Shell subsidiary, SNEPCO, has signed an agreement with the Nigerian National Petroleum Corporation (NNPC) and other partners, which may see the much-delayed Bonga South West project take off.
The NNPC and the international oil companies signed on the dotted lines to formalise the execution of the Oil Mining Lease (OML) 118 (Bonga) Agreements on May 25 in Abuja.
Details of the deal were not immediately available at the time of publication.
According to Nigeria’s oil corporation, by these agreements, the NNPC and the contractors have settled the long-standing disputes that have challenged the Production Sharing Contract (PSC) administration and entered into a new PSC with clearly aligned terms.
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“This marks a watershed in the administration of deepwater operations in Nigeria,” said the NNPC. “Over $10bn of investment will be unlocked as a result of this development.”
The Bonga South West FPSO vessel is to be moored in the OML 118 offshore Nigeria.
The Bonga oil and gas field ranks among the largest fields on the West Coast Africa requiring exploration and development in phases.
Located approximately 135km west of Port Harcourt, Bonga was discovered by 1,300 meters of water depth in 1995 and started the first production in 2005 with a first FPSO.
In 2001, Shell and its partners discovered Bonga South West (Bonga SW) large enough to trigger a stand-alone exploration-production project with an additional FPSO.
In 2004, a third field was discovered in Block 140, branded as Bonga North or Aparo, 95 percent owned by Chevron. The Aparo field appeared in fact to belong to the same geological structure as Bonga South West.
However, the field has suffered setbacks. Shell had in 2016 announced the first setback due to a crash in oil prices from over $100 per barrel to below $30 per barrel.
Fiscal challenges soon presented another problem. The company had disputed the government’s review of fiscal terms in the revised production sharing contract which led to a delay in the final investment decision (FID) on Bonga South West project.
Shell had maintained that it would not embark on FID unless the tax issues in the PSC were resolved.
In 2019, Shell invited bids for a new FSPO for the project’s initial phase which includes a new FPSO vessel, more than 20 deep-water wells, and related subsea infrastructure, an apparent indication that the issues may have been resolved.
Shell said the Invitation to tender is for engineering, procurement, and construction contracts for the 150,000 barrels-per-day project in the Gulf of Guinea.
Bayo Ojulari, SNEPCO managing director, had said that it had concluded OML 118 negotiations with the NNPC.
“We now have a clear commercial framework, supported by the government and project investors, toward a potential Bonga South West Aparo Final Investment Decision (FID),” Ojulari said.
It is possible that the COVID-19 pandemic may have impacted the timeline for the project.
