Making Nigerian upstream sector work
Emmanuel Odusina,
Minister of State for Energy (Gas)According to the Energy Information Agency (EIA)
Nigeria exited 2007 with oil reserves sitting at 36.2
billion barrels in proven reserves second only to Libya in African. The country has managed to hang on to its title of African’s number one producer despite having its production over the past few years curtailed by militant actions. State Action The industry is run by the Ministry of Petroleum and up until the inauguration of President Umaru Yar’Adua the ministry was led by Petroleum Minister Edmund Daukoru.
However with months in office under his belt Nigeria new President Umaru Yar’Adua named himself Ministered of Petroleum. The move by Umaru Yar’Adua puzzled many and questions were rampant as to whys the president is holding on to the energy portfolio.
Those on the optimize side believe that his desire to retain the portfolio shows his commitment to fixing the sector while others question if this is the case and wonder if the status quo within the petroleum ministry will continue. Umaru Yar’Adua appointed three junior ministers to aid him in the task of running the ministry.
Fatima Balarabe Ibrahim, Henry Odeins Ajumogobia and Odusina Olatunde Emmanuel will join Yar’Adua in overseeing the industry as Minister of State for Energy (Power) Minister of State for Energy (Petroleum), and Minister of State for Energy (Gas) respectively.
The ministry of petroleum was not the only state body to see a shake-up the Nigerian National Petroleum Corporation (NNPC), the country state owned oil and gas firm, was also tagged for some changes upon Umaru Yar’Adua arrival on the presidential scenes.
In September 2007s, in what is seen as an attempt to tackles alleged corruption within the NNPC, he announced that he had decided to break-up the company. NNPC is now to be called the National Petroleum Company of Nigeria (NAPCON). NAPCON is, Umaru Yar’Adua said to become a fully integrated company capable of competing locally and internationally and focus solely on commercial operations.
The National Energy Directorate (NED) will be formed to be responsible for policy regulation, and National Asset Management. NED will be headed by the petroleum minister and will assume the responsibility to carry out directives of the ministry. NED will have a director-general with oil development, planning and coordination, legal services, corporate services and gas and power as its departments.
However, it has been almost five months since the announcement of the NNPC restructuring and still no significant changes have been made, NNPC is still. functioning as the country’s state-owned firm and virtually nothing has been heard on NAPCON.
Companies operating in Nigeria should be prepared to renegotiates their offshore exploration contracts as the government has announced that it is looking to start preliminary discussion with oil companies in February to renegotiates PSCs signed between 1993 and 2000. due to the high price of oil, the government is looking to claim as little more loot for access to its considerable reserves.
In an article in the Financial Times, oil executives were reported as saying that the government’s plan to claim more production from the fields could deter investment in the country’s especially in light of the security problems in the Niger Delta that have led to a substantial amount of lost production.
The outcome of the negotiations should be interesting. The world and more importantly , the people of the Niger Delta, have Umaru Yar’Adua under scrutiny to see whether he will carry on the tradition of allowing corruption or if the country’s petroleum sector will finally contribute to the welfare of the whole country and not just a select few.
Unfortunately for the President, even if his intention is good, change doesn’t happen over night and the militants of the Niger Delta are short on patience these days.
There is plenty of ongoing action in Nigerian’s petroleum industry and interest in gaining access to acreage hasn’t slowed down. The country’s last bid round was launched in early-April 2007 and in hat was seen as indecent haste, the awards were made in under two months. Some saw the rush for the awards as a way to get the signature bonuses in before the new regime took over. Of the 45 blocks advertised, only 19 were picked up at the end of the day.
Four of them, OPLs 2001-2004 were already off the block before the exercise opened thanks to a last minute court injunction by shell who is laying claims to them. The bidders didn’t show interest in any of the 11 blocks in the less prospective basins of Anambra, benue, and chad either, that effectively assured that a third of the blocks on offer were not saleable, at least in this round.
