Business Monitor has just released its latest findings on Ghana’s burgeoning Oil & Gas sector in its newly-published Ghana Oil & Gas Report.

As the Jubilee field, which secured Ghana's place as a West African oil exporter, approaches peak output of 120,000 barrels per day following a series of technical problems, the nascent producer is increasingly looking to continue the boom as interest in the region's untapped deepwater potential remains high. Approval of the TEN project will see Ghana's second major oil development come online from late 2016; however, Business Monitor see risks that without a positive investment decision on a number of promising new discoveries under appraisal and/or new finds, the country's overall output will begin to gradually slip from the end of the decade. Although the Jubilee gas project now seems on track, tensions between Eni and the government over the Sankofa project will result in delays to Ghana's push to bring online more gas. This could see the government turn to liquefied natural gas to meet the shortfall in the wake of a precarious outlook for imported gas via pipeline from Nigeria.

Examples of the main trends and developments discussed in the report:

■ After a troubled start, output from the Tullow Oil-operated Jubilee field is on track to reach the target production rate of 120,000 barrels per day (b/d) by the end of 2013. According to Tullow's H213 operational update, output was averaging 110,000b/d and remained on track to reach the plateau rate of 120,000b/d the end of the year. With operators Tullow and Kosmos noting that current well deliverability at Jubilee exceeds the current capacity of existing infrastructure, further development may be required to allow for maximum monetisation of the field. Further development of Jubilee poses upside risk to Business Monitor’s forecasts, with plans designed to extend the fields plateau.

■ In another sign of strength for Ghana's oil sector, regulatory approval was given to the Tullow-led Tweneboa-Enyerna-Ntomme project (TEN), which will see peak output of 80,000b/d (less than the 100,000b/d initially planned) and is due to come online by late-2016. Tullow is in the process of seeking a buyer for up to 20% stake by Q114 in order to fund the US$4.9bn project.

■ This increased upstream activity will support rising production, which Business Monitor expect will grow from around 110,000b/d in 2013 to 243,000b/d by the end of their forecast period in 2022. However, these volumes assume the contribution of new supplies beyond fields currently approved, namely liquids from Eni's Sankofa development. With the introduction of new supplies from fields under appraisal such as the Mahogany, Teak, Akasa and Banda (MTAB) or the Cape Three Points Block, Business Monitor see risks that output will begin to fall from the end of the decade. There is added downside risk to this view from the prospect of a faster-than-expected rate of decline at the Jubilee field.

■ New production will be important, in line with a strong macroeconomic picture; oil demand is expected to rise, which will in turn reduce the amount of oil available for export, hitting earnings. However, with added supplies, should Ghana fail to invest in its downstream, it will continue to rely on expensive imports of refined products from abroad as the ageing refinery at Port Tema falls short of domestic demand.

■ A deal announced in late September would see Tema upgrade aging equipment in order to increase capacity from 45,000b/d currently to 60,000b/d by 2015. Current utilisation is 60% according to Tema officials, but the facility has struggle in the past given financing and equipment woes since 2009. Ghana continues to seek private investment, with the government acknowledging it alone will be unable to finance operations. There is a chance capacity could rise to as much as 245,000b/d over the long term if new facilities come online toward 2018. An absence of firm plans prevents inclusion of new capacity in Business Monitor’s current forecast.

■ Business Monitor see that the outlook for gas is promising, but as indicated by recent delays to the US$700mn project to capture gas from the Jubilee field, there are a number of risks to developing the necessary infrastructure to monetise gas, given the primary target for operators is liquids. After Sinopec halted work and threatened to completely pull-out of the Jubilee gas project following a row over missed financial obligations by the Ghanaian government, Business Monitor pushed back first gas to 2014. While the project is likely to come online next year, they see risks to future phases from both a lack of funds and the prospect that greater volumes of gas will be directed to increasing recovery rates from the Jubilee oil field as output plateaus.

■ While Business Monitor see scope for Ghana to eliminate its reliance on imported gas, uncertainty regarding supply and demand calls leads them to maintain a small import requirement fed by the WAGP for the duration of their 10-year forecast period.

To find out more about this report please click here.

NYC-based PIRA Energy Group reports that midcontinent fundamentals improve as weather turns cold.  In the U.S., product stocks build while crude draws.  In Japan, there is a big crude stock draw, but weaker product demands. Specifically, PIRA’s analysis of the oil market fundamentals has revealed the following:

Midcontinent Fundamentals Improve as Weather Turns Cold

Crude oil fundamentals improved throughout the Midcontinent in December, with stocks declining at least modestly at Cushing, Patoka, West Texas, the Rockies, Western Canada and the Gulf Coast. Winter has begun with a vengeance in the Midcontinent – from ice storms in Texas and Oklahoma to subzero temperatures in the Far North. Production impacts are likely to be most pronounced in the oil sands of Alberta and rural areas of North Dakota. Weather is also affecting truck and rail deliveries, with the latter exacerbated by yet another crude-by-rail accident.

