Bright Simmons : Ghana’s “socialites” charge $200 million to clean up obsolete Saltpond oilfield

The birthplace of modern Ghanaian politics

A 2.5-hour drive along the coast from Ghana’s capital of Accra lands you in sleepy Saltpond, the birthplace of Ghana’s first political party.

Go down the beach and hop into a canoe, and the bubbly fishermen will safely glide you in about four or five hours to the dilapidated Saltpond Oilfield 13 kilometers offshore. The only feature of note in that sober stretch of water is a hulking, slowly rotting, iron tower known in the petroleum trade as a “jack-up rig”. How it got there is the story of the Saltpond oilfield, a fascinating tale of the interplay between politics, business, and high society.

Ghana as the “next frontier” in the 1970s oil rush

In 1970, 74 years after oil was first struck in Ghana, the country’s first commercial discovery, the Sedco 10-1 well, was made offshore Saltpond by the Signal-Amoco consortium (some records indicate that commerciality was, in fact, established by well 10-A4).

Signal, the lead company, had sunk five exploratory wells, experienced a fatality-causing helicopter crash, and become embroiled in lawsuits, all without success in its primary endeavour of finding oil before the consortium with Occidental and Amoco made the breakthrough.

The consortium beat other global explorers like Texaco, Mobil, Chevron, and Oceanic, fresh from the euphoria of opening up the North Sea in Europe, and intent on making Ghana the next oil frontier after the fashion of Mexico and Indonesia. The pace of exploration, in the words of the CIA commenting at that time, was “frenetic”.

How the Saltpond oilfield was built up

Between 1977 and 1978, the jack-up rig (a kind of drilling vessel) called Mr. Louie, famous for having drilled the first offshore well in the legendary North Sea basin, was sailed into Saltpond waters by Agripetco, which had taken over the field from politically risk-averse Signal-Amoco through the efforts of Black American oil pioneer, Jake Simmons, to drill five additional wells.

Afterwards, Mr. Louie was converted into a production platform called APG-1. APG-1 is the rotting platform you see in Saltpond waters today.

Initially appraised as capable of producing at a flow-rate of about 3600 barrels a day, the field saw a significant volume uptick following Agri-Petco’s takeover in 1976. The Texan agro-petroleum cooperative managed to ramp up production at the field to 4800 barrels a day from 1978 onwards.

Saltpond field loses its lustre

But by 1984, Agripetco was no longer convinced about the continuing viability of the operation because of the low volume of output (750 barrels/day by this time). More importantly, its operations were out of tune with the revolutionary climate prevailing at the time.

Poku Adaa, writing for the Talking Drums in 1984, said:

In 1981, there were press campaigns and unconfirmed reports that the Saltpond Oilfield was producing nearly 10,000 b/day instead of the officially reported level of 3,000 b/day. Then from 1982, when the company was hoping to invest extra funds of over $50 million to raise output to between 6-8,000 b/day, it was subjected to political pressures, further press attacks and revolutionary outbursts which called for a review of its operating agreement. Saboteurs, believed to be extreme left-wing groups, set fire to Agri-Petco’s warehouse at Tema turning over $3 million worth of property and equipment to ashes.

The field was eventually acquired by Primary Fuels Incorporated (PFI) later that year, which tried to reverse its decline by drilling three new wells. After these attempts failed to strike fresh oil, PFI also pulled out in 1985.

Between 1985 and 2000, the Saltpond oilfield was to all intents and purposes abandoned. Paper plans to turn it into a gas field to feed power production came to nought.

When the new NPP government took office in 2001, a Ghanaian oil professional in Texas, who had long eyed the field and had even signed an inactive agreement with the preceding NDC government in 2000, intensified his lobbying efforts.

The Lushann era at Saltpond

He was given the right to enter the field, and by 2002 his company had successfully conducted a test flow using about $4 million in funding from the now defunct Nigerian bank, Continental Trust Bank, and with the technical help of Nigerian contractors like OilData.

By 2004, his Lushann-Eternit, the entity set up with Nigerian investors to explore the Saltpond oilfield’s revival had entered into a 20-year petroleum agreement with the GNPC, Ghana’s national oil company, representing Ghana’s interests.

As is customary in Ghana, the agreement was ratified by the Ghanaian parliament without any serious information by way of a due diligence report or contextual facts about the planned operations. All this despite the twisted set of facts surrounding Lushann’s entry into Ghana. I reproduce the information supplied to Parliament below.

