In the face of rising crude theft and departure from onshore assets by International Oil Companies (IOCs), shallow water oil fields may present independent producers with a way to grow production analysts say.
A review of the present shallow water oil field operational activities has analysts optimistic that capable local oil firms may be able to leverage these fields to grow production.
Historically, shallow-water assets have accounted for less than a fourth of Nigeria’s oil output but as local independents take steps to replace IOCs throughout the country, a number of new developments are being considered.
First E&P’s joint-venture with Dangote Industries, West Africa E&P (WAEP), is now embarking on the development of the Kalaekule field on Oil Mining Lease (OML) 72.
Further west, General Hydrocarbon Limited (GHL), the new operator of OML 120, is also moving ahead with the redevelopment of the Oyo field this year, an analysis by Oil price shows.
“These projects are currently supporting offshore market activity in Nigeria and have all one thing in common: local content. As IOCs shy away from additional investments in Nigeria and exit some of their licenses, Nigeria is left to rely on its local operators and local services companies to take the lead.
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“The ongoing development of shallow-water fields in Nigeria is sending promising signs to an industry deeply worried about the impact that IOCs’ divestment will have on its future,” it said.
Onshore fields account for about half of Nigeria’s oil production, but persistent crude theft and pipeline damage make increasing output there in the short term difficult.
By avoiding new market entrants and placing the proper assets in the hands of the right people, the country is steadily developing a new capacity to manage present market instability.
Several Nigerian energy businesses have established experience in running and maintaining critical infrastructure assets following the enactment of the Local Content Act in 2010.
Although they lack the financial might of IOCs, these local players have demonstrated their ability to successfully negotiate the country’s above-ground challenges.
Meanwhile, deep-water fields are maturing, and the recently enacted Petroleum Industry Act (PIA) shows little signs of reviving interest in Nigeria’s capital-intensive greenfield deep-water operations.
In the immediate term, shallow-water fields appear to be the most promising option for increasing output.
However, Bala Zaka, Technical Director-Drill Bits, Template Design Limited, believed that while these indigenous oil businesses may contribute to productive capacity, they may not be able to help ramp up production to satisfy the quota due to financial and technical constraints.
He said, “The difficulty with these oil companies is that they always have technical and financial capacity issues, which is why they may not be able to achieve the quota.”
