The Nation Newspaper

Tag: Oil exploration

  • ‘Attaining 2.5mbpd output futile without oil exploration’

    The efforts to attain 2.5 million barrels per day (mbpd) in crude oil production by the Federal Government will be unrealistic if aggressive exploration is not encouraged.

    This was the view of experts during a panel session at the 55th Business Anniversary of the Oil Producers Trade Section (OPTS), an arm of the Lagos Chamber of Commerce and Industry (LCCI), in Lagos.

    Industry operators, including the  Chairman/CEO, Waltersmith Petroman Oil Limited, Abdulrazaq Isa; Managing Director, Financial Derivatives Company Limited, Bismark J. Rewane; Lead Consultant to Senate Committee on Petroleum Industry Bill (PIB) and former Director, Department of Petroleum Resources, Austin Olorunshola; Boston Consulting Group Miguel Pita, and Leader, McKinsey Oil and Gas Practice, Europe, Middle East and Africa, and Chairman, Energy Insights and McKinsey Energy Think-Tank, OccoRoelofsen, among other members of the OPTS, spoke at the  event.

    The panel session entitled: “Competitive fiscals: Challenges, solutions and way forward”, examined how the Nigerian oil and gas space would be able to attract the quantum of investments that will drive government’s aspirations in oil reserves and production growth targets, especially in the face of the growing competition for capital from existing and emerging oil producing African countries.

    They noted that there are very competitive fiscals from other African countries and capital moves to an environment where they are welcome. Therefore, Nigeria should not foot-drag in its determination to maximise value from its hydrocarbon deposits.

    They said if there is no dependable plan to replace used reserves, even with the attainment of 2.5 million barrel daily, the production will drop abysmally with time because it is not sustainable.

    According to them, some new oil firms do not have exploration departments as required, such companies are only interested in production. “The Department of Petroleum Resources (DPR) is giving licences for petroleum refining, this is good but where is the oil? For instance, if Dangote Refinery takes 650,000 what else remains? It is important that government encourages exploration with competitive fiscals to enable oil companies take risk in oil search,”they said.

    “Government should quicken the completion and implementation of its new reforms to bring in fresh investments into the oil and gas sector. The government should also apply simplicity, transparency and enforceability in the new reforms,” they added.

    OPTS Chairman and Shell Petroleum Development Company(SPDC) and Chairman, Shell Companies in Nigeria, Mr. Osagie Okunbor, said:”We are talking about sustainability and that is a key thing to worry about. The Federal Government through its Economic Recovery Growth Plan (ERGP) eyes 2.5 million barrels per day, which is about a billion barrels a year.

    “The nation’s legacy reserve base has not been increased in the last 20 years. With 30 billion barrels reserves base and one billion barrels per year depletion, in 30 years the reserves base will be zero. The broad policy is around a replacement ratio of one to one and I don’t see a billion barrels coming into the reserves every year from the reality on ground.

    “The reality is that OPTS consists a significant proportion of what our economy represents, therefore, anything  that  impacts the oil and gas industry will have tremendous effect on the livelihood and meaningfulness of life of the average Nigerian.”

    According to Rewane, the upstream oil and gas sector should be optimised on one hand and continue to significantly aid the development of the country. “So, how do we incentivise this sector to the level of optimisation? We need to correct some misperceptions. There is this rhetoric about diversification, which is misinterpreted to mean ‘kill oil.’

    “In spite of all that have been said, we have not done so well as a country, but because we are in an era of politics where political expediency overrides economic reality. Over dependence on oil in the last 20 year period, even though activities have been diversified, the dependence has actually become more concentrated. Let’s not deceive ourselves as a country, we need to nurture this particular asset, the investors in these assets.

    “Because of the natural state of attrition, the politicians and policy makers have no control over the market. We cannot control OPEC, the glut in the international market, the thing we can control are the incentives we can offer investors,”Rewane said.

  • Ex-varsity don advocates use of magnetic methods in oil exploration

    I retired Professor of Geophysics, Nnaemeka Francis Ukaigwe, of the University of Port Harcourt, Rivers State, has called on exploration companies, governments and universities to intensify research in the use of gravity and magnetic methods in oil exploration.

    Ukaigwe delivered a paper at the 9th valedictory lecture of the university.

