Thomas Manu, GNPC's Director of Exploration & Production
Edited transcript
David’s Introduction: Last week we began our series on Ghana’s emerging oil and gas industry. We spoke to the Minister for Energy, Dr Joe Oteng Adjei. Our guest today is from the Ghana National Petroleum Corporation (GNPC) - the lead agency for the oil and gas sector in Ghana. GNPC has been busy in this sector for many years. I’ll be asking our guest what their role is exactly and how they see this industry unfolding.
David: Mr. Thomas Manu, what is the role of the GNPC given the discovery of oil and gas in commercial quantities now in Ghana.
Mr. Thomas Manu: The role of GNPC is clearly spelt out in the law establishing GNPC ie PNDC law 64 which mandates GNPC to conduct exploration and production activities on its own or in association with foreign companies or industry investors. We also have to ensure transfer of appropriate technology to Ghanaians. We are mandated to deveop national capabilities of all aspects of petroleum operations in the lcountry.
David: Let’s examine exploration. GNPC was not successful, was it?
Mr. Thomas Manu: I wouldn’t say GNPC was not successful
David: You didn’t find the oil. Tullow and Kosmos Energy found it.
Mr. Thomas Manu: I wouldn’t say Tullow oil and Kosmos Energy alone found the oil. GNPC has been working and if you are conversant with exploration processes you will know that it starts with reconnaissance survey, acquisition of data, interpretation, evaluation etc. If Tullow Oil and Kosmos Energy were to start from scratch they wouldn’t have found the oil.
David: So they benefited from your work?
Mr. Thomas Manu: Yes, GNPC had done a lot of work in terms of evaluation of the basins and promoting the data. As a matter of fact the prospects that were drilled to discover the oil had been identified by GNPC long ago.
David: So why did you not extract the oil then?
Mr. Thomas Manu: It takes about $50 million to drill a deep-water well and given the financial circumstances of GNPC at that time we could not do it and that is why it was appropriate for us to promote the prospect to companies who will team up with us to drill with their risk capital.
David: So the original mandate of GNPC acknowledges the fact that you do not have the resources to drill wells, is that correct?
Mr. Thomas Manu: Yes, it’s correct to some extent but you have to put that in the context of risk. Exploration success is very low, maximum 30%. It means that for every ten wells that you drill you will find only three wells with commercial oil and gas. So a national oil company like GNPC given our resources at that time and given the fact that we did not have the technical capabilities and financial capability was not prepared to risk that amount of money given the cost of well drilling.
David: What do you think accounts for the success of this recent discovery by Tullow Oil and Kosmos Energy?
Mr. Thomas Manu: Tullow has been looking for oil for a long while but they had not been that successful. However, a combination of their capabilities and GNPC’s technical capabilities led to the oil find. It has something to do with the strategy and the philosophy. Most companies were not looking at what is called stratagraphic traps??? which is not well defined and perceived in industry as high risk.
David: Why were Tullow Oil and Kosmos Energy successful?
Mr. Thomas Manu: There was convergence of philosophy and strategy between GNPC and these companies. GNPC having worked on all these basins for all this while had the conviction that we had all the necessary ingredients for this discovery and we led them in the right direction. These companies came believing in our strategy and philosophy and therefore led to the oil discovery.
David: Are there other areas that you are confident there is oil and are you going to lead other people into that direction?
Mr. Thomas Manu: Yes we are confident that there is still a lot of potential out there especially in the western basin; that’s where the jubilee oil field is.
David: Do we have other basins and is there exploration across board?
Mr. Thomas Manu: We have the Saltpond basin and Voltarian basin and there is exploration across board. As we speak now there is a company called Afren in the Keta deep water basin. The Saltpond basin is receiving its due attention in terms of exploration but because of its geological differences some foreign companies especially have preferences for certain basin types as a result of their past experiences.
David: So what are the prospects for Afren and the other companies?
Mr. Thomas Manu: Activities so far have been good and they are on track. They are currently awaiting an extension on their contract to drill the next deep water well.