The Lushann era at Saltpond was marked by controversy after controversy. As early as 2003, the Attorney General was threatening to to freeze the company’s assets in response to bizarre incidents of disappearing oil cargoes.

Interspersed with apologies, Lushann’s engagement with the government continued to hold, even as national security operatives regularly briefed the Ghana News Agency about purported investigations.

Before we forget to mention, documents released by the US government in connection with a failed entrepreneur visa application by a Nigerian citizen in 2007 cast very worrying light on the financial practices of Lushann. There appeared to be laxity about compliance in the company’s every dealing.

By 2010, the government’s representative in the joint venture, GNPC, had pulled out.

Throughout its engagement with government, Lushann insisted that it had tax credits deriving from its investment activity and was thus not required to pay taxes. I have only been able to establish royalty payments for 2012 and 2013 amounting to a total of just a little over $500,000. The company never paid corporate income tax over the 15-year period it was active in Ghana.

Its operation of the Saltpond field by this time had also become a major source of diplomatic embarrassment for Ghana. Nigeria insisted that someone, possibly with the connivance of the Ghanaian authorities, was using Saltpond to traffic smuggled oil from their oilfields. An accusation seemingly borne out by international investigative journalists who gathered evidence of large cargoes shipped from Saltpond to an oil refinery in Italy that could not have practically originated in Ghana.

By 2015, the government had had enough. Production output was barely 200 barrels of oil a day in the midst of a constant stream of rumours about the smuggling of bunkered fuel and other murky dealings. The authorities therefore ordered the permanent shutdown of the field by December 2025.

However, Lushann’s agreement, originally scheduled to expire in 2024, was left untouched on the basis that new investors were expected any moment from then to take over operations. When these promises failed to materialise, the agreement was terminated in 2016 and a further instruction to “decommission” the field was issued.

One did not have to be a seer to foresee that the long history of messy oil production at Saltpond would not pave way for a clean and smooth decommissioning.

This thing called “decommissioning”

Decommissioning an oilfield implies an attempt to restore the production area as close as possible to its virgin state before oil production commenced.

In Saltpond’s case, the decommissioning process involved the plugging and abandonment of the six production wells (four of which had practically been shut-in by PFI before they departed the country), the removal of the topside of the jack-up rig (“Mr. Louie”), and the affixing of a navigation buoy where the rig was implanted to warn off vessels from colliding with the below-water legs of the platform.

A swift decommissioning was urged by various actors due to fears of a potential oil spill from the wells, which were, apparently, not shut-in properly following the 2015 shutdown order, as well as concerns about possible gas explosions on the rig. Such a spill would have a devastating effect on not just marine life but also on the entire central and eastern coastal areas of Ghana with their many communities and ecological niches.

The government started engaging with a consortium comprising of PAP Energy and Oxand-Dietsman-Zeal to prepare a decommissioning plan. A contract was eventually signed in March 2018 and the final report presented in October of that year.

The Saltpond “decommissioning” saga now begins

A decision was taken to phase the decommissioning exercise beginning with the “plug and abandonment” during the course of 2019 of the two recently producing/active wells in the field. The Ghanaian parliament was thus informed as follows:

By 2020, nothing much had happened.

Enter the scrap-dealer

Kennedy Oham, who had served as general manager of the Saltpond field operations before the 2015 shutdown, saw an opportunity to make a killing by brokering a scrap deal for the topside deck and hull of the Mr. Louie jack-up rig.

It is safe to say that right from the outset of full-scale production operations at Saltpond Mr. Oham had been the number two player in the management structure of Lushann-Eternit.

Sadly, Mr. Oham’s massive and public falling out with Mr. Sintim Aboagye, Lushann’s CEO, was messy and murky through and through.

Lushann’s chief principal made damaging allegations against Mr. Oham for conspiring with a long chain of actors in the banks and within the national security apparatus to destroy Lushann after defrauding it of tens of millions of dollars. A tall order given Lushann’s perennially broke status.

In light of this background, Mr. Oham had the incredibly complex task of navigating a very fraught terrain as he worked to secure the support of the authorities for his scrap-focused plan.

Initial interactions with powers that be made it clear that scrap deals were of no interest to anyone. The full gamut of decommissioning operations, from plug and abandonment and conducting-pipe removal to rig dismantling and seabed cleanup, was very much the focus. This is where things started getting interesting. Mr. Oham, ever the sharp-minded scavenger, began to see a much bigger prospect than scrap.

How Hans & Co came into the picture

Piecing together dozens of accounts from multiple insiders, sources, and informants, I have arrived at the following story of how a company called Hans & Co became the anchor of the strategy that eventually led to a $96 million contract to decommission the Saltpond oil field.

