Many observers would have noticed a recent brief from Bloomberg about the investment prospects for Ghana’s offshore oil sector.
From the very start IMANI has been somewhat less sanguine about developments in the nascent industry (see previous commentary on our website).
Despite the highly optimistic forecasts now and in the past, it is important to note the following facts:

1. Oil production in the flagship Jubilee field is actually falling. What was initially considered an adverse revision of production figures by Tudor Pickering Holt is now turning out to have been merely conservative.
   Production volumes have broken through the psychologically alarming 60,000 barrels a day floor several times this year. On some days, production barely exceeds 50,000 barrels. A graph of the output trajectory since the onset of production in late 2010 points to a new “dangerous normal” of low production for Jubilee. Average annual production may stay around 60,000, and we actually expect the new floor to inch close to 45,000 by mid-2013.
2. Tullow has announced the likely onset of oil production from new wells being commissioned for phase 1a of the Jubilee plan of development by end 2012. These new wells are expected to help stabilize production levels and lift them to the optimistic plateau volume of 120,000 barrels per day.
3. Once again, these projections are highly optimistic and should be treated with caution. The development activities being undertaken for phase 1a follows the same strategy of “speed to first oil”, “excessive confidence in cutting-edge but still maturing techniques”, and “tight drilling blueprint/schedules” that characterized the phase 1 program of the Jubilee plan of development.
4. We expect the lift in production volumes to be marginal in the wake of phase 1a completion. We expect a 2013 timeline for phase 1a to start making significant contributions to total production volume. We expect production to rise above 80,000 barrels for a period and then beginning regressing again.
5. Generally, the results from Jubilee mirror the performance of other offshore projects in West Africa, for instance in Cote d’Ivoire and Cameroon, where optimistic timelines and production levels have failed to materialize over the long-term.
6. We do not believe to be credible projections of production hitting the 250,000 barrels per day level in the medium term.
7. We also note that finding costs for Ghana’s oil sector appear outsized in comparison with similar projects elsewhere. Both on a preliminary proven reserves and daily production basis, capital expenditure in the Jubilee field appears to suggest a fundamental lack of competitiveness that requires additional study.
8. While aggressive marketing of the sector’s prospects can enhance its attractiveness to investors, there is also a continuing concern about credibility. Chronic optimism might over time prove counter-productive as sophisticated investors dig in.