David: How long will that take?
Mr. Thomas Manu: They are now going to parliament. When there is expiration of a contract it’s up to GNPC and government to take advantage of that expiration to re-negotiate the terms to lower the exploration risk and that is exactly what has been done with the Vanco and Afren agreements
David: Which basin is Vanco working in?
Mr. Thomas Manu: Vanco is also at the deep basin Tano area also in the Western Region.
David: What about the Saltpond basin? There’s been a rig sitting there for ages.
Mr. Thomas Manu: The Saltpond basin is producing about 500 barrels of oil per day.
David: What do we do with that?
Mr. Thomas Manu: We sell it, mostly to Tema Oil Refinery (TOR). We have been producing limited quantities from that basin but it is not a significant amount.
David: Are we moving into significant amounts now? How is Ghana compared to oil countries like Nigeria and Angola?
Mr. Thomas Manu: It’s very significant but we cannot compare ourselves to Nigeria because Nigeria produces over 2.4 million barrels of oil per day. We are look at producing 120,000 barrels of oil per day increasing to about 240,000 barrels of oil per day. This is just the beginning of the industry and with the risks lowered, we will see more exploration activities. We will see more discoveries and we will see our production profile going up to most probably 500,000 to 600,000 barrels of oil per day within a very short while
David: Many people are expectant. We spend substantial amounts of money importing crude oil; now we have found oil, are we supposed to be happy? Are things going to change significantly for the better and how will we feel the impact of these discoveries?
Mr. Thomas Manu: We are supposed to be happy but we must be cautiously happy. We have to manage expectations. We cannot expect that by 2010 everybody is going to be rich and everybody is going to be employed. It’s going to take a while because we have to train people and develop the necessary capacities.
David: You wait till you find oil until you train people and develop capacity?
Mr. Thomas Manu: GNPC has undergone a lot of training but that is as an institution. But the businessman on the street, the insurance companies, the financial companies, the legal services, the accounting services will have to undergo training because the emerging oil industry brings about many opportunities.
David: Where can we most begin to feel quickly the benefit of this resource find?
Mr. Thomas Manu: We can benefit from the resource find if we concentrate on the investment side. For example the fiscal side that is to yield revenue streams to government has been decided in the agreement already and there is very little we can do about it.
David: What will we get in terms of revenue?
Mr. Thomas Manu: This will depend on oil prices. Percentage wise we will be getting 56% of net oil rising as profitability goes up to about 67% of net oil. Net oil meaning that if you take out the cost of development from the gross amount, the profit left will be shared in that proportion. We will get the majority of the share.
David: What is the 10% of GNPC all about then?
Mr. Thomas Manu: The 10% of GNPC is part of the fiscal revenue that will come to the state.
David: Percentage wise, how much does the government royalty amount to?
Mr. Thomas Manu: 10% for this agreement but the subsequent agreements that were negotiated after the discovery went up to 12%.
David: How do you define royalty?
Mr. Thomas Manu: The government as the state is the owner of the resource and takes that royalty. It does not respect your cost. It is 12% of the value of the oil and we can take it in kind or in cash. If it’s in cash, it’s the value of the oil and if it’s in kind when the companies produce 100,000 barrels we take 12,000 barrels
David: I want you to help us get a sense of how different government revenues will be. Please compare it to say cocoa and gold. Are we going to get twice the amount we get from cocoa, what are the ratios?
Mr. Thomas Manu: Government revenues from oil will depend on a lot of things such as control of the cost. If the cost of exploration and production is kept at a minimum then there is more to play with. The agreement determines how to control cost and because of the approval processes they just can’t do anything they want. For every undertaking on their part we always have to sit and agree on the extent of the undertaking and budget for it. They will have to justify costs before it is considered as petroleum cost.
David: Do we have a good relationship with our partners?
Mr. Thomas Manu: We have respectable good relationship.
David: As partners in this business, do you see these companies becoming involved in Ghana over the long term?