This story is without doubt one of the most eye-popping I have ever investigated in my two decades of public policy activism in Ghana.

In Ghana, talk big money, or go home

In Oham’s first set of interactions with the authorities, it became clear that the lean strategy of spending about $21 million on the remediation of the field was not going to be taken seriously since the authorities had already created a budget of $60 million for the preferred work program.

Mr. Oham started to rewrite his expectations very quickly. By 2021, he had become part of a politically credible group with the clout to navigate the power dynamics in play. Key to the effectiveness of this group was the involvement of the Deputy Director of State Protocol at the Ghanaian presidency and a close confidante of the then President. A dapper man with a penchant for shiny hair pomade and universally known as, “Adon”.

A Ghanaian company founded in 2017 by one Gloria Bartels, the now legendary Hans & Co, was identified as the right corporate vehicle to use for the deal. Gloria Bartels was a dowager empress of swag in her own right, and a regular at charity fairs organised by Ghana’s First Lady. Near as I can tell, her primary occupation has always been, “rich businesswoman”, simples.

After months of informal conversations, formal negotiations with the authorities commenced in September 2021. Within a month, a decision to award the million-dollar contract to Hans & Co had been made. In January 2022, the contract was finally signed.

Decommissioning an offshore oilfield is not child’s play

It does not take much of an imagination to figure out that decommissioning an offshore oilfield with facilities dating back to the 1970s is not the kind of project one awards to any mushroom company without extensive due diligence.

Even in the most advanced petroleum jurisdictions, decommissioning, because of its complexity, remains an area of active research to simplify scope, cut cost, lower safety risks, and eliminate time and budget overruns. It is an industry on its own dominated by such sophisticated global service providers as Petrofac, Schlumberger, Haliburton, Acteon, and Oceaneering.

To navigate such project to a successful conclusion within budget requires exceptional project management capacity.

For example, Tullow’s decision to shift from Maersk to Petrofac in decommissioning the Banda and Tiof oilfields (four wells) in Mauritania saved it significant grief and brought the cost well below the original budget of $60 million. (It is important to note, however, that Banda and Tiof are both much further into the ocean with far deeper wells than Saltpond and its decommissioning had required a submersible rig, in case you are trying to put the budget into perspective.)

Meanwhile, the intense focus on cost-cutting in the decommissioning industry is also changing the stakes into one of high technology. Decommissioning companies like Acteon are aggressively pushing “rigless” methods which do not require the rental of expensive drilling vessels just to plug old wells. Cutting-edge techniques like “rigless”, nonetheless, demand skillful talent.

It follows, therefore, that the level of technological sophistication of a decommissioning contractor is critical to minimising the project budget and ensuring successful execution.

No one with a mind to protecting the public purse can compromise on technical sophistication when hiring a contractor capable of safely navigating equipment to the seabed to permanently cover up shafts on the ocean floor, remove all manner of electrical material, and take apart and transport giant metals weighing tens of thousands of tonnes within tight time and budget constraints. Very curious readers can read an overview of how Shell went about decommissioning the Brent Delta or, if too busy, watch this quick video.

On the critical importance of technical sophistication, Ikon Science says as follows:

At Brent Delta the removal of the 24,200-tonne platform was performed in a single lift using the Pioneering Spirit. A low-cost method of rigless well P&A was also trialled onshore by Centrica in Canada in 2016. The trial results demonstrated that this technology could potentially reduce well P&A costs by more than 50%.

The Mysteries of Hans & Co

All the above is why any fair-minded observer would find incomprehensibly crazy the decision to award an outrageously high $96 million contract to dismantle and remove just one platform, plug and abandon two active wells in shallow water (85 feet/26 meters), reinforce the shut-in of an extra four wells, and install a single buoy, to a total upstart company with zero track record. Yet, this is what politics in Ghana regularly produces.

Not only is Hans & Co unable to maintain consistent management, even a web presence is beyond it.

At the time of the contract, every single management member was merely moonlighting. The Chairperson of the company was the President’s full-time Deputy Director of State Protocol. Perhaps, wary of the connotations, the gentleman used his secondary identity, Philip Kofi Ennin, instead of his official name, Philip Kofi Aning. The COO used the name, “Junior Brobbey”. (The CEO of the company, then active in several other pursuits apart from serving on the board of the Ghana Cylinder Manufacturing Company, did use his professional name, Nana Forson Danso – even though most people call him “Joe Forson”).