    In the lecture, titled: “The other five per cent: an exercise in gorilla psychology”, he said: “In exploration, 95 per cent of dollar expenditure goes for seismic method, the other five per cent goes to magnetic and gravity methods.

    “The methods can successfully be used to achieve very good and explicit results in finding the site and target of mineral resource deposits in the soil, but the problem is that the methods are surrounded in misery, so it is not very clear to geologists how to look at the map without processing it. They do not have the mathematical skills to process it so they run away from it and also get company magenta to run away from it.

    “But if put in the hands of those who know what to do with it, it will give us the same kind of results as Seismic is giving.

    “Companies should devote more resources to these two methods; it will save them a lot of money and inconveniences. The data already exists, nationally and locally; every company has the data as a must they will acquire it, but because they don’t have enough trained hands to interpret them, they abandon them in their files.”

  • Lagos Assembly seeks suspension of oil exploration

    Lagos Assembly seeks suspension of oil exploration

    •Lawmakers want resolution of environmental issues 

    BASIC infrastructure must be put in place before oil production can begin in Lagos,  the House of Assembly  told oil exploration companies yesterday.

    Oil has been discovered in commercial quantity in Badagry.

    The Assembly said the government needed to prepare before the beginning of operation to avoid a repeat of the problems in Niger Delta and other oil-producing states.

    The lawmakers’ reaction followeda motion at plenary by the Chairman of the House Committee  on Energy and Mineral Resources, Folajimi Mohammed.

    The lawmaker said efforts must be made to ensure that the state does not go the way of Niger Delta and other oil producing states, which, he said, were suffering from environmental degradation, following the activities of oil companies.

    Speaker Mudashiru Obasa said there was need for the government to be pro-active on the matter and learn from the past.

    He said: “We must safeguard the host communities and we must commend the companies that have been investing in oil exploration in the state over the years before oil was eventually discovered.

    “All necessary infrastructures must be put in place to protect the state and the host communities so that we would prevent what is happening in Niger Delta from happening in Lagos State,” he said.

    Mohammed  in the motion called for a stakeholders’ meeting to discuss the socio-economic importance of the exploration of oil and other related issues to prevent the Niger Delta experience.

    He stressed that the discovery of oil in Lagos has called for the recognition of the state as an oil-producing state, but that it was important to consider the consequences of the exploration.

    After extensive debate of the motion, the House passed a resolution calling for stakeholders meeting over the discovery and exploration of oil in Badagry area.

    Some of the stakeholders identified by the lawmakers include exploration companies, state officials and the host communities.

    Rotimi Olowo (Somolu 1), made reference to the degradation of Rivers State after the discovery of oil in the state and pointed out that adequate infrastructure should be provided for the people of the area.

    He said that despite the fact that Nigerians were happy when oil was initially discovered in the country, it later turned to a source of sadness with the activities of the oil companies.

    Supporting, Gbolahan Yishawu (Eti Osa 2)  added that a special account should be created for the 13 per cent derivation that would accrue to the state from the Federal Government as an oil producing state.

    The lawmaker from Badagry Constituency 2, David Setonji, explained that he received the news of the discovery with mixed feelings.

    He expressed fears that the exploration would negatively affect his people and that a percentage of what would accrue to the state from oil revenue should be given to the area.

    Another  lawmaker from Badagry but who is representing Ojo Constituency 1, Victor Akande, said the oil companies should be made to employ 60 per cent Lagos residents, especially those from Badagry area.

    The Deputy Speaker of the House, Wasiu Eshinlokun, observed that there was need to learn from the past with the destruction of marine life, environmental pollution and oil spillage in the Niger Delta.

     

  • Concerning President Buhari’s order for oil exploration in the north

    Concerning President Buhari’s order for oil exploration in the north

    Whatever amount is to be spent now, prospecting for oil in the north, should, in my opinion, be considered a bargain.

    I Just like football does to Nigerians in general, President Buhari’s last week directive to the NNPC to commence oil exploration activities in the Benue Trough, in addition to his earlier order to the corporation to re-ignite its search for oil in both the Chad Basin and the Kolmani River area following the reported discovery of hydrocarbons by Shell in the area, has since concentrated the attention of critical segments of the Nigerian society. The directive has seen literally all the politico-cultural divides in the country as well as relevant professionals, weigh in, for or against. Not surprisingly, the 19 northern state governors have been sufficiently optimistic about oil production in the region that they have since hired a British firm through the auspices of their regional development company, the Northern Nigeria Development Company, to embark on oil exploration activities.

