• Monday, July 22, 2024
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Eight idle oil fields offer lifeline to sinking petrodollars

Eight idle oil fields offer lifeline to sinking petrodollars

Eight idle oil fields can offer 900,000 barrels per day (bpd) for Nigeria’s ailing energy output, providing a lifeline for the country’s dwindling oil revenue.

Nigeria sits atop 36 billion barrels of crude oil reserves and 206 trillion cubic feet of proven gas reserves but has seen a steep decline in investments in the vital oil sector in recent years.

Oil receipts fund the country’s budget, but many oil and gas projects lie idle, threatening the target set over a decade ago to raise reserves to 40 billion barrels.

These big-ticket projects include: Zabazaba’s 150,000 bpd; Shell Bonga South West, 225,000bpd; Bonga North project, 100,000 bpd; Chevron Nsiko project,100,000 bpd; Exxonmobil’s Bosi, 140,000 bpd; Satellite Field development phase, 80,000 bpd; and Ude, 110,000 bpd.

Read also: Big oil buyers’ shift to electric vehicles threatens Nigeria petrodollars

Oil experts surveyed by BusinessDay Nigeria said the country must urgently begin the process of optimising its idle assets.

They however said it will require disciplined planning, economic reforms and consistent government policies that can inspire investor confidence.

They said the projected gains from Nigeria’s oil and gas sector following the passage of the Petroleum Industry Act (PIA) have remained a mirage, as poor implementation of vital provisions of the Act leaves principal actors in a battle for supremacy and revenue.

“Officials at both regulatory and other agencies still demand bribes to attend to licences and approvals, and the delay in the process and bureaucratic obstacles have not changed,” a senior industry source, who asked not to be quoted, said.

Austin Avuru, executive chairman and founder of AA Holdings Limited, said the Nigerian oil and gas industry requires an annual $25 billion investment in the next 10 years to achieve efficient optimisation of its resources, as the world moves towards cleaner energy.

“We need to invest $25 billion annually to stabilise production at two million barrels per day,” Avuru said during his last month presentation at the Harvard Business School (Association of Nigeria) event in Nigeria’s commercial capital.

“This investment is crucial to ensure the sustainability of the sector and its contribution to the national economy,” he added.

Other experts questioned the length at which the Nigerian National Petroleum Company (NNPC) Ltd went to secure a $3.2 billion loan from the African Export-Import Bank (Afrexim).

They said the NNPC is not the finance ministry that should be assigning itself the mandate of supporting the naira.

“The state-owned company should ordinarily be ashamed and concerned that the drop in crude oil output, which will help worsen the value of the naira, is largely of its own doing,” Africa Oil+ Gas Report, an energy intelligence publication, said.

It added, “The state-owned company should be focusing single-mindedly on improving its technical efficiency so it can deliver more of the crude oil-locked behind pipes as a result of its suboptimal operational procedures- into terminals.”

“While the general perception is that NNPC is mainly a joint venture partner in producing assets that it doesn’t operate, the reality is that NNPC has 100 percent in several producing assets, most of them underperforming because of the company’s poor technical delivery,” the report noted.

BusinessDay’s findings showed NNPCL operates the Okono/Okpoho fields in Oil Mining Lease (OML) 119 offshore NigerDelta, free of any encumbrance of pipeline evacuation.

Read also: Naira gains put spotlight on petrodollar inflow

“The low output of 10,000bpd, at which the company has been stuck for over the last five years is not due to geology, but facility constraints. NNPC insiders know they can produce 30,000 bpd readily. But it won’t happen,” Africa Oil+ Gas Report added.

Tunde Adenikan, a senior energy analyst with a global law firm, said the expected confidence on the part of investors has not happened because the old system of opacity has not given way to a new regime of transparency and accountability.

Breakdown of idle fields

Zabazaba (150,000 bpd)

The Zabazaba field is a twin asset with Etan field. They are located in oil prospecting lease (OPL) 245 offshore Nigeria in the Niger Delta of the Gulf of Guinea – in water depths ranging from 1,200m-2,400m.

The oil and gas fields form part of an integrated project, which is being jointly developed by Nigerian Agip Exploration (NAE) and Shell Nigeria Exploration and Production Company (SNEPCO).

Operations at the oil-rich block have been halted for more than a decade by a series of trials and competing legal claims. The area is considered to be potentially one of the richest concessions in the country, with recoverable reserves of 560 million barrels, according to Eni’s estimates.

In 2011, Shell and Italian oil giant Eni paid $1.1 billion for OPL 245, an oil block located on the southern edge of the Niger Delta but secretly owned by a former Nigerian oil minister, Dan Etete.

Eni, Shell and some of their former and current managers were acquitted last year in a criminal case in Milan, in which they were accused of knowing that much of the $1.1 billion they paid to acquire OPL 245 would be distributed as bribes.

Even after that verdict, a civil suit continued, with Nigeria seeking combined compensation of $3.5 billion from Eni and Shell, claiming the amount reflected the real value of the licence purchased in 2011 by the two companies.

Nigeria is betting that the withdrawal of the lawsuit would spur oil majors to resume operations in both the OPL 245 and several other fields that have been abandoned by international oil companies (IOCs).

But analysts say the issue is more nuanced. Ending the civil action “is a very good step, especially when you consider that the asset is very prolific,” Ayodele Oni, energy lawyer and partner at Bloomfield Law firm, said. “No one was going to invest with the dispute, until it was resolved.”

Shell’s Bonga South West, 225,000bpd

Bonga, Nigeria’s first deep-water oilfield, can produce 225,000 barrels of crude oil and 150 million standard cubic feet of gas per day.

In 2023, Shell Group said that it would provide a $5 billion investment opportunity in the Bonga North project off the shores of Nigeria, located in the deep water.

“We are very focused on resolving all investment-related issues. There is no bottleneck that is too difficult for us to remove in our determined march toward making Nigeria the African haven for large-scale investment in all key sectors,” President Bola Tinubu told a Shell delegation last December.

Bonga Southwest/Aparo is a conventional oil development located in deepwater in Nigeria and is operated by Shell Nigeria Exploration & Production. Discovered in 2001, Bonga Southwest/Aparo lies in block OML 118 (OPL 212P), OML 140 (OPL 249), and OML 132 (OPL 213), with water depth of around 4,395 feet.

Production from the Bonga Southwest/Aparo conventional oil development project is expected to begin in 2026 and is forecast to peak in 2027 to approximately 146,765 bpd of crude oil and condensate and 157 mmcfd of natural gas.

Read also: Nigeria losing 400,000 barrels of crude oil daily — Nextier

Bonga North project, 100,000 bpd

Bonga North is a conventional oil development located in deepwater in Nigeria and is operated by Shell Nigeria Exploration & Production.

According to GlobalData, which tracks more than 34,000 active and developing oil and gas fields worldwide, Bonga North was discovered in 2005, lies in block OML 118 (OPL 212P), with water depth of around 3,346 feet.

Chevron Nsiko project

Chevron operates and holds a 95 percent interest in the Nsiko discovery in OML 140, which lies in approximately 5,800 feet (1,768 m) of water, 90 miles (145 km) off the coast of the western Niger Delta region.

The field has a capacity of 100,000 bpd

ExxonMobil’s Bosi, 140,000 bpd;

The sanction for ExxonMobil-operated Bosi field development has been much slower than would have ordinarily been expected of the 1996 discovery. Production is expected to be around 140,000 bpd optimum.