Tullow Unlikely to Halt Ghana Oil Output Despite Damaged Ship

Reuters

ACCRA, June 29 (Reuters) - Tullow Oil is set to announce on Thursday how it will repair a ship that is a hub for its most important oil field, and is likely to recommend a fix that will allow output to continue - instead of suspending it for a year, officials said.

The 'spread mooring' solution would mean Tullow avoids the need to tow the vessel from its position in the Jubilee field off the coast of Ghana for repairs at a port such as Singapore or Rotterdam, which might take up to a year.

Keeping the oil flowing is vital for Ghana, which holds a 13.6 percent stake in the Jubilee field and is already facing financial troubles that have led it to strike a 3-year austerity deal with the IMF.

It would also benefit the London-headquartered company at a time when its hedging strategy has yielded rewards in the face of lower oil prices, the analysts said. Tullow said in May it was hedged for 2016 to an average floor price of $73.10 per barrel while Brent Crude stood at over $48 on Wednesday.

That floor price drops to $68.36 next year and $62.09 in 2018, giving Tullow an incentive to maintain short term output.

"Tullow has suggested 'spread mooring' because they cannot afford a shutdown," a senior official in Ghana's energy industry told Reuters. His view was echoed by others close to the decision-making process.

The Floating Production Storage and Offloading (FPSO) vessel processes and holds oil from wells in the Jubilee field, by far its most productive asset.

The ship, called the Kwame Nkrumah after Ghana's founding president and a pan-African nationalist, broke a bearing on its main turret in March, bringing the field's production of roughly 100,000 barrels per day to a halt for around two months before it was restarted at a lower rate.

Ghana lost millions in revenue as well as gas supplies needed to alleviate power cuts that have angered voters. President John Mahama faces a tough re-election battle in November, with power supply a major issue.

Engineers have identified three options to fix the turret, said several people close to the company.

Tullow holds a 35.48 percent stake in Jubilee and must secure agreement prior to its announcement from its partners Ghana National Petroleum Corporation, Kosmos, Anadarko and Petro SA.

"We will be updating the market on the situation with the turret," said company spokesman George Cazenove, who declined to give details, citing the market sensitivity of the decision.

Spread mooring would involve using anchors or buoys to replace the tug boats, which currently hold the ship steady at what one analyst said was a cost of around $10 million a month.

This would also enable Tullow to tow the vessel for repair at a later date, if needed. In that case, it could fabricate parts before moving the ship, cutting the period of downtime.


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