    Quite understandably too, interventions have been both politically and economically driven. To each of the Ijaw Youth Monitoring and development Group and the Urhobo Monitoring Development Group, the directive is ill-motivated, driven, as Kinsley Oberuruaria of the latter organisation said, by a strong desire ‘to annihilate the people of the region’ While Eric Omaleof the Ijaw Youth Council described it as a good initiative, he had no doubts whatever that the timing is wrong because of the prevailing situation in the oil industry worldwide, makes it ill advised. For that reason, according to him, the venture is economically unwise. While Muhammad Ibrahim, the National Publicity Secretary of the Arewa Consultative Forum, claimed complete ignorance of the directive, the Afenifere, whose two chieftains differed in their reactions, was more forthcoming. For Chief Seinde Arogbofa, Secretary-General of the highly regarded Pan-Yoruba Socio-cultural organisation, it is a move in the right direction as it is in accord with restructuring which the group has canvassed, like forever. Said he: “There is nothing wrong if they find oil in the north. That is why we are calling for restructuring. If that is Buhari’s own restructuring agenda, it is okay.” But not for the  organisation’s usually combative spokesperson, Yinka Odumakin, who sees it as a waste. Why? Because, 58 years  ago this year, a colonial Secretary of state divined that as a result of the north’s “ fears and dislike for the more educated southerners, if they were not economically bound to the federation, they would be glad to be quit of it.”  This, he concluded: “may explain the desperate search for oil in the north at a time oil is becoming worthless.”

    Much more than the political commentary, I am, however, more enthused by the more nuanced interventions by the oil, financial and economic professionals who weighed in and spoke to the issues involved. For Dolapo Oni, Head of Energy Research, Ecobank Capital, the move must have been informed by the need to reduce the reliance on the Niger Delta with a view to reducing the country’s vulnerability to attacks in the region. Good as it is, the ideal model, he says, should have been a concession, emphasising that NNPC could gather data and allow companies to do their own search. But, he continued, it may not be the best of times if we are dedicating the NNPC’s scarce resources to going beyond the 2D and 3D.”

    Abdullahi Bukar of Uquo Gas Field Development described the renewed efforts towards exploring for oil in the Benue Trough and Chad Basin as a very good development, hoping that ”a well-thought-out policy will be put in place because anything that will increase Nigeria’s oil and gas reserves is very welcome.” To Johnson Chukwu, CEO, Cowry Asset Management Limited, “the effort to diversify the nation’s oil and gas production is a good move, depending on the level of resources being committed to it.”

    And as is usual on the ekitipanupo  web portal, the subject generated considerable interest, attracting as at the time of writing this, not less than 25 posts. One of them, by a university lecturer, was targeted at the objections from those who spoke for the Niger-Delta region.  According to Dr Eniola, the Ijaw Youth Council that could not call their rampaging youths to order lacks the moral right to talk about how to diversify an economy they are trying everything to cripple. If the monies realised from cocoa and groundnut had not gone towards building the infrastructure for oil exploration in the Niger Delta, where will Nigeria be today? Continuing, he   admonished the Ijaw  Youth  Council to busy itself with  unravelling why the  six years of Ijaw presidency,  with the  billions of dollars in appropriations through duplicated ministries and intervention agencies, have not impacted on the ordinary Ijaw man nor on the entire Niger –Delta area. What he believes should now concentrate the mind of the average  Ijaw  person is the decimation of their area by Niger Delta sons and daughters, even elders,  who collected huge amounts of money in the name of  Niger Delta development but simply refused to invest in their homeland.

