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Exploring hydrocarbon prospects in North’s Inland Basins

By Kingsley Jereiah
12 May 2019   |   3:20 am
After about 40 years, Nigeria has returned the search for oil in the North. The debate on the viability of the search, primarily championed by President Muhammadu Buhari has divided stakeholders. Apart from seeing the project as a northern agenda, and a waste of taxpayers resources, some stakeholders have repeatedly condemned the project, while others…

The Group Managing Director of NNPC, Maikanti Baru

After about 40 years, Nigeria has returned the search for oil in the North. The debate on the viability of the search, primarily championed by President Muhammadu Buhari has divided stakeholders. Apart from seeing the project as a northern agenda, and a waste of taxpayers resources, some stakeholders have repeatedly condemned the project, while others insist that exploring hydrocarbon opportunities across the country is in the best interest of Nigerians, since there is high prospect of oil and gas find across the inland basins, especially with improved technology that could fast track the process. KINGSLEY JEREMIAH writes

In February this year, President Muhammadu Buhari flagged off of well drilling activities at Kolmani River Well of the Gongola Basin, by President Buhari. The event took place in Barambu Town in Alkaleri Local Council of Bauchi State located at Barambu Town in Alkaleri Local Council of Bauchi State.

In his speech at the event, Buhari highlighted the need to treat oil exploration in the North and other inland basins as a national priority, as part of efforts to boost the nation’s oil reserves to 40 billion, and daily production to three million barrels per day.

He said: “A key execution priority of our Economic Recovery and Growth Plan (ERGP) is ensuring national energy sufficiency and this cannot be achieved through hydrocarbon resources from the conventional basins alone. Therefore, exploration in our frontier basins is a national imperative and a core policy thrust that must be sustained.

“It is on this note that I directed the NNPC to aggressively intensify its exploration campaign in the inland basins to discover new hydrocarbon reserves that will boost oil and gas production and extend economic benefits to the people within the North East and the nation at large.”

He stressed that his administration would ensure that exploration efforts in all frontier basins of Chad, Gongola, Anambra, Sokoto, Dahomey, Bida and Benue Trough were intensified in order to usher in prospects for a more prosperous Nigeria.”

This is not the first time that the President, who doubles as Minister of Petroleum Resources is displaying his unflinching desire to achieve oil discovery in the northern part of the country.

NNPC tower

The search for hydrocarbon in the North has been on for about 40 years, and the journey to the hydrocarbon sand in Kolmani River started in the 1990s, when international oil companies (IOCs) used 2D seismic data to explore crude oil.

The search led to the discovery of 146ft of hydrocarbon sand in the Kolmani River 1 well, with an estimated prospect of about 33BCF of gas. But the IOCs however didn’t investigate deep target as their drilling was based on 2S seismic data.

In 2016 and 2017, a subsidiary of NNPC, Frontier Exploration Services (FES) acquired a 3D seismic data over the Kolmani River prospects area in order to determine whether there is any possibility of prospects overlooked by the multinationals.

The IOCs, including, Chevron, Total, and Shell, which had oil blocks in the upper Benue Trough, had drilled wells in the region. Out of the three that were drilled by them, only the block belonging to Shell had gas reserves, but the discovery was untested.

Indeed, Buhari, who was the Federal Commissioner (minister) for Petroleum under a military regime in the 70s brought up the idea of oil exploration in the north beginning with a search in the Lake Chad area.

Coming back to power in 2015, Buhari renewed the bid. About three years ago, the corporation started drilling activities in the Lake Chad Basin, situated in parts of Borno State but suspended the exploration for crude oil following attacks on its workers and some military personnel by, Boko Haram terrorists.

Justifying Exploration Activities Across Nigeria
THE NNPC and some stakeholders in the petroleum sector believe that the country is sitting on a huge natural resource like hydrocarbon and the resource must be explored, especially as the future of oil goes bleak and the country seeks to grow reserves and daily production.

For instance, Group Managing Director of NNPC, Dr. Maikanti Baru noted that there are a number of drillable prospects, which led to the planning of the current project.

So, Ikenga 101 belonging to a consortium of service companies, Messrs Etihad Oilfield Services, and Drilog Petrodynamics Ltd, under a Turnkey Contract Agreement would look deeper at the Gongola Basin in order to determine the size of gas find and explore deeper targets.

Baru insisted that with indications for huge prospects, based on new technology being deployed, and prevailing data from neighbouring countries, the group would lead efforts across the basins before inviting the private sector.

“Exploring frontier basin areas that have not been explored, are normally very risky and costly, and normally, the private sector would not want to take that risk; they expect the government to go out and look for it, and once the reserves establish the presence of hydrocarbons, then the private sector would come in and develop it. It is the same concept that we are adopting based on the President’s directives.”

