOIL Offshore in the Deepwater Cape Three Points block. We also have good relationships with the Petroleum Commission [PC] and the Ministry of Energy.
Ghana has an upcoming election, and we always look at the potential impact of such events on the business landscape. It is important for governments to continue legislative and regulatory frameworks that are predictable, attractive and secure and which protect investments for the long term, and that there is continuity and stability in terms of our agreements, laws and regulations.

What factors into your investment decision besides political and financial issues?
In addition to aboveground risks and factors for the sector, a key consideration in our investment decision is the attractiveness of the underlying geology. You need to have the presence of “good rocks” and a working hydrocarbon system. Only about a third of the offshore continental shelf in Ghana has been explored, so there are future opportunities for continued study, exploration and hopefully development to produce assets.
Before ExxonMobil makes a significant investment, we look at all of the available data; if there is limited data, it is more challenging to make an investment decision. ExxonMobil has been around for more than 100 years, and we have a strong and diverse global portfolio with a wide and deep analogue database. Our decision to enter Ghana’s upstream sector was based on the experience we have built and the large resource database we have to draw from.

What is your view on the potential to double the country’s oil production by 2024?
According to the projected production schedule shared with the public by the Ministry of Energy mid-2019, the current confirmed investments will peak in 2023 at approximately 250,000 bopd, before declining to half that in 2028. The actual aspiration shared is to be approximately 332,000 bopd by 2028, nearly triple what mid-2019 production indicated.
This stretching target can benefit us, industry and the resource owner by creating momentum for industry growth. In light of what we have seen over the last year or so in terms of the timing of awarding new contract areas and executing new PAs, delays in new development projects being brought online, and some technical challenges and reduction in production and forecasts for some of the currently producing assets, this aspiration could prove challenging.
Based on our global experience, the time from early exploration to first oil generally ranges from six to 10 years. To achieve a goal of doubling oil production over the next four years, all plans and projects will need to move forward at a steady pace.

What can be done to help improve the odds of this production goal being met?
The government and industry need to bring forward exploration projects at an accelerated pace. They also need to sign and execute PAs with a framework that could lead to successful and commercially viable discoveries.
Industry seeks development plans that can be approved and executed in a timely and efficient manner and a framework that supports development projects and producing assets, including potential near-field opportunities that could be brought online today. There needs to be larger and more accessible acreage in the early exploration stages, with more flexibility on relinquishment and the ability to drill within one’s declared development area.
The Ministry of Energy’s current efforts to amend some of the existing petroleum regulations could support a framework that might incentivise new and current operators and investors in the oil and gas sector.

 

How well developed is the local supply chain to support your activities?
The oil and gas sector in Ghana is relatively new and is considered to be a smaller source of jobs, but we have capabilities and services and it takes time to attract, develop and maintain the required skills for a local supply chain in a specialised industry. We support local content plans and regulations that help ensure that the local supply chain and local content are developing and growing. Key factors in the consideration of suppliers include safety standards, quality of products and services, and timely execution.
ExxonMobil is still early in the exploration phase in Ghana and this will involve specialised types of activities such as seismic acquisition and highly advanced geophysical capabilities related to processing and analysis of data. ExxonMobil has the expertise within its global portfolio, so we utilise centralised services which support our operations worldwide, and that is a model that works where there is demand for highly specialised services that are required for limited periods of time.
Ghana has a highly skilled workforce and an abundance of capability, especially in the financial, office support and legal sectors, and we utilise these as needed. We recognise that the local supply chain is prepared for development and production, but it can take 10-30 years to develop the necessary local experience in this specialised industry. To develop that kind of specialised expertise, there should be educational programmes in place that drive and develop the pipeline for specific industry skills. It can take five to six years to obtain industry relevant degrees, and sometimes longer to obtain experience and exposure in a given subject matter to maintain those skills. We are proud to note that in Africa, more than 90% of ExxonMobil’s employees are local nationals.

How realistic are Ghana’s local content requirements for foreign companies?
Building local content is very important for long term development, and we support countries that establish local content regulations, whether it is financial or workforce capacity. Local content regulations should be implemented in phases in order to keep pace with all stages of oil and gas operations, ramping up as the industry or project grows. Local content not only helps manage costs, but it returns value directly to the resource owners and ensures inclusion in the development of an asset. Wherever we operate, we want to ensure that we have a local workforce to partner with and grow with us as resources are developed.
ExxonMobil will comply with all of the commitments of the PA, joint operating agreement and regulations. Some of those regulations also require a percentage of local content in each phase of exploration, development and production. In a new and developing country, this can be a challenge in the early stages. For example, we heard from the Norwegian ambassador during a local content forum last year that this is a long path. It took Norway 50 years to develop the local expertise that it has today.

What potential is there for Ghana to become a regional hub?
Ghana is perfectly situated from a geographical and strategic point of view, and the vision for Ghana as a hub for West Africa will be long term, potentially 30 years from now, so there is a need to start planning and investing towards this today. Ghanaians should also start looking at working outside of the country to gain the experience and expertise they need to help build the country into a regional hub.

What type of activity is taking place during your first exploration phase here?
We are in the early stages of the initial exploration phase, and we will focus on acquiring, processing and analysing seismic data. Together with our co-venturers, GNPC and GOIL, and the regulatory authorities, we are aligned on our work programme and work commitment.
PGS Ghana, which has a contract with the PC, has been conducting a large multi-client seismic survey in the Tano Basin over an area including and covering our Deepwater Cape Three Points acreage, and we will license their data for analysis. We will then work with our co-venturers to analyse the data and look at what the potential opportunities are.

What makes ExxonMobil stand out in the market as an international partner?
ExxonMobil is one of the largest oil and gas companies in the world. We have more than 100 years of experience when it comes to exploration, development and production. We also have our midstream and downstream experience base to pull from, in addition to a global portfolio that spans multiple assets and resources.
With our technological and innovative abilities and real-world experience gained in similar geological settings such as Guyana, we have the opportunity to bring a wealth of global expertise to bear on our operations in Ghana. We have an unwavering commitment, and we do not compromise when it comes to business ethics, safety and operational integrity. This gives us the opportunity to be considered a partner of choice in any place we work.

What is your outlook for Ghana’s oil and gas market in the coming years?
Based on what we have seen with the government’s commitment to sit down with industry and its drive to create a strategic environment that is attractive to investors, I am optimistic. Ghana continues to be attractive when it comes to aboveground factors, with a wealth of unexplored potential that provides ample room for growth for investors and increased revenue to the resource owner – the people of Ghana.

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