Of the blocks that did garner bids, five were nullified for various infractions ranging from the use of personal checks to make down payments to lower than expected bid amounts. The bid round also saw for the first time in Nigeria’s Licensing history, a total no- show from Western majors. The reasons for this range from the Niger Delta crisis to the Nigerian government’s new found love for Asian’s NOCs, to fear that hastily arranged bid round could offer difficulties with the new government. In the end it turned out that none of the Asian firms showed up either in spite of their preferential rights of rights of first refusal.
Those who did bid were mainly indigenous firms and smaller independents. The winners include: Bayelsa oil Company Ltd. For OPL 240; Conoil/ECL International won OPL 290 Essar Exploration & production scored OPL 226; Gobal Energy won OPL 2009; and Moni Pulo gained access to OPLs 239 and 234. another indigenous firm, Pan Ocean Oil Corp gained access to OPL 275.
The awards caused a bit of consternation on the part of some and the government was called on to investigate the awards, and later assured winners that the awards were on the up and up. However, it did put together a committee to investigate any malpractice in the awarding of the blocks. Nigeria’s new Minister of State for Petroleum, Odein Ajumogobia, said that those companies that followed the revised guidelines for the 2007 round has nothing t fear.”
Even though the review committee was constituted by the government to investigate several complaints received by the ministry, it would be unfair to revoke license that met all the conditions stated in the revised guidelines,” he explained. Other than the bid round there have been a few companies farming –in to assets; afren Plc announced in May 2007 that it farmed in to Nigeria’s Ofa field located in OML 30 in a deal with indigenous Operator Independent Energy Ltd., effectively earning it a 50per cent stake in the block oriental Petroleum took a share of the Ebok marginal Field on OML 67, and farmed-in on Equator’s OPL 323. Major Action Nigeria’s oil gas industry plays host to the industry’s largest players from US supermajor Exxon Mobil to Chienese stateowned CNOOC.
The country also play host to number of independent and a rising number of indigenous firms. Foreign oil companies participates through joint-ventures (JVs) with NNPC. Nigeria’s largest JV is operated by SPDC (Shell) , which produces nearly half of Nigeria’s crude oil averaging a daily output of approximately 1.1 million barrels. Other majors contributing to the country’s production include Chevron, Total, and Agip. Production Sharing Contracts (PSCs) are another vehicle through which foreign oil firms participate in Nigeria’s petroleum industry; mainly in the country’s deepwater developments.
The majority of Nigeria’s reserves are founds in the Niger River deltas although more and more companies are beginning to explore off the coast in the deeper water territories, as stated above, Nigeria sits on more than a few barrels of oil has significant natural gas deposits also.
The country production an average of 2.3 million bpd of crude oil but could possibly hit 3.0 million bpd if all shut-in production came back online the government is targeting 4.0 million bpd by 2010 and is betting on the potential of its deepwater acreage to hit that target.
While the Niger Delta has been the country’s main source of production for many years, investment in deepwater is picking up as it is seen as less of a security risk than the Niger Delta region. Shell has been production oil since the late 1930s and despite all the fingers pointed at the company by environmental groups human rights organizations, and Nigerian citizens, it is still Nigeria’s number one producer.
SPDC pumps oil from over 90 fields and produces about 70% of the country’s commercial gas, shell Nigeria Exploration and Production Co. (Snepco), another subsidiary, operate two deep water and three onshore license. The company is also the operator of the Bonga field that began producing oil at the end of 2005.
Bonga is estimated to hold recoverable reserves of 600 million barrels and at peak production the field will produce around production the field will produce around 225,000 bpd and 150 million cubic feet (Mmcf) of natural gas per day. In mid 2006, snepco announced an oil and gas discovery in the northern section of the field, the Bonga North 2x, and although it did not give any indication of the potential of the discovery, the company did say tat it strengthens the potential of the Bonga field. Next on the list of foreign producers in Nigeria is ExxonMobil contributing about 750,000 bpd to Nigerian’s production total.
Culled from Petroleum Africa
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