Only Kennedy Oham, presented as the “Project Director”, had any real links to the oil industry. Every other person was engaged in what in Ghana is called “fre fre ko bo”, essentially hustling and moonlighting.

Equally curious is the fact that the Chairman of Hans & Co, as presented to the authorities, was not so in fact as far as the company’s corporate register was concerned. He was not even a Director of the company.

What’s more, the people who did control the company, the Bartels family, had incorporated a holding company, Hans Group, in 2018, closely held by the matriarch of the family and her son in law, the scion of an interesting Ghanaian-Lebanese dynasty. This holding company was the ultimate controller of the other Hans companies pursuing these kinds of gigs in the country.

Evidence that Hans and Co is merely a “container” for the Bartels family is strewn all over the due diligence report we commissioned. Apart from titilating trivia such as the address of the company being given as “near Fiesta Royale Hotel” (essentially the Dzorwulu family home of the Bartels family), this is a company that has no consistent line of revenue.

Far worse is the fact that in a proper and diligent review process, Hans & Co would not even have obtained the requisite licensing to operate in Ghana’s upstream petroleum sector, much less been qualified to hire a bunch of specialised subcontractors and fly in a freelance drilling supervisor by name Adejumo Abayomi to undertake a project which in the event of an accident would prove totally catastrophic for Ghana.

The Debacle

It should not come as a surprise to the reader that Hans & Co failed to deliver on the contract. Despite a budget that was 60% higher than the already inflated initial budget, the project was suspended mid-way (before the rig proper could be dismantled) after the allotted funds were said to have run out.

About ~$85 million had been paid out to the company by this point and a further ~$3.7 million in invoices were pending. Below, you can see the Mr. Louie rig before the ~$90 million (left) and afterwards (right).

In fact, Hans & Co claims that fuel and rentals for the vessels it hired to perform the plug and abandonment ended up costing more than was budgeted for.

It also insists that the downtimes whilst the dismantling vessel, LB Fugar, was moored in Ghana until its demobilisation in December 2023 cannot entirely be blamed on it. In fact, it blames executives at the national oil company for stalling at various points.

Hans & Co is furthermore demanding an additional $81.1 million. Funds it says it needs to clear its arrears of $28 million and an extra ~$55 million to complete the project anytime after the Ghanaian authorities have validated the work performed through a third-party contractor at additional cost.

Hence by the time the project is completed, optimistically assuming no further time and budget overruns, a minimum of $200 million would have been spent to decommission an oil field that in its 55 years of existence has generated far less than $10 million for the national kitty.

Indeed some analysts claim that contrary to the belief that no decommissioning fund was ever set up for Saltpond field, as required by law, there had been one, even though Lushann never contributed to it. Whichever funds had been left by the international investors who worked the field before 1985 must have thus have been dissipated.

The palpitating fact here is that the government of Ghana, the longsuffering people of Ghana, and multiple investors have all lost money by betting on Saltpond. Only one group of people won the jackpot in the end: the politically connected pocket-liners laughing all the way to the bank.

A serious case of cost-inflation

Hans & Co’s failure to deliver on the scope of the decommissioning project is particularly egregious for three reasons.

The first one has already been mentioned: the Bartels family and their collaborators, Philip Aning and co, have no business being involved in a project exhibiting this degree of technical complexity. A lifetime of being serenaded in the glamour magazines as a fixture of high society, or as a “socialite” in Ghanaian parlance, rarely prepares one for the rough and tumble world of high-stakes offshore petroleum engineering.

Second, the use of high-handed political machinations to prevent the project management consultants – TSB-Ensol – a consortium that indeed did have some world-class decommissioning talents on its payroll, from providing supervision and oversight was frankly unconscionable. Even though this preventive measure was demanded by the new top executives of the national oil company following the departure of the old guard in April 2022, Hans & Co’s political clout could simply not be overridden.

Third, and perhaps most crucially, the original cost of the project ($60 million) was already inflated by ~200% using as one’s benchmark a project design involving the latest technologies and techniques for top-side dismantling and recycling, and for rigless subsea well “plug and abandonment”, especially in a shallow-water environment.

I make my third claim fully aware that decommissioning costs in more complex contexts such as the North Sea, with its turbulent weather, can easily hit $8 million per well (though, even here, forecasted costs have fallen 25% since 2017 and average per-well decommissioning cost in 2022 was $5.6 million), and that dismantling vessels can cost easily upwards of $100,000 a day, crew inclusive (lower than drilling rigs but still substantial). Thus, in a more challenging engineering context, where topside dismantling takes, say, six months, the $60 million original budget for the project would be high but not entirely unreasonable.

