The impact of “Mahogany" on West Africa's deepwater region

In June, Dallas-based independent Kosmos Energy announced the Mahogany oil discovery offshore Ghana, in 1,320-m water depth. The discovery has the potential to not only transform the Ghanaian oil and gas industry, but also make an impact in the wider West African region. Reserves are estimated at 500 million bbl, valuing the discovery at $2.7 billion, and ranking it number 11 in future sub-Saharan deepwater projects.

Seismic studies indicate that the Mahogany structure extends westwards into the adjoining Deepwater Tano block, operated by Tullow Oil. The results of the appraisal program over the next six months will be monitored closely. If proved, the scale of the development-with Capex estimated at $6 billion-will be a challenge for the smaller partners, Kosmos, Sabre Oil & Gas and E. O. Group. Deepwater projects of this size in sub-Saharan Africa have been the domain of the super-majors to date.

Mahogany Field is significant on several counts. First, the potential upside makes it a world-class discovery. In energy-short Ghana, it has generated great interest, while for the operators of the two blocks, it is their biggest global exploration success to date.

Mahogany Field straddles Deepwater Tano and West Cape Three Points blocks offshore Ghana, Africa. Source: Wood Mackenzie’s PathFinder.

Second, the discovery marks the opening of a new hydrocarbon play in the Tano Basin. Tullow has already indicated several follow-on prospects.

Third, the discovery is important for the partners. Assuming 500 million bbl of oil and a 50:50 unitization across the two blocks, the field would rank as the top asset for Tullow and add 70% to the company’s estimated commercial reserves. For Kosmos, the field is a company maker and represents another success for the management team that discovered the Ceiba Field in Equatorial Guinea.

The precise fiscal terms for Mahogany have not yet been finalized, although they are expected to be more favorable than standard terms. Annual Ghanaian production is less than 1,000 bopd. The country can look forward to a new revenue stream that is expected to peak at $1 billion in 2019. Total value to the country is estimated at US$9.5 billion.

Significant risks and challenges remain, but the discovery of Mahogany marks an exciting landmark.