Cautious optimism greets oil discovery in Gongola Basin
• Environmental Challenges, Insecurity, Cost Of Production Bane Of Further Exploration
• Commerciality Of Find Critical – Experts
Exciting as the news of the discovery of hydrocarbon deposits in the Kolmani River II Well on the Upper Benue Trough, Gongola Basin may be, stakeholders, yesterday, insisted that the development would only be meaningful after the volumetric of the hydrocarbon is determined.
They equally noted that festering insecurity, environmental issues, dearth of infrastructure and cost of production were major factors that must also be taken into account, just as economically viable farmlands, as well as communities may be affected and relocated.
Exploring the many implications of the development, some industry players noted that the development is also capable of dousing agitations of the Niger Delta region, hoping that it would balance resource locations in the country.
The Nigerian National Petroleum Corporation (NNPC), which announced, on Friday, the discovery of crude oil and gas in the Gongola Basin, northern Nigeria, noted that the commercial viability of the discovery coming from the drilling of a total depth of 13, 701ft before hitting oil and gas in several levels is yet to be ascertained.
The outfit added in a statement that a Drill Stem Test (DST) is currently ongoing to confirm the commercial viability and flow of the Kolmani River reservoirs. President Muhammadu Buhari, on February 2, 2019 flagged off drilling of the Kolmani River II Well, insisting that there was need to explore hydrocarbon across the country.
While the NNPC said the outcome of the search would be announced in 60 days after activities began on February 2, the outcome eventually came eight months after. Before embarking on the activity, the NNPC said it acquired 435.54km2 of 3D Seismic Data over Kolmani Prospect in the Upper Benue Trough, Gongola Basin to evaluate Shell Nigeria Exploration and Production Company (SNEPCo) Kolmani River 1 Well Discovery of 33 BCF and explore deeper levels.
The well was drilled with “IKENGA RIG 101” to a total depth of 13,701feet encountering oil and gas at several levels.According to the corporation, on Thursday October 10, 2019, at 18:02hours, one of the reservoirs was perforated and hydrocarbon started flowing to the wellhead at 21:20hours in which the gas component was flared to prevent air charge around the rig.
Preliminary reports indicate that the discovery consists of gas, condensate and light sweet oil of API gravity ranging from 38 to 41 found in stacked siliciclastic cretaceous reservoirs of Yolde, Bima Sandstone and Pre-Bima formations, NNPC added.
The state oil firm revealed that it has acquired additional 1183km2 of 3D seismic data over highly prospective areas of Gongola Basin with a view to evaluating its full hydrocarbon potential.Professor of Geology and NNPC Chair in Basinal Studies, Nuhu Obaje, who lauded the development, especially as the search has been on for above four decades, said although the volumetrics are yet to be announced, the discovery would shore up national reserves, and bring significant positive socio-economic transformations.
While analysts had projected a high cost of oil production in the region, especially with the limited oil and gas infrastructure there, Obaje said despite being far from the coast, the construction of national grids of pipelines and other flow infrastructure, as well as the proposed trans-Saharan pipeline will make the economics optimal for further exploration and harnessing of the potentials in the frontier basins.
“More employment will be generated for all Nigerians, while the region will benefit in infrastructural development and several corporate social responsibility projects and programmes. More significantly, investors confidence has been boosted such that we expect some good amount of private sector investments in the basin, and indeed in the other inland frontier basins comprising the Bida, Sokoto, Anambra and onshore Dahomey basins in the years ahead,” Obaje said.
He said even though the NNPC is presently working on all the inland basins, government would be encouraged to put some of the blocks in the inland basins up for bidding during the next bid round.
“Definitely the environment will suffer. There will be dislocation and relocation of communities, pollution and destruction to farmlands and the aquatic ecosystem, but futuristic strategies for mitigation and reclamation should already begin in earnest. But above all, Nigeria will benefit. This is a milestone achievement for the NNPC and critical stakeholders,” Obaje stated.
The former President, Nigerian Association of Petroleum Explorationists (NAPE) Abiodun Adesanya described the discovery as a positive accomplishment and a gamechanger for national development.
According to him, the fact that the country has oil and gas discovery from another section of the country means that its benefits to the citizens will spread, stressing that the resources would be useful for economic development, especially for addressing the country’s energy deficiency.
“There are a lot of things we can do with the gas locally in that area and oil can be piped as feedstock to the Kaduna Refinery, or a new one that may be built in Gombe area,” Adesanya said.Stating that the discovery would reduce over dependency on resources from the Niger Delta, Adesanya added that the find, however, needed to be appraised to confirm the extent and determine the size of the oil and gas reserves found.
“Once we cross that threshold, it can then be packaged into a licensing round that would naturally be attractive to both local and international investors.“As far as cost is concern, when you commence exploration in new areas, cost could be higher than normal because there are lots of unknowns. Whether the oil would be for export, I wouldn’t think so because of our own internal energy needs,” Adesanya said,
He continued: “If we find crude oil, that can be refined locally; if we find gas, we would process it to generate power, build LPG, Ammonia or fertiliser plants, whose products can be consumed in the country, that will be good news.“However, environmental and security issues could be of concern. The area is just North of the Yankari Games Reserve, therefore, we have to ensure that the environmental impact is minimised and global best practices adhered to so that we will not destroy the ecosystem of that area. As much as possible, mistakes and lessons learnt from the Niger delta area should guide our operations,” he said.
With an indication that sweet crude was discovered, Adesanya said drilling of wells to appraise the discovery would be the next logical activity, adding that the cost of such appraisal wells would be less because of information that is now available from Kolmani River-2.
The former President/Chairman of Council, Chartered Institute of Bankers of Nigeria (CIBN), who is also the Dean, College of Postgraduate Studies, Caleb University, Prof. Segun Ajibola, noted that while the cost of oil exploration is usually high, especially at the beginning, there was need for economies of scale to come in.
“For the oil exploration, a lot depends on the oil reserves as discovered. If paltry, then not much benefit would accrue to Nigeria, but if the volume of reserves is right, the cost would go down with time. There is need to address, infrastructural, security and community-related issues to sustain volumes, earnings and expand the scope of exploration,” he said.
The Chairman of the Petroleum Technology Association of Nigeria (PETAN), Mazi Bank-Anthony Okoroafor, who said the development remained strategic in the history of the country, noted that the move was in line with exploring all the inland basins to realise their full potential.
Partner and Head of Odujinrin & Adefulu’s Energy Practice, Real Estate, and Mining Teams, Dr. Adeoye Adefulu, in his reaction said it is great for the national oil company to explore all potential basins in the country. Adefulu added that results of the discovery once released, would help investors decide on its commerciality or otherwise. “I anticipate that it is unlikely to be those investors we are used to that will first take advantage of the prospects,” he said.