Thus, one needs to pay close attention to the following facts to get my point about cost-inflation of the original project budget: the Saltpond structure has relatively simple “Christmas trees” (the network of tubing and piping used for offshore oil production), the depth limitations are extremely benign, Ghana’s shores are among the most pleasant in the Atlantic, and the whole field is very close to the shore.

All of these allow for the use of intervention vessels, heave-compensated cranes, and other such solutions to explore lower-cost rigless solutions. This is akin to some of the practices adopted by Lushann when it re-entered the field and revived production at much lower costs than had long been assumed to be required.

The challenging but necessary duty of benchmarking in value-for-money assessment

To subject the above claim to more stress-testing, I looked for a large dataset of decommissioning cases in a region that is not as prominent as the North Sea but which still abounds with good examples.

I settled on the US Pacific OCS region, an important offshore oil production area in the United States. It is particularly fitting because executive moratoriums on oil production in the region for decades now have led to a lot of previously producing facilities needing to be decommissioned.

The Pacific OCS dataset comes from a study performed for the US Bureau of Safety and Environmental Enforcement (BSEE) by TSB Offshore (one-half of the same consortium that was prevented from overseeing the Hans & Co decommissioning in Ghana).

Below, I reproduce some of the tables in the BSEE report that contain valuable cost-benchmarking information.

What you are looking for in that mass of data is a general sense of the cost per well linked to each platform. Of course, if you are of that bent, you would also notice critical operational parameters such as the water depths, lift weights, number of wells, number of jacket legs, etc.

Without even being super-diligent, you would notice that in more challenging engineering contexts, total costs for removing platforms and plugging associated wells numbering way more than at Saltpond can easily come to less than $12 million.

I am the first person to acknowledge that projects can be mind-numbingly unique and there is quite a bit of specificity missing in the above analysis. Benchmarking is thus a very risky enterprise. Nonetheless, there is substantial evidence that a) considerably cheaper methods could have been used for the Saltpond decommissioning project if the right project consultants and contractors had been engaged and b) that the costs were inflated.

On top of all that, the decommissioning project, which kicked off in July 2022 by the way, and was originally intended to be completed in July 2023, was bungled and abandoned mid-way even after a 202-day extension meant to end in September 2024. Such crazy time overruns, coupled with a near-100% budget overrun, are ample evidence of poor contractor selection.

And, yet, Ghana has multiple regulators and institutions designed to prevent these kinds of problems and their attendant waste. Somehow, they never succeed when it matters most.

So, what lessons learnt?

For people who struggle to understand Ghana’s current fiscal woes, Saltpond offers a colourful suite of lessons: many of the country’s public financial challenges are quasi-fiscal in nature. They originate outside the core fiscal areas that programs like the current IMF bailout tend to pay attention to.

Inevitably, they originate in the murky undergrowth of political economy where overnight contractors aided by presidential courtiers override sound technical governance at frontline agencies and then proceed to make a mess of complex projects. The costs are often off-budget and thus hard to track. Somehow, someway, they worm their way into the country’s financial heart and trigger the kind of cardiac arrests that became the recent Domestic Debt Exchange Program (DDEP) in which a bankrupt nation raided the saving boxes of its pensioners.

As I have often argued, only eternal vigilance and dynamic watchdogging can really tackle this crisis of governance. The reliance on reform blueprint after blueprint, and the proliferation of novel formal institutions, to somehow magically transform public sector fiscal behaviors is, in my modest reckoning, misconceived. It leads to fossilisation, a process whereby the panoply of blueprints and formal institutions calcify over time into a rigid mass that merely obscures the living, breathing, ongoing, mess.

Formal fiscal reform programs and their kin can only go so far. These are problems of power incentives, and and their manifestations. Power can only be matched with power.

Until the civil society movement and other segments of society with opposing incentives can be equipped to play an eternally vigilant watchdog role, and hold the political class to account through non-stop second-guessing and agitation, thereby shocking hidebound institutions to act, I do not believe that Ghana shall be spared fantastic spectacles like the Saltpond decommissioning epic anytime soon.

Maybe, one day, the international development finance system, from Eurobond subscribers and credit rating agencies to multilateral development banks like the IMF and the World Bank, shall align with a reawakened domestic business community to back the civil society movement. Thereby enabling the latter to provide the spark needed to fire up cogs in the rusty wheel that is supposed to represent “checks and balances” in Ghana’s participatory democracy.

Until then, we will keep serving you these epistles, mostly after the fact.