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Offshore security threats weighing on Nigeria’s oil fortunes  

Boasting huge hydrocarbons resources yet to be exploited, Nigeria’s offshore fields are burdened with increasing threats, casting a dark shadow on players’ operations and the country’s potential to attract investment into its vital oil and gas industry in 2020.

The waters of Nigeria’s oil-rich coast have been a hotspot for piracy incidents over the past decade, even though it dropped in the first quarter of 2019, according to the International Maritime Bureau. Pirates often kidnap crew for ransom and sometimes siphon off the petroleum products.

“Nigerian waters remain risky for vessels,” the London-based International Maritime Bureau said in its first quarter 2019 report.

Nigeria’s offshore domain is one of the most fertile hydrocarbon provinces in the world. Current oil reserves in the country are estimated at 36 billion barrels and natural gas reserves at over 202 trillion cubic feet.

But large-scale oil theft and other security challenges have prevented Nigeria, Africa’s top producer, from producing up to its optimum estimated capacity of 4 million bpd, depriving the country of potential revenue.

“We noticed more incidences on the waters, attacks on tanker vessels towards the tail end of 2019. We have also noticed increased firepower from the attackers showing that they are more coordinated and determined. The fact that they are showing more determination shows that we should also display more determination as well,” a senior naval intelligence officer with knowledge of the matter told BusinessDay.
Some major international oil companies operating in the country have suspended their activities and many have moved deeper offshore, where the risks are very minimal, according to sources.

French Total has more than 20 major assets offshore, alongside other oil and gas companies such as Chevron, Mobil, Shell, Agip, among others.

“Security in parts of the Niger Delta remains a major concern with persisting incidents of criminality, kidnapping and sabotage as well as onshore and offshore piracy,” Royal Dutch Shell plc, the largest international producer in Nigeria, said in a statement.

Experts say lack of a critical infrastructure protection policy and strategy, limited maritime domain awareness, inadequate naval presence, poor cooperation and coordination among maritime agencies, poor fleet support facilities and poor funding are major factors militating against the protection of offshore assets in the country.

“For offshore fields there is less threat to security and with the technology being developed daily, there will be growth. But it also depends on some other factors because after drilling to a certain depth, it will be impossible to get anything from such fields and there are a couple of wells above such feet now which is a loss to government in terms of revenue,” Ademola Henry, team leader at the Facility for Oil Sector Transformation (FOSTER), said.

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

Nigeria’s deepwater assets hold the country’s livewire in the oil and gas sector accounting for 40.47 percent of the total production of 2.1 million barrels per day (bpd). However, only seven out of the 87 deepwater oil blocks in Nigeria are producing, while six are at different phases of development.

Assets with 13 billion barrels of oil equivalent resources remain untapped in Nigeria’s deep offshore area, a development which has raised huge investment concerns for the oil and gas sector.

“Nigeria is going to enter quite a steep decline in production,” said Lennert Koch, principal analyst of sub-Saharan Africa upstream with Wood Mackenzie. “In order to keep its revenue up…it needs to develop additional fields.”

Wood Mackenzie delayed its projected startups for the deepwater projects Bonga Southwest Aparo, operated by Shell, and Preowei, operated by Total, by two years to 2027 and 2025, respectively, and for ExxonMobil’s Owowo by four years to 2029.

Total said Preowei is under study with a final investment decision scheduled for 2020 or a year later. Exxon did not immediately respond to a request for comment, while Shell also declined to comment immediately.

Together, the deepwater fields hold an estimated 1.5 billion barrels of oil, and could add 300,000 bpd.
Kidnappings of crew members in the Gulf of Guinea during 2019 were up by more than 50 percent, according to the International Chamber of Shipping (ICS), driven by piracy stemming from Nigeria.

The region accounted for more than 90 percent of maritime kidnappings around the world, with the “vast majority” of the attacks from Nigerian territorial waters.

According to a statement from ICS, pirates are “bolder and taking greater number of hostages” and “levels of violence are high and deaths have occurred both during attacks and captivity of seafarers and military personnel”.

“We welcome efforts of the Nigerian Navy to respond to reported incidents of piracy by dispatching patrol boats. However, the spike in incidents in 2019 and this year has shown just how far away we are from solving this endemic issue,” Esben Poulsson, ICS’s chairman, said.

ICS said Nigeria was improving its maritime security through projects such as the Deep Blue Project, but “now is the time to see real results in terms of action at sea and in the capture and prosecution of pirates”.

Nigeria’s Deep Blue Project was launched in July 2017 with an Israeli company. The contract came under scrutiny in 2019, with complaints that the arrangement sucked in more funds than the Nigerian Navy.

“Our absolute priority will always be the safety and welfare of the crew. We stand ready and willing to work in close partnership with the government of Nigeria, and the international community to protect ships and their crews as they go about their legitimate business,” Poulsson said.

President Muhammadu Buhari signed an anti-piracy law into the books in mid-2019. The new law provides penalties upon conviction for maritime crimes, restitution to owners of violated maritime assets or forfeiture of proceeds of maritime crimes to the government.

DIPO OLADEHINDE

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