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Global offshore exploration bounces back to boom but Nigeria misses out

There is a wave of booming global Floating Production, Storage and Offloading (FPSO) expected in the second half of 2021 and 2022, but Africa’s biggest oil producing country is missing out despite having more than half of its oil and gas blocs idle.

With the world’s increasing need for new energy sources, new processing and storage facilities continue to be on the rise as more FPSOs have enabled many companies to explore and, quite literally, dig deep into uncharted territory.

A new report from energy intelligence firm Rystad is forecasting a total of 20 contracts for FPSO units are expected to be awarded in 2021 and 2022, creating a very healthy project line-up for contractors.

In addition to the six FPSO contracts in 2021, Rystad believes another four will be awarded before the end of the year – more than triple the three awards from 2020, signaling a rapid comeback in contracting activity, despite the COVID-19 pandemic.

Read also: Oil region experts, leaders welcome PIB with cautious optimism

The report ignored Nigeria who boasts of four planned and five possible FPSO projects, representing 45 percent of planned and possible projects in Africa but however expects new contracts in Mero 4 and Parque das Baleias in Brazil, Limbayong in Malaysia, Liuhua 11-1 in China.

According to Rystad, another 10 projects are likely to be awarded in 2022. Most of the FPSO awards come from Latin America with four units bound for Brazil and one for Guyana. Angola and the UK are likely to see two awards each, and one is lined up for Australia.

“After a weak 2020, the recent awards and the expected ones are doubling the pipeline, ensuring manufacturers will keep busy in the years ahead,” said Aleksander Erstad, energy service research analyst at Rystad Energy.

Petrobras is currently evaluating bids for the two Brazilian FPSOs, Mero 4 and Parque das Baleias. In Malaysia, Petronas is evaluating bids for the Limbayong FPSO, with a contract award expected to be handed out before the end of the year.

China’s CNOOC is looking for a cylindrical FPSO to redevelop the Liuhua 11-1 and Liuhua 1-4 fields in the South China Sea. The FPSO will be built in China and is likely to involve COOEC, Cosco and CIMC Raffles.

The above development will be a huge concern for Nigeria, who sits atop over 36 billion barrels of crude oil reserves but has the world’s largest number of poor people.

More than half of Nigeria’s oil and gas blocks are idle hence a target set over a decade ago to raise reserves to 40 billion remains illusory. Production has hovered at two million barrels per day for years.

The initial diagnosis was that government control was the culprit, but 23 years after the introduction of the Production Sharing Contract (PSC) which now make up a sizable chunk of Nigeria’s oil output there are still challenges.

Some stakeholders say the failure of the Nigerian government to quickly review fiscal policies governing oil exploration of oil in deep, offshore waters is costing the country a loss in oil revenue amounting to trillions of Naira.

Other experts say Nigeria’s success in boosting offshore developments will also depend on its efforts to make the regulatory and legislative backdrop more certain for investors.

Last week, Nigerian lawmakers finally passed the Petroleum Industry Bill (PIB) after several attempts. The bill has been in the works since the tenure of former President Olusegun Obasanjo who led Nigeria between 1999 and 2007.

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