Mr. Thomas Manu: One cannot say for sure because the industry is dynamic. A while ago we had Exxon and we had Mobil. Now it is Exxon-Mobil. There are mergers and acquisitions and decisions whether to remain in a particular country are strategic in nature which are taken by the head offices and may have nothing to do with the conditions in the country ie whether we have good relations or not. So it is very difficult to answer your question but I’ll say that currently there are some movement s within the Ghana industry which suggests that not all the partners will remain in the country for a long time.
David: This is serious business and people are risking their money. Do you feel they find the Ghanaian business environment as well as the regulatory environment conducive for their investments?
Mr. Thomas Manu: I think we have very good investment and petroleum laws; we have the right political climate which encourages them to invest in Ghana.
David: How do you feel about the state of things now and what would you like to see happen? Are you happy the way things are unfolding? Do you have concerns? What are your perspectives on the emerging industry?
Mr. Thomas Manu: I am very happy to start with. At the same time there are some challenges such as the development of capacity. The phase one development alone will cost about $4.2 billion; that is the Jubilee Field. How much of this investment will remain in the country? For the oil industry not to remain as an Island within the economy, this is crucial.
David: Why don’t we have regulations and systems that require them to do XYZ so that we as a country can benefit?
Mr. Thomas Manu: I think it’s not a hopeless case for Ghana. We have a provision within the petroleum production and exploration law that requires them to use Ghanaian goods and services including employment where there are qualified Ghanaians.
David: And if there are no qualified Ghanaians?
Mr. Thomas Manu: If there are no qualified Ghanaians, they present their work schedule with the job requirements and we determine if they are qualified or unqualified. If they are unqualified they can recruit an expert. However, they will have to make provisions for a Ghanaian to shadow this expert so that he can take over and this is over a period of 4 to 7 years. This is to say that from 4 to 7 years time Ghanaians should be at the helm of affairs. This is contained in the plan of development that is yet to be approved by the Minister.
David: So what is your other main concern?
Mr. Thomas Manu: The other concern is that GNPC has never been involved in the development of this huge asset. What structures do we need to put in place?
David: Do you know that?
Mr. Thomas Manu: Yes, I do. Luckily, there is a Board now so we are discussing the structures to put in place to be able to respond to these challenges. The rest is up to GNPC and government to let the opportunities available be known to the entrepreneurs, business community, to financial institution etc so they take advantage of it.
David: What are some of these opportunities?
Mr. Thomas Manu: For example, logistics. These companies will need transport logistics, they will need accommodation.
David: Will they not procure these services from foreign companies they believe are more competent?
Mr. Thomas Manu: We have put in place systems that require anybody who wants to participate in the upstream petroleum industry to register with GNPC and in doing so companies must produce contents detailing the goods and services their companies will need from the country; it must detail the percentage of Ghanaians the company will be able employ and explain why it cannot employ 100% Ghanaians; it must detail plans the companies intend to put in place to localize subcontracts. All these are being monitored by GNPC. While waiting for the comprehensive policy from government there are some provisions in place to ensure that we develop the Ghanaian capacity. It will gladden my heart ten years from now to find there is a Ghanaian production and exploration company drilling oil and making money for the Ghanaian economy.
David: Some suggest that opportunities are not upstream because of the size of investment and so on. Do you share the view that Ghanaian entrepreneurs well benefit most from the downstream segment of oil production?
Mr. Thomas Manu: I do not share this view entirely; I still think there are a lot of opportunities upstream. Let’s look at the supply chain of the whole Jubilee field. It has the rig segment, the production segment, the supply segment, services segment etc. Its true Ghanaians cannot manufacture rigs or the FPSO that is used in production. But we have fabrication yards that can be improved to manufacture components for the FPSO. We have specific agreement with all the sub-contractors and discussed schedules for the first phase of production and the services that can be provided here in Ghana. We’ve looked at the capacity of our local industry. In addition we requested information on the aspect of their sub-contract that can be catered for locally so we provide them with those services. They have agreed to these conditions so It is up to Ghanaians to look at these areas and take advantage of the opportunities. It is also up to Ghanaians to deliver whatever services they intend to provide. If services are delayed then they have an excuse to use service providers from elsewhere. So Ghanaians must sit up and do their work well in order to benefit from this.
