Nigeria: Deepwater Oil Production in Sight as Companies Intensify Activities

19 March 2001

Lagos — The announcement Thursday by Shell Nigeria Exploration and Production Company that it had signed contracts for the development of its Bonga oil field signifies the intensity of activities that will take place in Nigeria’s deep offshore region this year.

Bonga is the first commercial deepwater discovery to be developed in Nigeria, but is sure to be trailed by other companies, also keen to exploit the rich reserves beneath the sea.

While SNEPCO (a full subsidiary of Shell Petroleum Development Company of Nigeria) has reached the development stage of its work at Bonga, others are at various stages of work on their own fields.

Bonga field is located on Oil Prospecting Licence (OPL) 212, one of the two deepwater offshore blocks that were awarded to SNEPCO by the government in 1993. The other is OPL 219, located in the ultra-deep offshore region.

Texaco Nigeria Outer Shelf Limited, for instance, is currently searching for companies to process 3D seismic data on OPL 213. The company says this is part of its approved exploration programme for the block this year.

Similarly, Nigeria Agip Exploration Limited is also in search of a semi-submersible deepwater drilling rig as well as operational services for drilling. It says these are for its planned development programme on two deepwater oil blocks, OPL 316 and 211.

The scope of work to be done on the field this year, according to the company, includes drilling, completion, testing, re-entry, of exploratory, appraisal and development wells. It said these would be done in the water depth of 1,500 metres.

These activities, says an official of the Department of Petroleum Resources, regulator of the oil industry, "are an indication of increased activity in the upstream sector."

Nigeria's deepwater region is strategic to the achievement of a target that the present government has set for itself. By year 2010, the government says it plans to raise Nigeria’s crude oil reserves to 40 billion barrels, up from the current reserve of about 25 billion barrels.

Over the same period, Nigeria plans to raise its production level to 4 million barrels per day, up from the current production of 2.2 million barrels per day.

The deep and ultra-deepwater regions are key to the realisation of this dream. During the last licensing round for oil blocks, half of the 22 blocks on offer were located in this region.

"Without a major contribution from deepwater discoveries, the gap between current reserves/production and the aspiration levels will be too great for onshore activities to close," Paul Warwick, Managing Director, Conoco Energy Nigeria, said here in a lecture late last year.

Bonga will play a significant role in this quest. "Bonga is a giant oil and gas field by world standards and will increase Nigeria’s crude oil reserves by some 600 million barrels," SNEPCO said in a statement released Thursday.

The Floating, Production, Storage and Offloading vessel planned for it will have a production capacity of 225,000 barrels per day, as well as a storage capacity of two million barrels per day. First oil production from Bonga is planned for 2003.

Development of the deep offshore fields will involve huge costs to oil companies and the government, through the Nigerian National Petroleum Corporation, which represents the state’s interest in joint ventures with producing companies.

Shell’s contract for the development of Bonga is worth $2.4 billion. The government will spend $4.5 billion as its contribution to joint venture projects with producing companies. Government owns an average of 57 percent interest in these joint ventures with oil companies.

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