Aker leads race to partner Springfield’s mammoth oilfield development
Following the announcement by Springfield late last year of a huge oil and gas discovery in its exploration block, several international oil firms have begun jostling for the position of technical partner and operator of the oilfield to be developed out of the find.
Springfield reckons that a third of its estimated 1,5 billion barrels equivalent discovery is recoverable and based on current projections expects to develop a field that can produce between 300,000 and 350,00 barrels per day. Instructively this would amount to more than twice the daily production of Ghana’s current flagship field, Jubilee which is also the oldest, having commenced operation in December 2010.
The block where Springfield struck huge success in just its second full scale drilling, is 84 percent owned by the wholly Ghanaian owned company, with Ghana National Petroleum Corporation holding the other 16 percent equity stake.
However, even as Ghana celebrates by far its biggest success with regards to indigenous ownership and participation in an upstream oil and gas field to date, Springfield is well aware that it will need a foreign partner, for both technical expertise and financing required to develop and run the field.
Here, the obvious leading candidate is Aker Energy, the Norwegian company which itself is on the brink of securing government’s approval for its plan of development for its impending Pecan field, following its discovery of over 500 million barrels of oil equivalent in its offshore exploration block, which it had acquired from Hess at the beginning of 2018. Aker already is partnering Springfield in an array of technical matters regarding the latter’s exploration activities through its subsidiary, Aker Solutions Ghana.
However, there are other international oil companies looking to secure a piece of the action, including Tullow Oil, which has been studying the data behind the new find, as given it by Springfield. Tullow has the advantage of practical experience in developing deep water oilfields in adjacent blocks to Springfield’s discovery off the cost of western Ghana.
Aker on its own part can lay claim to capacity in developing a field which nears the sheer size of the one which Springfield now needs to develop; Akers Pecan field, when its first phase commences production expectedly by late 2021 or early 2022, will be the biggest in Ghana, but it will be eclipsed by Springfield’s impending oilfield soon after.
Capacity to raise the requisite financing for developing Springfield’s oilfield will be a crucial consideration too. The discovery, like the others off Ghana’s shores over the past 13 years, is in deep waters which is relatively expensive to develop. Development costs for the relatively large Springfield oilfield can be expected to cost US$5 billion or more.
While Aker has declared its confidence to raise the requisite finance to develop its impending Pecan field, its financial capacity could be stretched if it is called upon to secure financing for Springfield’s even bigger field at the same time. GNPC can be expected to increase its own equity stake in the field – even if it means borrowing on its own balance sheet, which it has shown it has the capacity to do more so now that Ghana Gas’s own balance sheet has been incorporated too.
Nevertheless, most of the finance required will have to come from abroad, an admixture of equity and debt and this means more than one international oil company may get to be equity partners to Springfield.
Such partnership is made all the more attractive, not just by the sheer size of the oilfield Springfield’s new discovery can accommodate – the equity partners can be assured of Government’s eager support since the lead partner is wholly indigenously owned and the state’s GNPC already has a bigger than usual equity stake with expectations of this being increased further.
The selection of a partner by Springfield is now one of the most crucial decisions facing Ghana’s oil and gas industry. Whichever partner is chosen will anchor the plan of development for approval by government which itself would like to see the field as quickly as possible to enable it provide some of the direly needed public revenue to meet maturing Eurobond issuances annually from 2023.