[FILE] The Minister of State for Pretroleum Resources Emmanuel Ibe Kachikwu PHOTO: TWITTER/NNPC

Interestingly, some stakeholders have expressed optimism over the moves, even as they are of the view that the country would not grow its reserves if bold steps such as exploring hydrocarbons across the country were not considered.

Leading the pack was the President of the Nigerian Association of Petroleum Explorationists (NAPE), Abiodun Adesanya who said: “The reasons for doing this at this time is, of course, understandable. The science and the data support embarking on this drilling campaign and it’s very good for national development.

“No doubt the result will open the space for more exploration activities in the area and this is fantastic for national development, cohesion and respect amongst its divergent regions,” he added.

A geologist and Publisher, Africa Oil and Gas Magazine, Toyin Akinosho, who hinted that no geologist would naturally say no to any exploration, also backed Adesanya.

He also added that since private companies were unwilling to invest in inland basins, it behooves the government to open them up in order to attract international investors.

In his contribution, the Director, Centre for Petroleum, Energy Economics and Law (CPEEL), at the University of Ibadan, Prof. Adeola Adenikinju noted that if oil and gas are discovered in commercial quantities in the region, the development, will further enhance the realisation of the national goal of expanding oil reserves to 40 billion barrels, and daily production capacity to three million barrels per day.

The Technical Adviser to Nigeria Extractive Industries Transparency Initiative (NEITI), Dauda Garuba corroborated other stakeholders’ views, insisting that the geography of the region could lead to positive results.

“Let’s stay positive about politics about the search for oil. Okitikpukpa area in present day Ondo State was where the seepage that launched Nigeria into oil search started, but the actual flow started many years later in Oloibiri in present-day Bayelsa State, and later in Ogoniland in present-day Rivers State,” Garuba stated.

Implications Of Oil Or Gas Discoveries In North
WHILE potentials of gas exists from the previous search, oil and gas discovery in the northern flank could exponentially change the political landscape in the country since most national discussions and development agenda have always been pegged around oil resource management.

Former President/Chairman of Council, Chartered Institute of Bankers of Nigeria, who is also the Dean, College of Postgraduate Studies, Caleb University, Segun Ajibola insisted that it would be a thing of joy if oil is discovered in the North as the exploration in Chad Basin and other points in the north have lingered for long.

“If successful, it will reduce piping crude through all the way from the South to the North, the Kaduna Refinery to be more specific. It will reduce the restive posture in the Niger Delta, and the moderate the agitation for resource control, he said.

Currently, the Niger Delta region is environmentally endangered; land and water have been polluted, and the health of the people living in the oil-producing region threatened as loopholes in regulation and governance remain a major challenge in the nation’s petroleum sector. With the development in the North, some experts foresee a transfer of communal agitation to the northern region.

Ajibola noted that oil find in the north may equally throw up environmental degradation problems, thereby opening up communal agitation and protests that is already rampant in the Niger Delta. “But this could be avoided and/or managed to avoid the kind of communal conflicts in the Niger Delta.

He added, “Oil find in the North has no negative implication on the Niger Delta region as exploration activities in the region by the multinational oil companies have reached maturity and only need continued management to avoid such things as pipeline vandalisation, oil bunkering, militia, etc.

“With proper handling, oil find in the north can only make Nigeria as a whole more prosperous. Oil exploration in the inland basins will continue into the future as the country continues to search for more fields to beef up the oil reserves. It will be generally more expensive than what obtains in the already well-equipped Niger Delta, but that will not deter the search due to a multitude of socio-political and economic arguments. However, the search should fulfill the well-known internationally accepted process flows,” the scholar said.

Similarly, should gas be discovered in commercial quantity, Adesanya believes that the first thing to do is to determine the gas chemical composition, then build a gas processing plant to separate the gas into different products.

Spending Hard-earned Resources Amidst Uncertainty, Poor Economic Outlook
DESPITE the enthusiasm, some stakeholders believe that there is no wisdom in the continued search for hydrocarbon resources, considering that over $3b has already been expended on the project without making any commercial find.

Currently, the nation’s economy is choked by a total debt profile of N24.387t. The country’s refineries are in a shambles, needing subsidy, which deprived the economy of N10 trillion between 2006 and 2018. The developments have already pushed the number of poor Nigerians to 91 million, while unemployment figure settles at 20.9 million.

While the sector is currently seeking leeways for investment in the face of regulatory challenges, which continue to push investment opportunities to other destination, the project is coming at a time when the country is struggling to finance joint venture agreements, where the nation is already indebted to the tune of about $4b.

The continuous push is equally coming despite the lack of support from the IOCs, when the campaign for global shift from fossil fuel to renewable energy is on the increase, and there has been a loss of interest in encouraging production of already discovered reserves.

