Adewale Sanyaolu, Houston, Texas
Except urgent steps are taken, Nigeria may continue to lose the gains inherent in its deepwater assets that accounts for 40.47 per cent of the total production of 2.1 million barrels per day (bpd).
Deepwater oil blocks are those located in areas of water depth beyond 200 metres and extending up to 200 nautical miles seaward from the coasts of Nigeria.
The development has got stakeholders worried that an asset with 13 billion barrels of oil equivalent resources remained presently untapped in Nigeria deep offshore area.
It was for this reason that, oil and gas experts gathered at the recently concluded 2019 Oil Technology Conference (OTC) held in Houston, Texas, USA, to x-ray issues around Nigeria’s deepwater operations. The event was organised by the Petroleum Technology Association of Nigeria (PETAN), with the theme ‘‘Deepwater Operations in Nigeria: The Journey So Far’’.
Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Mr. Maikanti Baru, presented the lead paper with the team of discussants drawn from Shell Nigeria Exploration and Production Company (SNEPco), DPR, Total E&P and PETAN. Managing Director, Seplat Petroleum Development Company Plc, was the Chief moderator.
Overview of Nigeria’s Deepwater Assets
Deepwater operations in Nigeria began in 1990s with SNEPco taking the lead. Nigeria’s first deepwater well was completed in 1998 while production started in 2005. It increased Nigeria’s oil production by 10 per cent.
Aside Bonga, other deepwater exploration, drilling, and production operation operations have come full swing. They include the Chevron Agbami field, ExxonMobil Erha field, Nigerian Agip Exploration Aboh field, Total E&P Akpo and Usan fields, to the most recent, Egina field by Total E&P.
Added to Nigeria’s potential project line up above are the Bosi fields as well as the massive billion barrel Owowo field, both discovered by ExxonMobil, but still awaiting development. Chevron is working on Nsiko, part of the block that is over 2, 400 meters deep, much deeper than Bonga.
Setback to Deepwater Devt
Director, Department of Petroleum Resources (DPR), Mr. Mordecai Ladan, who was represented by Deputy Director, Upstream, Mr. Enorese Amadasu, said Nigeria has 83 deepwater oil and gas blocks out of which 30 have been awarded and eight blocks out of the 30, are oil mining leases (OMLs) that have begun production, with 53 open blocks yet to be awarded.
According to him, today, Nigeria has about 13 billion reserves for deepwater with only two billion barrels explored.
He said since inception, crude production from deepwater has reached 3.2 billion barrels of oil from a target of four million barrels per day.
Amadasu said production from deepwater is currently around 850,000 bpd from eight producing fields representing 40 per cent of total oil production, and this may witness further decline as a result of challenges which included fiscal and regulatory uncertainties and technological constraints.
But to tap the remaining 11 billion barrels, he said, there is the need to have more attractive fiscals and changed regulatory regime, adding that, there is also the need to amend the policy that nobody brings third parties and investors who will bring floating production, storage and offloading vessels (FPSO) so that all the other small reserves can be developed and tied in.
To unlock the huge potential in the deepwater, the DPR chief said the Federal Government will have to create more attractive fiscal and regulatory regime, incentives based on reserves replacement, ensure accelerated lease renewals and encourage deep play exploration and reserves maturation.
He listed other measures to include; creating unique fiscal policy for unique emerging players, responsive legislative environments for gas commercialization, among others.
“DPR as a regulator, working with other stakeholders including the Nigerian National Petroleum Corporation (NNPC), decided to go into deep water, when the inland and the offshore was already saturated. The only way to do that was to come up with Production Sharing Contract (PSC) agreement, and that was how 83 blocks were mapped in Nigeria’s deep water and 30 of the blocks were awarded. Eight of the blocks were awarded in 1993, eight in 2000 and other 14 in 2015.”
For his part, Managing Director of SNEPCo, Mr. Bayo Ojulari, said regulatory lapses, non-flexibility in funding options for offshore operations and a lack of collaboration among indigenous operators and IOCs has stalled progress in deepwater development .
“The battle is between the regulation of the deepwater and investment. We have everything going for Nigeria that we should not be talking about eight FPSOs, we should be talking of about 30 FPSOs,” he said.
One of the things that silently frustrated progress in deepwater has been delays in tidying up the commercial framework that will support investment. The fragmentation of Nigerian contractors which has led to their inability to work together becomes a major impediment.
Avuru, said the excitement and expectations that came with the deepwater discoveries did not last.
“Years after deepwater production came on, that rash of new discoveries have not materialised. All we have seen is development and production to the point where as we speak today, some of the earlier producing fields have already plateaued.
So there has been little additional exploration work, there is little additional discovery in deepwater, what we’re actually seeing is the onset if we are not careful, of a decline to deepwater production.”He said.
National Assembly steps in
In his contribution, Chairman, House Committee on Petroleum Upstream, Mr. Victor Nwokolo, said the National Assembly had raised a private bill in May 2017, but after sending same to the Executive for assent, it was returned for amendment. The bill, he said, was initiated to review fiscal terms for deepwater production that exceeds depths of 1000 feet based on section 5 of the agreement from.
The bill had proposed that royalties on production exceeding depths of 1000 feet should now be 3 per cent as against 0 per cent in the old terms that was meant to incentivize the operations of the IOCs. Nwokolo noted that Nigeria had lost a lot of oil revenue due to the non-review of the PSC terms over the years but said in the last three weeks the National Assembly has stepped up the amendment of the bill and will send it for assent before May 29.