Nigeria accounts for 45% of FPSO projects in Africa ahead of peers

The number of Nigeria’s planned and possible floating production, storage and offloading (FPSO) projects have put it ahead of African peers amid a booming market for deep offshore oil infrastructure on the world’s second-biggest continent.

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With the world’s increasing need for new energy sources, new processing and storage facilities continue to be on the rise. These facilities are referred to as FPSOs have enabled many companies to explore and, quite literally, dig deep into uncharted territory. With this capability, FPSO has also made way for new destinations, from which oil and gas can be processed. One of them is in Africa.

Nigeria has four planned and five possible FPSO projects, representing 45 percent of planned and possible projects in Africa. Angola, Africa’s second-biggest producer of oil has five planned and two possible FPSO projects. The rest of Africa has three planned and four possible FPSO projects, according to a new report by FPSO Network, an umbrella body for deep offshore infrastructure providers.

Estimated at over $23.5 billion, the FPSO projects in Africa’s biggest crude oil exporter were expected to assist the Federal Government of Nigeria to move the needle from 37 billion barrels to 40 billion barrels of oil reserves target and daily production of four million barrels per day (b/d).

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FPSOs range in size from 50,000 barrels tankers with capability to process 10,000 to 15,000 b/d to Very Large Crude Carriers (VLCC) size units able to process more than 200,000 b/d and store 2 million barrels (such as the Bonga FPSO off Nigeria will be able to produce 225,000 b/d).

Some are held in place with a simple spread mooring system, some are fitted with a turret system that allows the vessel to weathervane. A few small units are held in place by dynamic positioning. The choice of mooring system depends on local weather and sea conditions. As many as 60 to 70 subsea wells can be tied back to the production unit (the Dalia FPSO off Angola will be tied to 67 wells through 9 manifolds) or the unit could be produced from only one well.

In Nigeria, deep-water projects have typically included more favourable fiscal terms than onshore/shallow water projects. But the Petroleum Industry Governance Bill (PIGB), if passed into law, is expected to increase the government’s share of production revenue coming from deep-water projects.

“We are a mature field and the certainty of striking oil is high. With this, we can get tougher in our contractual arrangements, unlike countries just starting out” Ibe Kachikwu, former minister of state for Petroleum Resources said in one of his last interviews, while in office, with BusinessDay and other journalists.

Experts believe that until the fiscal aspect of the bill is considered and is satisfactory to the Federal Government and International Oil Companies (IOCs), the uncertainty regarding the Final Investment Decision (FID) on offshore projects would continue.

Some of the prospective deep-water projects the development of which have either been sanctioned already or about to be sanctioned are Total’s Ikike, Owowo, Bonga South-West, and Preowei projects. The final investment decisions (FIDs) of these four are expected to be made by 2020, with the first oil from Preowei scheduled for 2022. There is, of also the Zabazaba and the Etan fields which Eni and Agip are working on.

In an earlier interview with BusinessDay, Oladiran Fawibe, the chairman and chief executive officer of International Energy Services, said that he could not explain why the government is demanding 50 per royalty from the deep-water projects and suggested that the government may be best served to study what is done in other oil-producing economies.

“One thing I know is that we are not going to give Nigeria’s natural resources out too cheaply. But we cannot continue to treat the IOCs as if they have no alternatives,” Fawibe said.