The looming merger between two of the world’s oil giants, Tullow Oil and Kosmos Energy has sparked optimism for a possible turnaround of Ghana’s declining oil production.
Energy Strategist, Dr. Yussif Sulemana is hopeful the technical expertise of the two oil companies which are already significant players in Ghana’s offshore oil fields could mean massive investment for the oil and gas industry.
Tullow Oil operates Jubilee and TEN (Tweneboa, Enyera, and Ntomme) fields, two of Ghana’s major offshore oil fields. The company has been plunged into financial distress as it seeks to cut its debts. Tullow is seeking to cut its debt to US$1.4 billion by the end of the year.
The company is also grappling with technical issues in the operation of its oil fields as experts have revealed that Tullow is facing gas injectivity and water flooding challenges leading to declining production.
The Public Interest and Accountability Committee (PIAC) has confirmed that the country has been experiencing a constant decline in crude production for three consecutive years spanning from 2020 to 2023. PIAC says Ghana has been recording an average of 9.2% annual decline in production since 2020 leading to significant oil revenue loss.
“If you look at what has happened over the years with Tullow being the operator of the field for the past three consecutive years, we do have a lot of challenges—production keeps dropping. You can’t keep on doing the same thing and expect different results,” the energy strategist revealed in an interview monitored by The High Street Journal.
Considering the technical and financial challenges Tullow Oil is facing leading to low production levels, Dr. Sulemana Yussif believes the proposed merger could be a possible game changer for the country.
The energy strategist is convinced that the merger is a possible antidote to the country’s production woes considering the expertise of Kosmos who are already partners in the fields operated by Tullow.
The deal, he explains, depending on the number of shares transferred, could either be a merger or acquisition, making Kosmos the majority shareholder and the main operator of the field. This, he believes will unlock more investments in the field to address the technical and production challenges.
“Looking at what has been happening within the industry over the years, and looking at Kosmos capability as compared to Tullow, their financial wherewithal, their technical capability, and the kind of players they work with, like BP and the others, Kosmos work with them. If the two players agree in principle, there shouldn’t be any hurdles in terms of parliamentary approval or whatever,” he emphasized.
He further explained that “if I look at the challenges Tullow is facing, if they should come together with Kosmos, it will minimize these challenges to the bearest minimum possible, because Kosmos will be able to take a lot of decisions. They will be able to bring their full technical know-how and their financial model to bear.”
“I think what we need now is investment within the Ghana upstream sector. And I think if Kosmos finds it very profitable, and I think our fields are very profitable, they will do a lot of investment. And that’s why I see it as a positive move,” he added.
Bloomberg reports that the deal if successful, could create a major Africa-focused oil producer with over 120,000 barrels of oil equivalent per day. A critical challenge to this merger lies in structuring a deal that balances the interests of both shareholders and creditors, particularly as Tullow navigates the task of refinancing $1.4 billion in debt maturing in 2026.
