At least three Nigerian oil and gas companies have in the last couple of weeks taken investment decisions meant to drive business expansion on Nigeria’s onshore oil assets and marginal fields.
Seplat Petroleum Development Plc leads the pack with the acquisition of London-listed independent exploration company, Eland Oil & Gas to consolidate its position as the leading indigenous Exploration and Production (E&P) company in Nigeria.
Eroton, one of Nigeria’s junior indigenous E&P companies have put in place various ingredients needed to drill on the Akaso field in Oil Mining Licence (OML) 18, onshore Nigeria. San Leon Energy, licence partner has confirmed it has been notified by Eroton that the drilling rigs needed to work on OSMU-1 are in place and expected to start in in the coming days.
Similarly, a joint venture led by Green Energy has sanctioned the second development phase of its shallow-water Otakikpo oil field (OML 11) in the Niger Delta off Nigeria, according to London-listed partner Lekoil.
“This acquisition signals the next step in our journey that will underpin Seplat’s ambition to be the leading independent E&P in Nigeria,” Bryant Orjiako, Chairman of Seplat said.
The acquisition could raise Seplat’s oil production by 30 percent to about 64,000bpd by 2020, according to data from Bloomberg, although the deal would not boost Seplat’s gas production.
For Eroton E&P, OMSU-1 is expected to take about 60 days to drill to a total depth of 11,900 feet and complete, with the well to target the E4500 and E3000 formations. San Leon added the well was expected to be connected to the OML 18 production system.
“Drilling the first new well of Eroton’s operatorship marks the start of a new chapter in the development of OML 18,” Oisin Fanning, chief executive of San Leon said.
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“Increasing oil production at the wellhead is an important step in increasing cash flow from the asset and I look forward to providing shareholders with an update on the performance of this new well in due course, in addition to providing further information on further development activities,” Fanning said.
OML 18 is located in Rivers State and hosts the Akaso, Asaritoru, Awoba, Bille, Buguma Creek, Krakama, Orubiri, Cawthorne Channel and Alakiri fields.
The Green Energy led joint venture has signed a memorandum of understanding with Schlumberger and an unnamed major international oil company for an infrastructure-sharing and drilling programmed around a group of marginal field assets in licence OML 11 hosts Otakikpo.
Given this, the joint venture has now secured a 20-year extension of the Otakikpo marginal field licence following a payment of $1 million to Nigeria’s Department of Petroleum Resources and is finalising terms with key engineering, procurement and construction contractors to determine cost and schedules so that financing can be put in place, London-listed Lekoil said in a statement.
Oil field services player Schlumberger, which has been enlisted as a technical partner, has estimated that existing infrastructure could have the capacity to produce 10,000 barrels per day of oil and up to 12,000 barrel per day with debottlenecking.
But, insecurity in the Niger Delta area continues to haunt all indigenous oil operators. Companies operating onshore oil assets in the swamps or on land remain susceptible to security challenges. The vandalisation of flow lines and the export lines create significant losses because these pipelines are easily accessible. This is one of the factors that have made supermajor oil companies divest from onshore oil assets in order to best focus on offshore oil assets that more difficult to reach by vandals.
People familiar with the terrain have said that indigenous operators at some point were losing over 30 percent of daily production. This has come down to about 20 and 30 percent daily production.
“We were losing about 20,000 barrels of crude a day. Some operators produce as much as 20,000 barrels per day and that is a viable business for them. If you are losing 20,000 barrels of crude per day, it severely impacts your cash flow and the return on your investment,” Ebiaho Emafo, managing director and chief executive officer of Eroton E&P Company Limited told BusinessDay in an earlier interview.
