Globally, national oil companies are getting more integrated for increased economies of scale with their exploration and production (E&P) subsidiaries playing in different countries, such as the multinational firms. The Nigeria Petroleum Development Company (NPDC), the E&P arm of the Nigerian National Petroleum Corporation (NNPC), shouldn’t be an exception, writes EMEKA UGWUANYI Assistant Editor (Energy).
Background
Any oil producing country strives to optimise the benefits of the hydrocarbon resources for the extant and future generations. Nigeria shouldn’t be the exception. In the over 50 years of crude oil production, the country has nothing to show for it, a development condemned locally and internationally. Qatar, a small Middle East country, has an integrated national oil company and all the subsidiaries are doing well- creating value for the citizens and operators. Nigeria can make NNPC and its subsidiaries profitable.
For instance, Brazilian national oil firm, Petroleo Brasileiro SA (Petrobras), which is an equivalent of NPDC, divested its interests in all the oil and gas assets in Nigeria to create more value for Brazilians. The company expects to earn over $5 billion from the deal.
According to Reuters, the decision to sell the Nigeria assets marked a retreat away from foreign markets to enable the company concentrate on oil assets development in Brazil to realise the government’s goal for Brazil to become self-sufficient in energy.
With the divestment, Petrobras, the report said, can focus more on exploring for oil in a vast deep sea region off the coast of Brazil known as the subsalt, believed to hold billions of barrels of high-quality oil. The report noted that despite cash flow being crimped by falling output, the government refused on anti-inflation grounds, to let Brazilian gasoline and diesel prices rise in line with world prices. This has forced Petrobras to subsidise consumers even as its debt rises above its internal limits.
An industry operator noted that the essence of maintaining national assets, such as NNPC and NPDC is that unlike the privately owned firms that are often interested in maximising profits for the owners, the country falls back on these national firms in times of difficulty and challenges for the benefits of the citizenry.
The operator said those against the development of the NPDC into a big company that can compete with other multinationals locally and internationally, don’t mean well for the country. He said as the government creates environment and policies that promote the development of private sector oil firms, it will also ensure that companies such as NPDC are robustly developed because it is the company owned by Nigerians.
Establishment, growth of NPDC
The Nigerian Petroleum Development Company (NPDC) is the exploration and production arm of the NNPC, established in 1988 to enable the NNPC to meet its objective of being a major player in the upstream sector of the oil and gas industry.
However, over the years, the company could not realise its objective as a result of lack of cooperation from past administrations, which actually stripped the company of some of its very prolific acreages.
But with the encouragement from the Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke, and the support of the Presidency, NPDC has gradually begun to grow to realise its objectives. Asset stripping, which almost compelled the company to close shop has stopped.
In 2010, the Minister gave the NPDC a target to produce 250,000 barrels per day by 2015 when its production was just 65,000 barrels per day. It produces 130,000 barrels per day representing a 100 per cent growth. Bulk of this growth in production came from assets divested by Shell, which it held in joint venture with the NNPC on behalf of the Federal Government. While Shell sold the stakes it had in these assets with other international oil companies, the petroleum minister handed NNPC’s stakes in these assets to NPDC. They include Oil Mining Leases (OMLs) 4, 26, 30, 34, 38, 41 and 42.
The Managing Director of Shell Petroleum Development Company and Chairman, Shell Companies in Nigeria, Mutiu Sunmonu, during the divestment said the sales were competitively and transparently carried out in line with international best practices. Besides, he stated that companies were given preference as part of contribution to developing indigenous E&P companies.
Alison-Madueke noted that efforts to make NPDC attain the 250,000 barrels per day production were on course. She explained that with such production level, the company can exist on its own, be able to seek loan from any financial institution in the world, bid for acreages and produce oil from any part of the world just like the multinational oil firms.
NPDC is embarking on aggressive drilling programme. For instance, it has successfully drilled two new wells in its OML 119. The wells, Okono 6 and 7 are producing 12,000 barrels per day. They are situated in an area where most of the wells produce an average of between 2,000 and 3,000 barrels per day.
The minister had also told reporters that NPDC’s plans is to drill more wells this year, adding that additional two rigs would be deployed for operation in addition to the two the company currently has on site. She said the target is to drill 40 wells in the next five years as part of NNPC’s growth projection.
As part of the growth efforts, NPDC is carrying out well repair and maintenance activities aimed at boosting reserves. For instance, the company carried out repairs on some of its wells in OML 26 in June last year. This helped to double production from those wells contributing to the company’s current 130,000 barrels per day production.
Gas production
NPDC is putting measures in place to boost gas production especially for supply to power plants. The Phase 1 of the Oredo Gas Handling Facility situated near Ologbo in Oredo oil field was completed this year and supplies 65 million standard cubic feet per day of gas to the Nigerian Gas Company for transmission to power plants. During the inauguration, the minister assured that the second phase of the project would be completed before end of this year. It is expected to produce additional 100 million standard cubic feet per day.
The second phase will also come along with the completion of the Liquefied Petroleum Gas (LPG) processing component, which will deliver about 4,000 metric tons of LPG to enhance the campaign to get every home to adopt LPG as its domestic cooking fuel and stop the trend of deforestation arising from the use of firewood.
NPDC Managing Director, Victor Briggs, said: “The only way we can increase our production is really by going out there and do the work. It is either you are repairing a well that has gone down because there are technical issues or you are drilling a well. I consider Okono 6 and 7 a success because the two wells combined are delivering over 12,000 barrels per day and that by any standard is significant especially in an area where most of the wells around are producing an average of 2,000bpd to 3000bpd.
“Under the leadership of the former Managing Director, who is now Group Executive Director Exploration and Production, Abiye Membere, our production grew from between 60,000bpd and 65,000bpd to about 130,000bpd. That is about 100 per cent growth. For us to meet the 250,000bpd target by 2015 we will have to do another 100 per cent growth from our current production. And that is what we are trying to do. First, we tried to repair some of the wells to restore their production capacities. For instance, in OML 26, between when that asset was handed over to NPDC in June and now the production of that field was doubled. All of these have added up to the 130,000bpd production that we are talking about today. To meet the 250,000bpd target by 2015 means doubling our production as I said earlier, but I am confident that we will meet the target because we have the resources and the reserves are there, and we have the people. Everything is therefore set for us to meet the target.
“While we are drilling to increase our production, we are also working hard to boost our reserve because this is what ensures sustainability. For instance, in one of our wells in Okono, we are drilling deeper to assess its greater potential. That drilling is going on very well as at today; if we find what I think we will find, and I think we will find it, that will give us more reserves in that field.”