    If that was political commentary, not so Goke Omidiran, a geologist who commented as follows: “This is one development agenda that may have economic benefits for the nation.  I have been somewhat involved in my time in oil and gas exploration in Nigeria, including the Chad Basin.  Let me say first, of all, that this directive is  within  the president’s  powers and may be applauded if those who will implement  it would use their best business judgment to determine what steps to take and how far to go to achieve the goal. The advantage of finding oil is enormous when we think of what it promises – especially, its political implications on one hand and its economic benefits on the other.”  He would like to suggest the inclusion of the following processes:

    1) NNPC should take the road of opening bids for oil prospecting licences (OPL) from interested and capable parties, both local and international,

    2) NNPC should provide the exploration companies with the enabling environment including tax holidays and hefty rebates in area of customs and exercise and other relevant expenses.

    3) Instead of basing exploration activities in the subject areas on the same mindset as the Akata-Agbada Formation sequencing prevalent in the Niger Delta basin, new models should be developed to determine the oil and gas trapping mechanism rather than rely on the Niger Delta model.

    4) Finally, NNPC and the federal government must know when to pull the plug on the effort, should it end up  showing no prospects.

    In concluding, I would like to say that I see the directive as a win-win situation. I believe that any attempt directed at increasing our oil resources is worth the while since we are not obliged to sell the end product only as crude which would involve so much money building a lengthy pipeline infrastructure from the north to the sea ports located in the south. It can therefore jump start our manufacture of the many byproducts as NNPC did when I was personally buying polypropylene from them with Ms Nzeribe as the manager in charge. Geo-politically, I strongly believe that discovering oil in commercial quantities in the north will create for the country, a ‘balance of terror’,  as a greater part of the   agitations/criminalities in the Niger-Delta area are fuelled  solely by the availability of oil in the region. It is the reason, for instance, why Nigeria no longer has as much as a third of the electricity generating capacity it had at the beginning of the present administration. Those worried about the huge funding exploration in the north would involve should   equally  think  of the huge resources that  would be required to resuscitate the oil  facilities bombed out of existence by those avenging political defeat in addition to the colossal   amount of money that will go into the Ogoni land clean up, for instance. It should also be of some moment that in the case of everybody going his/her different ways, which we can only pray God forbid, a landlocked  north, with no oil source of its own, can be trusted to fight with everything until all oil infrastructure in the Niger Delta becomes history. Whoever has seen what has become of Southern Sudan would never wish that for our dear country. Whatever amount is to be spent now, prospecting for oil in the north, should, in my opinion, be considered a bargain. However, seized, as we all are, of  NNPC’S  historic, endemic corruption and profligacy, the  president  must ensure that more than an eagle eye is trained on the expenses on this huge and  open-ended  national  assignment.

  • Fed Govt mulls zero JV funding for oil exploration

    Fed Govt mulls zero JV funding for oil exploration

    • Nigeria, Texas trade hits $15b

    The Federal Government would adopt the zero funding model for JV operations from next year, the Minister of State for Petroleum Resources and Group Managing Director, Nigerian National Petroleum Corporation (NNPC), Dr Ibe Kachikwu, has said.

    Kachikwu, who made this known at the ongoing Offshore Technology Conference in Houston, Texas, U.S, said the step became necessary following the arrears of Corporation to the various Joint Venture (JV) projects,

    Kachikwu, who was represented by the Group Executive Director, Gas and Power, NNPC, Seidu Muhammed, said the zero JV funding is to be adopted in view of the long debt of cash calls of over $5billion owed by the NNPC on behalf of the government over the years.

    He said  government has a very big funding challenge, and unable to meet its JV counterpart funding, lamenting the current realities in the epileptic operational condition of refineries, and the high level of poverty in the communities where these oil firms operate, among others.

    Under this model, he said, the operating companies would no longer wait for the NNPC counterpart funding before going on with operations and projects’ implementation. They will get funds and go ahead with implementations, while the NNPC’s bureaucratic processes of approval including endorsement by the National Assembly continues. The operators of the JVs will deduct costs at the end and remit what are due to NNPC.

    Kachikwu added that the Ministry of Petroleum Resources and the NNPC are carrying out interventions in the security issues, noting that such intervention in pipeline security has yielded fruit with three major pipelines including Escravos and Forcados linked to operation of the refineries. He also extended hand of partnership to the private sector to help in the refineries.

    Meanwhile, the Mayor of Houston, Sylvester Turner, has said the oil and gas trade between Nigeria and Houston has become a success story as it reached $15 billion.

