Eni Faces Forced Unitization of West Africa Fields

(Bloomberg) -- Ghana’s government is forcing Eni SpA to merge its Sankofa offshore oil field with a neighboring discovery made by a domestic explorer and imposing its own terms on the deal, according to a letter seen by Bloomberg.

The West African country’s government is seeking to maximize recovery of petroleum resources, and the move comes after the Italian oil major and Accra-based Springfield Exploration and Production Ltd. missed a deadline to work out an arrangement for combining the fields, Minister of Energy John-Peter Amewu wrote in a letter dated Oct. 14.

It’s common within the oil industry to combine nearby fields that turn out to be part of the same geological structure. The process, known as unitization, distributes the resources between license holders in proportion to their share of the initial discoveries, allowing for more efficient development of the resources using shared infrastructure.

However, Eni had opposed the unitization of Sankofa, which it operates in a venture with Vitol Holding BV, with Springfield’s Afina field. The Italian company said that Springfield hadn’t sufficiently tested its discovery to show that it shares a reservoir, the ministry said in another letter in April.

As of Oct. 14, no significant progress had been made by the two companies to work together, making it “obvious that (they) do not intend to comply with the Ministry of Energy’s directives,” according to the Oct. 14 letter, which was addressed to Eni and Springfield.

“The Minister of Energy now imposes terms and conditions for the unitization of the Afina and Sankofa fields to ensure optimum exploitation and recovery of Ghana’s petroleum resources,” Amewu wrote.

Eni will be the operator of the unitized area, according to the letter. A copy of it was shared by two people with knowledge of the matter, who requested not to be identified because the information isn’t public.

Springfield said in December that Afina has 1.5 billion barrels of oil in place. According to Eni’s website, Sankofa has reserves of about 40 billion cubic meters of natural gas and 500 million barrels of oil.

An energy ministry spokesman declined to comment when reached by phone.

“Eni is in contact with all the pertinent stakeholders, including the relevant Ministry in Ghana, in order to define a way forward and evaluate any case for potential unitization in accordance with applicable law and international good oilfield practice,” the Italian company said in a statement.

Kenneth Noonoo, Springfield’s corporate affairs manager, said by email that “this is a unique and proud moment.”

“We look forward to working with Eni as the operator of the unitized field in maximizing the production and the economic benefits for all stakeholders, including the Government and citizens of Ghana,” he said.

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