Is Ghana ready to decommission oil installation?
The West African coast has undoubtedly a long and rich oil industry history spanning many decades.
It is, however, pitiable that most energies have been trained on just getting the oil out as it yields quick and ready money, while a relatively lucrative undertaking in the decommissioning industry is given scant attention.
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As is usual in many other fields, African oil nations prefer to out-source when it comes to decommissioning as no country within the sub-region has yet developed the needed skills to play lead roles.
That reality must change as Ghana gets ready to retire two of its oil rigs in two of its offshore basins.
The three basins
After many decades of searching for oil in the three offshore basins of Accra-Keta, Saltpond and Tano, some fields and rigs have served their usefulness and must be retired.
Before other commercial discoveries were made, including the Tano Basin, Saltpond was up but currently has been declared by the sector ministry as not economically viable and is up for decommissioning in addition to the North Sea Pioneer anchored off the coast of Sekondi/Takoradi.
Good move, but!
The explanation given for the decision was that the field had reached its economic limit and so the ministry had set up a committee under the Ghana National Petroleum Corporation (GNPC) to decommission the installations.
A good move but the question is: who is responsible for the project since it requires billions of dollars to decommission the field whose rigs were built to endure decades of rough sea life and whose removal is as tough as its installation.
Aside the torturous process, the cost component globally is a problem.
It is per some of these realities that governments are being urged not to remain on the sidelines but move to become equity players in decommissioning and show willingness to take on risk and cost.
The views are that if host nations assume a degree of risk with the majors focusing on squeezing out the last drops of oil from the fields, they should consider setting up a decommissioning fund or a guarantee scheme which helps smaller companies cover their letters of credit requirements for decommissioning.
The experts are also of the view that considering the cost component, it would be tangible for host nations to play within the decommissioning space by owning facilities which require late life assets at zero cost and manage the decommissioning, paid for by the operators.
Decommissioning fund
In the case of Ghana, the legislative and contractual arrangements make it obligatory to decommission, which requires a decommissioning plan subject to periodic review under the current agreements.
These led to the establishment of the decommissioning fund and the accruing amount to the fund is pushed into the escrow accounts to ensure that when the offshore or onshore upstream installation reaches its economic limit, funding would be available.
From the Public Interest and Accountability Committee (PIAC) report on Saltpond, the Phase I of the process started in October 2016 and entailed the selection of a Consultant to lead the process. Again the technical and financial proposals from shortlisted consultants have been submitted and evaluations completed.
The selection of the consultant is, however, said to be pending as of the end of the period under review, according to the Ministry of Finance, 2017.
However, in the case of the Tano basins, the question is: who is responsible for the decommissioning of Saltpond facility? – The taxpayer, grant, the fund or operators?
Saltpond in history
The facts have it that when the Saltpond Oilfields started its operations in the 1970s by the Signal-Amoco Consortium, there was a provision for decommissioning.
When the company decided to move out, Ghana took over the facility with the GNPC as a strong player after its establishment and manager of the Saltpond Offshore Producing Company (SOPCL).
Logically, therefore, the cost of decommissioning will rest on the shoulders of the GNPC and the state. Probably, what can be done is to ensure that the government through the industry regulator is able to capitalise on the pending decommissioning to create the needed scale in that area.
Elsewhere, to secure the future of the services industry over the long term, experts are advising governments to focus on the need to develop a transferable, exportable and scalable skill set around decommissioning projects.
From the views expressed by the ministry, the shortlisted consultants and the eventual winner should be made to put in their plan for the decommissioning process to develop local skills.
Decommissioning industry
It would be best for the GNPC as an indigenous – but international oil and gas company - to establish a company/unit under it, with special skills for decommissioning which can then be exported to other parts of Africa.
This decommissioning industry has become very well established; it produces nothing and uses billions of taxpayers’ money that could do a lot of good for the economy.
The decommissioning industry, while it creates short-term employment, requires no factories or new infrastructure to serve society and the economy.
Ghana has no excuse not to take advantage and strategise.
Other related matters
Again, it is interesting that several issues about the decommissioning of the SOPCL and the defunct North Sea Pioneer are out but environmental groupings are yet to direct their probing eyes to the proposition.
During the dismantling of the North Sea oil rigs, according to the environment group The Conservation, oil giant Royal Dutch Shell came under fire from environmental groups over its proposal to decommission the Brent oilfield in the North Sea.
The company submitted plans to the government relating to four concrete and steel platforms, which were commissioned into service for four decades.
It was reported that the environmental groups, which included WWF Scotland and Greenpeace UK, refused to back plans.
The groups claimed the company had not made enough information public to properly cross-reference its proposals against the internationally agreed OSPAR rules that were supposed to govern the decommissioning.
Need to know
It is intriguing this scenario that is playing out. While the decommissioning process has been triggered in the Saltpond basin case, members of the immediate environment have not been primed, or at least they are not aware.
From Simpa to Sekondi, the fisherfolk need be engaged to have a full understanding of the proposed project and management of probable hazards.
In the North Sea instance, Shell was one of a number of oil producers looking at decommissioning now that many North Sea oil and gas fields are reaching the end of their productive lives. The process which was opposed led to the boycott of Shell’s products.
A test case for Ghana
It is obvious that decommissioning is a massive, expensive and technically challenging task and Brent is seen as a test case for the rest of the UK industry.
Therefore, it would be important to ensure that SOPCL would also be a test case for Ghana going forward.
It is also important to note that transparency in the entire processes is key, if we must build upon the experiences.
Revenue expectations and receipts and tax reliefs, if any, are matters that should be openly available and in the public domain.
It should be obvious that many years after installation, the removal process would create a lot of problems for the environment.
Central Region
Off the coasts of the Central Region are habitats for several marine lives.
However, the process is likely to agitate the seabed and create noise. The removal process itself is said to be very energy intensive and will therefore be a major source of harmful emissions.
Some experts say if the architecture is left in place, it will naturally reef and arguably create an environmental positive.
The reefing concept has been used extensively in the Gulf of Mexico with the Rigs to Reefs programme.
In an area which lacks natural reefs, this has enhanced the marine habitat for many species of fish.
Admittedly, some people have raised concerns about environmental damage from deteriorating metals and reefing potentially disrupting the natural ecology, but one can certainly argue the positives outweigh any negatives.
Though by international laws it should be removed, some have argued that considering the cost, leaving this offshore infrastructure in place and using the savings from taxpayers’ money to fund green energy projects would be much more desirable.
To holders of these views, the high cost could be invested in improving social infrastructure in Saltpond and help in recovering the country’s manufacturing base, health insurance funding, education, marine conservation, improving agriculture and tackling poverty in the immediate host communities.