Billions at Risk for Ghana Oil Firms on Ocean Boundary Ruling With Ivory Coast

Ghana's decision to seek arbitration in a dispute with Ivory Coast over an oil-rich basin in the Atlantic could prove costly for the country and a consortium led by Tullow if a court halts development there.

The International Tribunal for the Law of the Sea will rule on Saturday on Ivory Coast's February request for a moratorium on activity in the basin. The decision is part of legal proceedings on a maritime border dispute sought by Ghana's President John Dramani Mahama in September.

Although many expect the dispute to be ultimately settled in Ghana's favor, analysts say a ruling that prevented the $4.9 billion offshore TEN oil and gas field opening in mid-2016 would be a further blow to the battered Ghanaian economy.

"Even if Ghana wins on the boundary eventually, as most people expect, they stand to lose two years of revenues from TEN which they badly need," said Anaïs De Meulder, Africa analyst at global risk advisory firm Verisk Maplecroft.

A final ruling by the court is expected in 2017 or 2018.

Ben Boakye, of the Africa Centre for Energy Policy think-tank said the loss to Ghana from an injunction could be up to $6 billion over two years, while Carmen Altenkirch of Fitch Ratings said revenues could be 1.5 lower than the government projects.

By contrast, Ivory Coast has almost nothing to lose.

Ten rounds of talks have failed to resolve the dispute over the Tweneboa, Enyenra and Ntomme (TEN) block and several others which Ivory Coast says lie at least partly within its waters. It revived its claim after Ghana discovered oil in 2007.

Precedent suggests the final ruling of the court in Hamburg is unlikely to favor Ivory Coast and redraw the customary equidistant maritime boundary, according to analysts.

OIL BOOM

When Ghana began pumping oil in 2010 at the Jubilee field adjacent to TEN, annual economic growth soared to nearly 15 percent in the West African country, which already produced gold and cocoa.

The economy is forecast to grow just 3.9 percent this year due to a fall in commodity prices and economic instability including a stubborn budget deficit and a currency that has tumbled since the start of last year.

The International Monetary Fund this month agreed a financial assistance package to help restore fiscal stability.

"A moratorium on oil production activities will ... have a serious impact on Ghana's current account position and ultimately the stability of the local currency," Joseph Asenso, a finance ministry economist, told the tribunal last month.

It could lead to "high fiscal deficits, loan repayment defaults and unpreparedness for disasters," he said.

ECONOMIC RIVALS

Ghana would not be the only loser. Tullow lost over 200 million pounds ($298.82 million), or 6 percent of its share value, in March when Ivory Coast's surprise decision to seek a halt to activities was made public.

Suspending operations in the disputed area would cost $1-2 billion, split between the TEN project partners, Tullow says.

CEO Aidan Heavey said in March Ghana has a robust case and expects the tribunal to dismiss the Ivorian request for a suspension. Ghana's energy minister Emmanuel Kofi-Buah also said on Wednesday the country had a "very strong case".

A suspension would imperil dozens of Ghanaian companies that have helped develop TEN, forcing many to lay off staff, said Boakye. And it is likely to stall further oil exploration in the Tano Basin, industry sources said.

Ghana's rising fortunes over the last decade made it an economic rival to Ivory Coast, which until a coup in 1999 was the region's most powerful country besides oil giant Nigeria.

The Ivorian economy is now booming but its oil sector lags Ghana's and analysts say it will struggle to increase oil output nearly five-fold to 200,000 barrels per day by 2018 as planned.

The two countries have enjoyed strong relations but Ghana told the court its neighbor sent "threats" to oil firms drilling there last year. In September, Mahama wrote to Ivorian President Alassane Ouattara to inform him of the arbitration request, court documents show.

"I don't think it has to do with a deterioration in relations as much as material factors. There's a lot of oil and gas and that is big money," said U.N. Special Representative for West Africa Mohamed Ibn Chambas, who is Ghanaian.

SOVEREIGN RIGHTS

Like most of Africa's sea borders, the one separating Ghana and Ivory Coast has never been officially set.

Court documents showed Ivory Coast has proposed three new boundaries which criss-cross the triangular-shaped disputed zone now covering 30,000 square kilometers.

It can seek damages in the next phase of the tribunal's proceedings, a court official said.

Ghana says in a document submitted to the court in February it has awarded nine permits partly or wholly within the disputed zone to companies including Britain's Heritage Oil, Hess Ghana and Russian producer Lukoil.

Ivory Coast has awarded two blocks in the same period to London-listed Afren, Nigerian firm Taleveras Energy and state oil firm PETROCI, court documents showed.

"Ghana has seen fit to act in the disputed area as if it enjoyed unlimited sovereign rights there," said Adama Kamara, a lawyer for Ivory Coast.