Global energy company, Shell, has delayed expansion work at its Nigerian offshore Bonga field by another two years on the back of a series of technical and operational setbacks, a report from S&P Global Platts has revealed.
This delay which was announced Feb. 2, according to a source as referenced by the report, is going to be a major blow to the Africans biggest oil producer economy quest to grow its crude production.
Recall that Shell and its partners just struck an agreement with Nigerian National Petroleum Company Ltd (NNPC) in the deep water oil block Oil Mining Lease 118 in May 2021, clearing the way for a massive expansion of the country’s Bonga oil and gas sector.
Nevertheless, the project had previously been placed on hold due to a long-running tax dispute with Shell, the field’s operator.
With this development, Shell further invited bids for the construction of a new floating production storage and offloading (FPSO) unit for its Bonga Southwest deepwater oil project in Nigeria after the disagreement was resolved.
However, a senior NNPC official told S&P Global Platts that the tender response had been disappointing.
“There has been a delay in progressing with the tendering process for the Bonga Southwest field. The tenders have been put on hold till around 2024,” the official said.
Bonga, Nigeria’s first deepwater oil field, can currently produce 225,000 barrels per day of crude oil and 150 million cubic feet per day of gas, which is fed into the Nigeria Liquefied Natural Gas (NLNG) plant at Bonny.
Read also: Chevron, Shell, four others to pay Nigeria N253bn in February
The Bonga Southwest development project was expected to add 1 billion barrels to Nigeria’s oil reserves. Shell had stated that the Bonga Southwest project would be developed in three stages, with a total potential production of 3.2 billion barrels.
According to NNPC officials, output from the field was one among the initiatives Nigeria was counting on to boost production to about 3 million barrels per day by 2023.
Nigeria’s production of high-quality light sweet crude oil has fallen to multi-decade lows as a result of operational, technical, and sabotage concerns.
Nigeria has the capacity to pump over 2.2 million barrels per day of crude and condensate, but output in 2021 was estimated to be around 1.55 million barrels per day, Platts said.
According to the NNPC, the concessionaire of the field, developing the Bonga Southwest would cost $10 billion.
The contract award for the building of the 150,000 barrel per day (b/d) Bonga Southwest FPSO has been placed on hold, according to a representative for Shell Petroleum Development Company of Nigeria.
“The Bonga Southwest has been postponed,” he stated, declining to provide any other information.
However, NNPC and Shell insiders suggested the delays could be due to a shift in Shell’s upstream strategy as part of its net zero goals.
Although Shell is Nigeria’s largest oil producer, ties between the two countries have deteriorated in recent years due to commercial and security concerns.
Ben van Beurden, Shell CEO, told investors in May 2021 that the company was focusing more on its Nigerian deep water and gas assets after determining that its onshore oil portfolio in Nigeria was “no longer compatible” with the company’s strategic ambitions, which include a climate change focus and a net zero carbon strategy.
The energy giant is negotiating with the government to sell its onshore oil assets.
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