Stakeholders carpet NNPC’s move to resume drilling for oil in Chad Basin

Experts say the Nigerian National Petroleum Corporation’s (NNPC) plan to resume exploratory activities in the Chad Basin in the last quarter of 2016, may not be viable for Nigeria in the short and medium term.

Studies have indicated that the Nigerian end of the Chad Basin has little potential for commercial oil exploration, requiring huge expenditure in addition to security concerns. In an era of low crude oil prices, international oil companies are unwilling to commit resources to drill in the North.

“While there is about 37 billion barrels of proven oil reserves and have about 187 trillion standard cubic feet of gas in the South, what we want to explore in the North is an unproven reserve of about 2.3 billion barrels of oil reserves and about 14.65 trillion standard cubic feet of natural gas available for four or more countries in the Chad Basin.

“If you do the cost benefit analysis, you can see that it is not viable in the short and medium term,” said Henry Boise, petroleum economics, management and policy researcher at Emerald Institute for Petroleum and Energy Economics, Policy Strategy, University of Port Harcourt.

Boise said, “Exploration is an expensive activity. You can explore an entire field and you might not find anything. In the Chad region, oil has been found where the water is deeper. The Nigerian region has shallow waters.”

Ibe Kachikwu, NNPC’s group managing director and minister of state for petroleum, said the national oil company, through its Frontier Exploration Services and Renewable Energy Division (FESRED), had progressed reasonably with seismic acquisition activities in the Chad Basin frontier area until insurgency led to its suspension.

Kachikwu said eight phases out of the planned 12-phase project to cover 3550sqkm had been acquired when the operation was suspended in November 2014

“A total of 1, 962sq km was acquired and processed, interpretation is on at 90 percent completion, and drilling activities will commence by the last quarter of 2016,” said Kachikwu.

BusinessDay checks however reveal that the search for oil in Nigeria’s Chad Basin, which is adjacent to Niger Republic, Cameroon, and Chad, has been on for 30 years but has been hampered by economies of scale projections, insecurity and unwillingness of oil companies to drill outside the Niger Delta with already proven reserves.

Between 2011 and 2013, Jerry Gana, then chairman of the Northern Economic Summit, said it got a $240 million approval for oil and gas exploration activities in the Lake Chad Basin and other areas of the North including the Benue Trough, Bidda Basin and the Sokoto-Rima Basin.

Exploration soon commenced in the region and in 2013, following former Vice President Namadi Sambo declaration that “oil prospecting in the Lake Chad Basin is yielding promising results and may lead to commercial exploitation of oil and gas,” an additional $100 million was earmarked for the project in addition to the N27 billion he claimed had been spent.

The huge cost notwithstanding, geologists are cagey of the possibility of finding oil in commercial quantity in Nigeria’s end of the Chad Basin: “The Chad Basin from the Nigeria end has been proved to be non-petroliferous,” said Omagbemi Kakayor, a petroleum geologist.

Christopher Renaldi, energy consultant for major oil and gas companies, who advised Nigeria’s Presidential Task Force on Power and agencies involved in the reform of the power and gas market, thinks this is not a wise move at this time.

“The big issue there is obviously security.  I am aware there is potential for oil in northern Nigeria but I don’t know you if you can do it because of the potential problem in northern Nigeria. I don’t think we will want to partner with NNPC to go into that part of the country,” Renaldi told BusinessDay on telephone from United Kingdom.

Sharkdam Wapmuk, researcher at Nigerian institute of International Affiairs, cautions, “The discovery of oil in the Lake Chad area may have the potential to transform the northern Nigeria, however, this will require prudent management to avoid the ‘resource curse’ that has driven Nigeria to dependency on oil at the detriment of other viable sectors such Agriculture, solid minerals, tourism, and many other critical sectors of the economy.”

 

ISAAC ANYAOGU