ITLOS ruling on maritime border dispute is credit positive for Ghana – Moody’s

Oil2The ruling of the International Tribunal for the Law of the Sea (ITLOS) on the maritime border dispute between Ghana and its western neighbor Cote d’Ivoire has been described as credit positive for Ghana by the ratings agency Moody’s.

Moody’s in its credit implications and current events analysis issued today April 30, 2019 and copied to, notes that the ruling which stated that Ghana can continue production at the Tweneboa-Enyenra Ntomme (TEN) oil field, but must not start new exploration until the maritime border dispute is resolved, an outcome most likely to come in late 2017, is credit positive for Ghana because it removes a threat to Ghana’s growth and revenue projections over the next two years.

The oil field operated by a consortium led by Tullow Oil plc, is Ghana’s second-largest oil field. It is more than 55% complete and is scheduled to start production in mid-2016 with capacity to reach 80,000 barrels per day.

Ghana’s first oil field, the Jubilee, currently produces 100,000 barrels per day, with capacity of up to 120,000, and is not involved in the border dispute.

“Based on our forecast of an average oil price of $72 per barrel during 2016-19, we expect the government’s annual oil receipts from the TEN field to total 1.0-1.5 percentage points of GDP,” Moody’s says.

Oillevels1Moody’s expects that together with the Sankofa offshore gas project, which is also not involved in the border dispute and is scheduled to commence production in 2017, increased oil and gas production would ease downward pressure on Ghana’s foreign exchange buffers and support growth prospects over the next five to seven years in its base-case scenario.

Oillevels2“Had the tribunal fulfilled Cote d’Ivoire’s request to immediately cease all activity in the disputed region until the resolution of the border dispute, it would have prevented TEN from reaching its production targets,” Moody’s notes.

The agency indicates that, that risk was a factor, albeit a less significant one.

“In the negative outlook we assigned when we downgraded Ghana to B3 from B2 on 19 March. In terms of exploration, the tribunal’s decision to suspend new drilling in the disputed waters does not affect our oil and gas production base case because it only includes the development of the TEN field in the disputed area. However, it limits any potential upside that may have come from any oil discoveries over the next few years,” it adds.

By Emmanuel K. Dogbevi

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