Senator representing Kaduna-Central Senatorial District Shehu Sani, during a visit of members of the Kaduna State Students’ Union to his office in Kaduna, alleged that “past leaders have amassed wealth through this venture,” and instead called on Buhari to investigate the over $3b already spent on the project.

Prof. Jerry Gana, in 2013, while serving as chairman of the Northern Nigeria Economic Summit, disclosed that N27b was spent on oil and gas exploration in the Lake Chad Basin at that time with additional $340m budgeted.

National Petroleum Professorial Chair in Oil and Gas Economics at University Of Cape Coast’s Institute for Oil and Gas Studies, Ghana, Wumi Iledare believes it was satisfactory to explore every basin in the country, but timing and cost could be major challenges.

“Funding mechanism may be an issue at this critical period of economic uncertainty in the nation. Usually, government in most cases are risk averse. So, I don’t want to believe government would normally use tax money for a highly stochastic upstream expenditure with a significantly low likelihood of value addition,” said Iledare.

Iledare, who was former President Nigerian Association for Energy Economists (NAEE) added: “At this phase, oil business should be reserved for investors with high risk profile and a large portfolio of assets to absorb failure. I hope we are not chasing the wind even with highly expensive modern technology.”

Earlier, the Executive Director, Civil Society Legislative Advocacy Centre (CISLAC), and Head of Transparency International Nigeria, Auwal Musa had equally described the move as unnecessary and not in the best interest of the country.

Hidden Agenda, Transparency And Wrong Timing
AFTER appraising the prevailing situation, some stakeholders are not convinced that the project is not politically motivated. For them, the move remains a northern agenda and a development, which is coming at the wrong time.

While there are currently seven confirmed basins that are exploitable with different likelihoods of commerciality, the questions most experts like Iledare continue to ask if it makes sense to fund exploration based on economic realities or sentiments.

They are also eager to establish if the decision to go to basin A or B is decided on technical merit or approved transparently by the board.

Iledare said: “A competent board accountable to stakeholders- the Nigerian People, will not make decisions that would not add value to its portfolio of assets. Well, in Nigeria, unlike most places that I am familiar with, what ought to be is less likely than what is.”

The scenario playing out is equally blamed on the shortfalls of the Petroleum Act of 1969, which allows the Minister of Petroleum to do and undo, thereby giving priority to a personality-driven petroleum sector policy framework against institutionalised policy.

Furthermore, some stakeholders are of the view that the series of meetings by some northern governors with the NNPC on the issue were sufficient indication that the region is desperate to continue the search.

At some point, the President, governors Ibrahim Gaidam of Yobe; Aminu Waziri Tambuwal of Sokoto, and Abubakar Badaru of Jigawa states were in separate closed-door meetings discussing oil exploration in the region.

Some are also quick to point to the fact that while Buhari was specific on the inland basins in the North, the NNPC mapping intervention did not say what should be done to the other areas. Therefore, restricting the search to an area without talking about areas like Ogun State or Anambra State makes the project look like a northern agenda.

According to the co-founder, Sustainability School, Lagos, and associate lecturer, Centre for Petroleum, Energy Economics and Law (CPEEL), University of Ibadan, Dr. Olufemi Olarewaju, while the chances of oil discovery in the inland basins, especially in the north cannot be ruled out, the current drive appears more political than economic.

He said: “The project appears to be politically motivated and the questions Nigerians should be asking is on the geopolitics of oil. Should we not focus on achieving higher process efficiency in the value chain of proven reserves?”

Musa had also alluded to this when he said: “We should not bring regional politics to everything that can benefit the entire country. The project has not been seen as a national effort to diversify revenue. If it is seen as something meant for national interest, I don’t think there is the need for the Sokoto State governor or anyone to lobby. There are signals that it is going to favour one particular region.”

Cost, Peculiarities Of Location
WHEN compared to drilling in the Niger Delta, the inland basins, especially Gongola Basin has a more difficult geological terrain. The location is equally isolated without necessary infrastructure, therefore the cost of the projects, which have been left in secrecy could be exponentially higher.

The indications were that mobilisation and drilling cost for the projects would be extremely high because the drilling would most likely through older and harder rocks compared to what is obtainable in Niger delta, especially as drilling would go as far as15, 000ft.

Adesanya noted that depth remains an issue that would be determinant in the cost of drilling, as well as the long distance required for moving materials and equipment like rigs to site.

“Also, there are a lot of ancillary things that are needed. Cost of personnel and allowances would be higher than if it were in the Niger Delta. So, there is going to be a big exposure financially. But in having those big exposures, there is also the need for stringent cost control otherwise it could be abused or go overboard.