U.S. Product Stocks Build while Crude Draws

Total commercial inventories increased this past week with a decline in crude oil more than offset by an increase in products. Crude runs remained very high. Reported demand was down largely due to the New Year’s Holiday as well as severe winter weather impacts (less travel, power outages, people hunkered down in many areas). For the same week last year, stocks built, so the year-on-year stock deficit widened.

A Big Japanese Crude Stock Draw, but Weaker Product Demands

The most notable items were a sharp drop in crude stocks for the latest week (1/4) and the relatively weak demands to begin 2014, which strongly built finished product stocks. The overall balance in total commercial stocks, however, rose only 1.1 MMBbls from the data that had last been reported on 12/21. We expect the data to normalize in the next week or so, with demand rebounding for all the major products.

U.S. Propane – Market Leader

U.S. propane continues to provide market leadership as stocks ended the year at a historically quite low level. The warming this coming week will provide some relief to end-users, and enable more resupply downstream, but cold will likely resume thereafter, keeping propane as the leader of the NGL complex. International markets have been generally pressured lower by the arrival of cargoes from the USGC and West Africa, in addition to milder weather especially in Europe. The arb has shifted to favor USGC exports to Europe over Asia, although Latin America will certainly remain the prime outlet for US product.

U.S. Ethanol Prices Decline

Ethanol prices fell the week ending December 27 due to reduced demand for gasoline blending. In addition, inventories in PADD II were the highest since May. Shortages of rail car space supported prices on the coasts.

Ethanol Production Increases

U.S. ethanol production started the year by rising to 919 MB/D from 913 MB/D during the prior week. The manufacture of ethanol-blended gasoline tumbled for the second consecutive week after having reached a record 8,856 MB/D during the week ending December 20. 

The information above is part of PIRA Energy Group's weekly Energy Market Recap, which alerts readers to PIRA’s current analysis of energy markets around the world as well as the key economic and political factors driving those markets. 

A bill for what is arguably the most liberal energy reform in Mexico to date presents an opportunity for ending an inertia situation that has surrounded the region's oil and gas industry for longer than necessary; however, a number of clarifications are required in the secondary laws that are due to be drafted and negotiated later in 2014, says an analyst with research and consulting firm GlobalData.

Adrian Lara, GlobalData's Lead Analyst covering Upstream Oil & Gas, states that while Mexico's energy reform introduces new arrangements, such as profit-sharing contracts, production-sharing contracts and licenses, the most ground-breaking aspect is the change in the Constitution that will allow private companies to participate in exploration and production (E&P) activities under specific contracting schemes.

However, as Lara says: "The changed law does not specify which type of contract will be applicable to the different types of hydrocarbon E&P. Industry observers and participants will therefore have to wait for the so-called secondary laws that will frame the fiscal terms for the new contracts.

"This additional information will allow for a more rigorous test in assessing the effectiveness of the 2013 energy reform. While it is still not decided when this fine print will be drafted and voted on, the second half of 2014 could be viewed as the best-case scenario."

Progress towards the current reforms began in August 2012, when a proposal for reforming Mexico's energy sector was submitted to Congress. This argued that the bulk of the region's remaining hydrocarbon reserves are located in challenging areas, both from geological and engineering perspectives, and that sophisticated and expensive technology is required to recover these reserves.

Furthermore, while Mexico's Petroleos Mexicanos (Pemex) possesses ample expertise in shallow waters, it lacks the experience needed for entering more complex projects located in offshore deep waters or onshore shale plays.

Lara continues: "Pemex's necessities, in a way, indicate ideal opportunities for private investment. Deepwater, shale and even shallow-water areas can benefit from different combinations of technology transfer, capital expenditure in E&P and managerial expertise."

A crucial test of Mexico's reforms will be the reaction of international oil companies when the first new opportunities are offered, which will depend to a great extent on what exactly is offered. In any case, Lara believes there is a long way to go before the approved reform materializes in new production, or has a significant effect on the wider Mexican economy through lower energy prices.

The analyst concludes: "For the time being, this reform seems to bring about the opportunity for ending Mexico's inertia situation. The most important point is that the bill's passage removes the barrier of the Constitution from a wide range of future reforms, allowing Mexico's energy sector to adapt to prevailing conditions in the future."

Comments to be attributed to Adrian Lara, GlobalData’s Lead Analyst covering Upstream Oil & Gas.