David: What are the opportunities downstream?
Mr. Thomas Manu: Downstream is where the refinery, bulk transportation and distribution occur. Ghanaians are used to this area already. Some people have developed capacities to provide tankers that tap oil and distribute.
David: Will that area expand?
Mr. Thomas Manu: I know there are plans to expand and increase the capacity of the Tema Oil Refinery (TOR). The extent of the expansion will depend on the policy the government will put in place.
David: What is the relationship between GNPC and the Ministry of Energy?
Mr. Thomas Manu: The Ministry of Energy is the regulator and GNPC is an agency.
David: Can we describe you as a national oil company?
Mr. Thomas Manu: Yes
David: In Brazil and Venezuela there are major state owned companies that get the largest share of the oil operations. GNPC is not like them, is it?
Mr. Thomas Manu: GNPC is nothing like them because over the years we’ve not developed our capacity. There were times that people called for government to scrap GNPC. There were also times that GNPC began acquiring assets that would enable them to develop to the level of these companies. However there were some changes in policy which restricted us to focusing on promotion.
David: Do you think that was short sighted?
Mr. Thomas Manu: Silence
David: It would seem shortsighted?
Mr. Thomas Manu: Silence
David: These are my words.
Mr Thomas Manu: Yes
David: These are my words but you agree with them. Do you think that now GNPC is returning to a more prominent role?
Mr. Thomas Manu: GNPC is returning to a dominant role in the industry.
David: And you think it is a good thing?
Mr. Thomas Manu: I think that’s a good thing
David: Why?
Mr. Thomas Manu: If we need to have the likes of Braz Petrol, Saudi Aramco, Venezuela National Oil Company, Petronas and co who have contributed to their national energy mix in their respective countries then GNPC returning to a dominant role is a step in the right direction. Unless of course you don’t see the relevance of these companies in the national energy mix.
David: What is the relevance of these companies?
Mr. Thomas Manu: The relevance of these companies is that they have developed the capacity to enable their respective countries to retain a lot of the value within their economy.
David: So the arrangement we have now, doesn’t allow this to happen
Mr Thomas Manu: Unless we develop.
David: And it’s largely because we just don’t have the expertise?
Mr. Thomas Manu: Yes, but expertise is not acquired overnight
David: Why don’t we leave the oil underground until we have the expertise?
Mr. Thomas Manu: Well you can say that, but having discovered the oil, would that be a prudent decision to cap it and leave it down there and start developing the expertise. Then what happens to the company that invested its risk capital to discover the oil?
David: So that is the one of the reasons we must exploit it and produce.
Mr Thomas Manu: Remember that oil prices rose to $147, so you keep importing whilst you have the resource down there.
David: Why are we back to such a volatile commodity? You know that one of the things we wanted to do for a long time was to try and add value to our natural resource before exporting. Is this oil discovery not going to take us back to that path?
Mr. Thomas Manu: Well, it depends on how we look at things. I think where we are heading now is not going to lead us to that path. The added value here is the gas that will be brought on shore, processed on shore before it is sold or exported if we need to.
David: On the environment; do we have the regulations in place to ensure that oil exploration and production is done in a safe and environmentally friendly manner?
Mr. Thomas Manu: The best policy is prevention of disaster, or spillage etc occurring. And if they occur we can handle them. The EPA is doing a fantastic job and is currently working with Norwegian agencies to develop that capacity.
David: What about the companies themselves?
Mr. Thomas Manu: The companies themselves are obliged under the law to adopt the most appropriate industry practices so they cannot bring in any technology that is inferior and that will lead to this kind of degradation. The Ministry of Energy and GNPC will take them on if they violate the laws and this can lead to termination of contract.
David: Thank you
First Broadcast 11th July 2009, TV3 Ghana