    He stated this in his special message to Nigeria’s Small and Medium Enterprises (SMEs) and Houston’s Original Equipment Manufacturers (OEMs) in this year’s Nigeria Content Investment Forum in Houston, Texas.

    According to him, the existing close ties between Nigeria and Houston have made many oil companies to open offices and associates in Nigeria. “330 Houston companies have businesses and trade connection with Nigeria,”he said,  adding that Houston is ranked Nigeria’s largest U.S gateway for international trade and for greater partnership.

    To further strengthen Houston/Nigeria oil and gas trade, the Mayor said in 2011, United Airlines opened direct flight to Nigeria from Houston to Lagos, linking two major energy cities.

    “This flight has promoted robust connections, and Houstonians and Nigerians have benefited greatly from this connection,” he added.

    Turner thanked the organiser of NCIF and publisher of Sweetcrude Reports, Mr. Hector Igbi kiowubo for the vision of the forum, which seeks to continue to grow credible partnership, fostering industry support and participation, cultivating new and innovative ideas  and initiatives that will be mutually beneficial to Nigeria and Houston.

  • ‘Buhari should probe $3b oil exploration’

    ‘Buhari should probe $3b oil exploration’

    The Chairman, Senate Committee on Foreign and Domestic Debts,

    Senator Shehu Sani, has urged President Muhammadu Buhari to investigate oil exploration in the North.

    Sani, who is also the vice chairman, Committee on Foreign Affairs, said over $3 billion was wasted without any hope of getting oil.

    The lawmaker, who represents Kaduna Central on the platform of the All Progressives Congress (APC), spoke yesterday when members of the Kaduna State Students’ Union visited him in his Kaduna office.

    He advised President Buhari to set up a committee to investigate oil exploration in the North, noting that he should not limit probe to the Goodluck Jonathan administration, but other governments.

    The senator said: “If we cannot get oil, we must get our money back because over $3 billion was wasted on oil exploration in the North, particularly in the Chad Basin and Benue trough.

    “This oil exploration issue started during the late General Sani Abacha regime, and many years after his death, no oil has been found in the region.

    “I blame northern leaders, who, in collaboration with their southern counterparts, impoverished the region.”

    The students’ leader, Saadu Bako, implored Senator Sani to assist them to enable them remain focused and get good education.

    The Northern Nigeria Development Company (NNDC) has said it will begin exploration of oil and gas in the Northeast by the first quarter of this year.

    Chairman of the company Alhaji Bashir Dalhatu briefed reporters at the 47th annual meeting last year in Kaduna.

    He said NNDC would collaborate with its technical partners and the Nigeria National Petroleum Corporation (NNPC) on the expertise and budgetary requirements for the launch of the oil exploration project.

     

  • Firms seek loans restructuring to cushion oil price slump

    Oil exploration and production companies are trimming their loans’portfolios and projects to survive following the slump oil price from N120 to N61 per barrel.

    The firms are approaching their banks to reduce their loans’ portfolios, among other cost-cutting measures.

    Speaking at a sensitisation programme by the Department of Petroleum Resources (DPR) in Lagos, the Head, Oil and Gas, Fidelity Bank Plc, Abolore Solebo, said firms were making frantic moves to reduce their credit lines, to save costs and manage their investments.

    He said an operator of a marginal oil field had asked the bank to cut  the amount of loans needed for the operation.

    He said: “A customer who operates one of the marginal oil fields has asked the bank for a reduction of the loan needed from the bank, due to falling oil price. He put in a call and I discussed the issue with the Board.‘’

    He said the declining price of crude oil was having ripple effects on stakeholders in the industry, adding that operators were trying to avert further losses by taking proactive measures.

    “The fall in price of crude oil is taking its toll on the industry’s operators. An operator, who got a credit for his business when the price was, for instance, $116 per barrel, never envisaged that the price could drop to $62 per barrel. The business was good then. Mind you, he needs to service the loan. But the question is at what cost, giving the fact that there is a glut in the crude oil market?

    ‘’As the prices of crude oil fall to abysmal level, the oil producing firms are finding it difficult to mitigate the cost of production. Their profit base is shrinking, and there is the need to for ways of reducing their cost.’’

    Also, an official of a first generation bank, who spoke on condition of annoymity, said banks were making efforts to reduce their debts overhang. He said financial institutions set up oil and gas departments, and appoint competent people to manage it to make money from the sector.

