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PIB delay, low oil prices impede Nigeria’s 1.124m bpd projects

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AFP Photo / Tatyana Makeyeva

AFP Photo / Tatyana Makeyeva

Planned projects in Nigeria, which are expected to add about 1.124 million barrels per day to the country’s crude oil production, have either been deferred or suspended due to the low crude oil prices and the delay in the passage of the Petroleum Industry Bill (PIB).

The various projects, which are now under consideration, are Chevron’s Nsiko 100,000 barrels per day (bpd) offshore deepwater project, ExxonMobil’s Uge 110,000bpd deepwater project; Satellite Field Development Phase 2 project belonging to ExxonMobil; Bosi 80,000bpd crude oil offshore deepwater; Eni’s 120,000bpd Zabazaba-Etan offshore deepwater project.

Others are Bonga Southwest and Aparo 2250,000bpd operated by Shell Nigeria Exploration and Production Company, SNEPCo; Total’s Egina 200,000bpd offshore deepwater project and Shell’s Bonga North 100,000bpd offshore deepwater project.

For example, apart from Chevron’s Sonam Field Development 30,000bpd, Shell’s Gbaran-Ubie Phase 2 20,000bpd onshore projects and the Egina projects, final investment decision is yet to be taken on the other projects.

Specifically, SNEPCo in February 2016, announced “a delay of a Final Investment Decision on the Bonga South West Aparo project; the decision to delay follows the evaluation of the bids from the various tenders for the Engineering, Procurement and Construction (EPC) contracts.”

The Guardian learnt that as a result of the uncertainty, International Oil Companies (IOCs) reached a final investment decision on only one of eight planned deepwater oil projects.

Both the approved and unapproved deepwater projects have the potential to bring on stream almost 1.124 million bpd of new production over the next five or more years, however, only 200,000 bpd has reached the critical development milestone.

Ironically, while Nigeria is facing challenges in bringing viable projects on stream, Ghana is expanding its deepwater operations.

Specifically, Tullow Oil expects first production early next month at TEN, its second deepwater development project offshore Ghana.

According to experts, if global crude oil prices remained low, this will also exacerbate project delays in Nigeria.

Accordingly, eight of the 11 pre-drilled wells in Ghana have been completed, with the ninth to follow this week.

Tullow’s total capex to first oil is within budget at around $4 billion, with forecast capex in the second half of this year to around $200 million as drilling completions continue and equipment and vessels are demobilized.

The United States Energy Information Administration (EIA) explained in its current analysis on the Nigeria’s oil and gas sector that in 2015, that Nigeria produced 2.3 million bpd of petroleum and other liquids, of which 1.9 million bpd was crude oil and the remainder was condensate, natural gas plant liquids, and refinery processing gains.

According to EIA, Nigeria’s 2015 production was slightly lower than the previous year because of natural field decline.

It stated: “The 125,000-bpd Usan deepwater field was the last major oil field to start production in Nigeria, which was in February 2012. Since then, there have been smaller start-ups that are extensions of Nigeria’s Bonga and Erha deepwater fields. The 40,000-bpd Bonga North West field came online in August 2014, and the Bonga Phase 3 project started production in September 2015, which will eventually add 50,000 bpd.

“The Erha North Phase 2 project came online in October 2015 and will eventually add 65,000 bpd. The projects have helped to partially offset production declines.

“Several planned deepwater projects in Nigeria have been repeatedly pushed back because of regulatory uncertainty. Some draft versions of the PIB have prompted questions about the commercial viability of deepwater projects under the proposed changes to fiscal terms. Deepwater projects have typically five included more favorable fiscal terms than onshore/shallow water projects, but the PIB, if passed into law, is expected to increase the government’s share of production revenue coming from deepwater projects.”


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