French oil giant, Total, was yesterday awarded an exclusive right by Nigeria and the Island of São Tomé and Principe, to begin exploration for oil in three blocks, 7, 8 and 11, located within the hydrocarbon-rich Joint Development Zone (JDZ) owned by both countries in the Gulf of Guinea.
The development coincided with the rise of crude oil price to a four-month high at $68 per barrel, boosted by tightened global supply and a monthly report of the Organisation of Petroleum Exporting Countries (OPEC), which built a case to extend production cuts beyond June.
The right to explore for oil in the JDZ blocks was formally granted to Total after negotiations were concluded and a Production Sharing Contract (PSC) signed by parties involved at a ceremony held in Abuja.
The JDZ is an area in the region of the Nigeria - São Tomé and Príncipe boundary region speculated to be rich in oil and gas reserves.
And, considering that neither country could have explored the resources in the zone without interfering with their maritime rights, they agreed in a treaty to create a Joint Development Authority (JDA) to develop the field and mutually benefit from its resources.
The JDZ with regards to this was signed in Abuja on February 21, 2001.
Speaking at the PSC signing ceremony, the Managing Director of Total Exploration and Production Nigeria (TEPN), Mr. Nicholas Terraz, stated that the oil company would invest more $10 million to acquire three-dimensional seismic data of oil and gas prospects in the blocks.
Terraz explained that it would be too early to estimate the hydrocarbon potentials of the blocks, adding that more than 1,000 squares kilometres of the field would be explored.
"This is for seismic acquisitions, and the investment is over $10 million. It is too early to tell the quantity of the oil. We have a four-year exploration period and during which we will need to acquire the seismic data. Total will be funding 100 per cent for the time being," Terraz said.
Also, the Executive Director, Monitoring and Inspections at the JDA, Dr. Ibiwari Jack, stated that while the potential of the oil blocks were unknown, Total's exploration of same would provide partners details of the hydrocarbon content of the blocks.
Ibiwari noted that the oil blocks assigned to Total had not been explored before, adding that the company would be the first to explore it.
"Having Total back to our JDZ gives us so much confidence. If others look back to see Total, they will want to come. The blocks they are into now, nobody has done any exploration there.
"They will go to do their seismic studies there and hopefully in the next one or two years, we will get to know the potential but the prospect is there, very huge," Ibiwari said.
In his remarks, the Acting Chairman of the JDA, Dr. Almajiri Geidam, stated that the signing of the PSC with Total was aimed at reviving activities at the JDZ after years of idleness.
Geidam noted that the JDA intends to also revive interests on the JDZ among investors and oil companies.
He said: "Since the JDA was established in January 2002, it has held two licensing rounds which culminated into the award of six blocks in the JDZ. Some exploration activity took place in most of the blocks that resulted in some discoveries of hydrocarbons.
"Today's event which is as a result of a careful re-engagement of the industry by the board aimed at reviving the fortunes of the JDZ requires us to commend Total for the renewed interest in the zone.
"Furthermore, this event is expected to elicit even more interest and confidence of other prospective investors as well as consolidate the existing cordial relationship between the Federal Republic of Nigeria and the Democratic Republic of Sao Tome and Principe.
"I wish to seize this opportunity to also reiterate the commitment of the board and staff of the JDA that we will work assiduously to ensure that the PSC signed today and indeed other existing PSCs are fully executed in accordance with the Abuja joint declaration on transparency and good governance signed by the two heads of state of the state parties," Geidam, added.
Crude Oil Price Hits $68 on Tighter Supply
Meanwhile, crude oil price hit $68 Thursday.
While the global benchmark, Brent crude hit a 2019 peak of $68.14 per barrel before falling to $67.85, the United States West Texas Intermediate crude futures were at $58.63 per barrel, up 37 cents or 0.64 per cent.
OPEC and some non-aligned producers including Russia have been withholding oil supply since the start of the year to tighten global markets.
In its monthly report released Thursday, the group cut the forecast of demand for its crude this year and predicted strong growth in non-OPEC supply.
"This highlights the continued shared responsibility of all participating producing countries to avoid a relapse of the imbalance and continue to support oil market stability in 2019," OPEC said.
OPEC and allies have agreed to cut oil output since January in an effort to reduce global supplies and support prices.
And this week, Russian news agencies reported Saudi Arabia was proposing that the deal be extended until the year-end.
In the meantime, United States sanctions have tightened markets and helped slash output from OPEC members Venezuela and Iran.
Venezuela's worst blackout on record has left most of the country without power for six days, with hospitals struggling to keep equipment running, food rotting in the tropical heat and exports from the main oil terminal were shut down.
Reuters reported that amid political turmoil in Venezuela, two storage tanks exploded at a heavy-crude upgrading project in the east of the country on Wednesday, according to an oil industry source and a legislator.
Two sources told Reuters that the United States also aims to curb Iran's crude exports by about 20 per cent to below one million barrels per day (bpd) from May, likely reining in waivers for Tehran's remaining customers.
Also, a report that a meeting between the United States and Chinese presidents to resolve a trade dispute had been delayed sent prices briefly down earlier.
Bloomberg reported that US President Donald Trump and Chinese President Xi Jinping might not meet until April at the earliest, after the Wall Street Journal said this month that Xi and Trump could meet around March 27.
A continuation of the tariff war between the world's top two economies could dent growth in fuel demand and dent prices.
US crude oil stockpiles had declined unexpectedly last week as output slipped from record highs and refining rates edged up, while petrol stocks decreased and distillate inventories rose, the Energy Information Administration said on Wednesday.
Crude inventories fell by 3.9 million barrels in the last week, compared with analysts' expectations for an increase of 2.7 million barrels.
The biggest decline came from the Gulf Coast, where stockpiles fell by more than 5 million barrels to 222.1 million barrels. Inventories in the East Coast and Midwest regions increased.
Crude stocks at the Cushing, Oklahoma delivery hub fell 672,000 barrels, their first drawdown in a month, the EIA said.