    “The global oil market is experiencing one of its moments, and the lenders are at the receiving end. Some financial institutions gave out big loans to oil firms,with the belief that they would continue to manke money from the transactions. But things are going awry. The market is no longer bouyant.  Banks are conerned with two things.  First is recouping the loans given oil and gas firms. Secondly, they are reducing the loan advances to operators in the petroleum industry,’’ he said.

    Nigeria had scaled down the crude oil benchmark for the 2015 budget from $78 to $73 per barrel, earmarked $2billion for the three-tiers of the government, among other measures taken in the wake of the falling crude oil price.

    Its  Coordinating Minister of the Economy and Minister of Finance, Dr Ngozi Okonjo-Iweala, said the measures would insulate  sthe economy from the falling crude oil prices.

  • Senate to boost oil exploration in the North

    Senate to boost oil exploration in the North

    A bill for an Act to create the National Frontiers Basins Exploration Agency, yesterday scaled second reading in the Senate.

    The bill sponsored by Senator Smart Adeyemi, (Kogi West), received unanimous support as senators described the Bill as long over due.

    The lawmakers believe that the agency, when created, would create an avenue for opening up new oil frontiers across the country and increase its oil-based revenue.

    Adeyemi, in his lead debate, said the essence of the bill was to establish the National Frontiers Basins Exploration Agency to execute, promote and oversee exploration activities in the inland sedimentary basins and for other related matters.

    He said it was imperative to continue to search for more oil and gas to add to the national reserves, especially since petroleum is the mainstay of the country’s economy.

    He said Nigerians know that petroleum accounts for about 90 per cent of the country’s foreign exchange earnings.

    He said: “The bill has, as part of its objective, the promotion of efficient, sustainable exploration of hydrocarbons in the frontiers basins of Nigeria.

    “The evaluation of all unassigned concessions in Nigeria and to undertake activities that will stimulate exploration interest of local and international oil companies towards increasing the country’s oil and gas reserves.

    “Some have entertained fear that Nigeria has to avert the financial challenges that may arise for its economy, as more and more wells in the Niger Delta begin to record a consistent decline in outputs.”

    Adeyemi who said the idea was to look beyond the Niger Delta Basin, assured that the venture will give equal opportunity for all parts of the country to contribute to the national coffers through the instrument of oil revenue.

    In his contribution, Senator Barnabas Gemade, said it will be wise to pass the bill so that an agency would be made responsible for the handling of funds meant for oil exploration in the frontier basins.

    Senate Leader, Victor Ndoma-Egba, said perhaps the country had not been zealous enough in its exploration of oil in the contiguous geological basin.

    He said: “We need to legislate an agency that will force the hands of the operators of the oil sector to explore for oil in the frontier basins.”

    Senator Olubunmi Adetunmbi (Ekiti North) who also supported the bill said, the bill has helped to call attention to the Petroleum Industry Bill (PIB) which had remained pending.

    He said, the issue of frontier exploration is a component of the mother PIB. “We are giving attention to this bill. We should extend the same action to PIB by getting the government committed to hasten all the process to fast-track its passage into law.”

  • FG budgets $100m for oil search in Lake Chad

    FG budgets $100m for oil search in Lake Chad

    The Federal Government budgeted 100 million dollars for oil search in the Lake Chad Basin this year, Vice President Namadi Sambo said on Saturday.

    Sambo stated this during a visit to the Shehu of Borno, Alhaji Aubakar Ibn Garbai, in Maiduguri.

    He said the action was aimed at preparing ground for the commencement of full commercial oil exploration in the basin.

    “I want to inform you that government is committed to the oil and gas search in the Lake Chad basin.

    “Last year about 75 million dollars was spent on the project and this year President Goodluck Jonathan has approved 100 million dollars for the project,’’ the News Agency of Nigeria quoted the vice president as saying during the visit.

    Sambo added that three blocks have been identified in the area after a series of research for further action.

    “So far, we have identified three blocks one of which is located in Maiduguri.

    “These blocks have great potentials for oil and gas exploration,’’ he said.

    Sambo said that government believed that commercial oil exploration would begin in the area at the beginning of 2014.