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Over US$389 million worth of upstream oil contracts cancelled following COVID-19

The Petroleum Commission says the upstream sector in oil has suffered significant shocks and other damaging effects under the onslaught of the coronavirus

Over 98 oil contracts worth roughly US$389 million, which were awarded in the upstream sector by Aker Energy, AGM Petroleum, ENI, GOSCO and Springfield between the last quarter of 2019 and the first quarter of 2020, have been cancelled because of the COVID-19 pandemic.

The cancellation of these contracts, such as the five-year Maersk drilling contract, which was terminated in June 2020 along with associated subcontracts, has had a devastating impact on local businesses.

The effect of the cancellation of contracts, amid the fallout of earlier reductions in workforce size, was lay-offs of expatriate and local personnel alike. Here again, over 500 Ghanaian workers in the industry are expected to lose their jobs because of the pandemic.

Speaking at a forum in Sekondi, the chief executive officer of the Petroleum Commission, Egbert Faibille Jr, said the industry has suffered significant shocks which have affected not only the economy but also work obligations and operations.

The Petroleum Commission organised the forum to interact with the Western Regional House of Chiefs and update members on recent developments in the sector. The Commission used the forum to make a donation of items to the House of Chiefs.

Revenue shortfall

Egbert Faibille said the shortfall in revenue in the upstream sector this year has been significant and is made worse by companies investing heavily to enable staff to work remotely to keep the industry running.

The COVID-19 pandemic is likely to delay Ghana’s second licensing round as the government gives priority to managing the domestic impact of the virus.

Faibille said although oil production is ongoing, the production and revenue forecasts for the year have been affected significantly, due largely to the postponement of the Pecan development campaign.

“The impact of the pandemic necessitated the freezing of the work programmes, and a decision to restore the period lost as a result of critical operations and maintenance works on production facilities scheduled for the year has either been stalled or cancelled,” Faibille said, noting that local businesses have also been hit significantly by the pandemic.

Ebenezer Harmah, a project evaluation manager at the Petroleum Commission, gave a presentation on the impact of COVID-19 on Ghana’s upstream sector. Some companies in this area have already reduced their work commitments by more than 50%, he said.

Drilling is suspended

“Almost 100% of workers have been laid off either temporarily or permanently by contractors and subcontractors. Again, over 450 potential direct and indirect temporary job opportunities have been lost through the suspension of drilling campaigns by Amni, GOSCO, ENI and Eco Atlantic,” Harmah said.

He added that the 2020 Ghana Upstream Sector Internship Programme (GUSIP) has been postponed. And there have been further staff cutbacks and revisions of deployments.

“For Yinson [the energy solutions provider], there is a 33% reduction in the personnel on board the FPSO John Agyekum Kufuor,” Harmah said. “For MODEC [the production services company], there is a 52% reduction in personnel on board the FPSO John Evans Atta Mills and a further 56% in the personnel on board the FPSO Kwame Nkrumah.

“For ENI, there is a 46% reduction in personnel on the onshore receiving facility. And for Tullow, there is 50% staff rotation.”

Fend off the coronavirus

In a related development, the Commission presented 2,000 branded face masks to the Western Regional House of Chiefs, together with tissues and disinfectant. The items are intended to help prevent the transmission of COVID-19.

“Additionally, an operational SunSink to combat the spread of the virus, especially in institutions such as yours, has already been strategically installed at the entrance of your premises,” Faibille told the chiefs.

“The SunSink, nananom, is an innovative, locally manufactured, automated, movable outdoor hand-washing basin. The washing basins named ‘SunSink’ feature a water storage system, a water disposal system, automatic soap and water dispensers,” he said.

The president of the Western Regional House of Chiefs, Tetrete Okuamoah Sekyim II, expressed gratitude to the Petroleum Commission for the gesture.

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Source
Business & Financial Times
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