Bottom Line: Tullow gets a boost in emerging oil major Ghana, with the official green light for a massive deep-water development project encompassing its three latest discoveries, while the list of beneficiaries will include some lucrative tender winners for an FPSO and major subsea infrastructure. But watch out for the local politics here.
Analysis: The government of Ghana has approved development plans for three major Tullow Oil Plc-led discoveries, the Tweneboa-Envenra-Ntomme, or “TEN,” deep-water project. First oil from the TEN project is expected in 2016, with a production rate of 80,000 bpd. The project will include the drilling of 24 wells connected to a Floating, Production, Storage and Offloading Vessel (FPSO) via subsea infrastructure. The TEN FPSO has been in the design phase since 2011. The TEN project is in the Tano contract area, and Tullow is the operator of the three license areas with a 47.175% equity interest. Anadarko Petroleum and Kosmos Energy each have a 17% interest, while Ghana National Petroleum Corporation has a 15% interest, and Petro SA has a 3.825% interest. The TEN project is located about 60 miles off the coast of Ghana and half that distance from Tullow’s Jubilee field, of which it is also the operator.
Recommendation: The TEN project is only Ghana’s second major offshore development. Not only would we look to Tullow right now, but also to the FPSO tenders, which will be awarded soon, now that the project has the green light, as well as to subsea infrastructure leaders. However, with Tullow we advise watching the dynamic between Tullow Ghana management and local political leaders. On 29 May, Tullow Oil Ghana announced that President and General Manager Dai Jones would be replaced by Executive Chairman Charles Darku (a Ghanian) in mid-August. We believe that Jones’ departure is related to a conflict between him and Darku the involved local politics. Both men supported different political parties in December 2012 general elections. This caused a rift within Tullow Ghana over which political party would be serving its needs and appears to have resulted in Tullow Ghana allegedly financially supporting rival parties.