Nigeria to seek increased market share

Jul 23, 2001 02:00 AM

Barring any setback, Nigeria's crude oil production capacity should, in year 2003, increase by 890,000 bpd. As a result, the country is also hoping to seek an increased market share from the cartel to which it belongs: the OPEC. For this target to be achieved, the Federal Government through the Department of Petroleum Resources (DPR) and the Nigerian National Petroleum Corporation (NNPC) will in the last quarter of the year begin talks with four multinational oil companies on the commencement of production activities in four oil fields.
They are expected to work out modalities for the production of the estimated 890,000 bpd at the four giant fields located in the country's deep offshore area. The negotiators will, however, rely extensively on OPEC's guidelines for crude oil production and increase in output quota by member countries.
The Nigerian government is keen on the early take-off of production activities in the oil fields, following revelations that they have a reserve capacity in excess of 3 bn barrels and the potential to boost national output by about 890,000 bpd when onstream.

The fields, Bonga of Shell Nigeria Exploration and Production Company (SNEPCO), Esso Exploration and Production Company's Erha Field, ABO Fields of Nigeria Agip Exploration (NAE) and Agbami Field belonging to Star Deepwater/Famfa Oil Company, are being prepared to roll-out first oil by 2003.
Specifically, the fields are located in oil prospecting leases (OPL) 212, 209, 316 and 216 and are being developed under a PSC with the government through the NNPC. For instance, SNEPCO's Bonga field on OPL 212 has been confirmed to contain over 1 bn barrels of crude reserve and an estimated output of 250,000 bpd, while Erha of Esso on OPL 209, has production capacity of 140,000 bpd in its reserve.
Agip's ABO field on OPL 316 is believed to contain over 800 mm barrels as reserve with a output of 150,000 to 200,000 bpd. Famfa Agbami field in OPL 216 is also expected to produce 125,000 bpd when on-stream with a proven crude reserve of over 1 bn barrels. Collectively, the four fields will be producing about 890,000 bpd when production commences in 2003.

A Presidency source told officials of these companies have, however, expressed concern over the target due to OPEC's allowable production quota for Nigeria, and the need to produce at maximum level to recoup their investment within a reasonable time frame.
The source added that there is already a production sharing agreement between each of the four oil companies and NNPC, but the Presidency believes that there is a need to discuss with the officials and allay any fear arising from OPEC quota when the fields are into production.
It disclosed that the companies are clamouring for an exemption from OPEC restrictions or that they be top priority over other companies in production allocation since they are expected to operate under a PSC agreement as against the joint venture operations.
Though the private multinationals invested their fund under the PSC without any financial commitment from the government or the NNPC but the corporation has overriding power in joint ventures as it maintains the lion equity share and in the PSC where the blocks are owned by NNPC.
The source hinted that while discussions are on with the PSC operators, the government will also initiate moves to press for a higher production quota from OPEC. It listed increase proven reserve, population and diplomatic manoeuvring as conditions for such request in higher production quota.

But, a senior official with an indigenous oil prospecting company stated that already some local oil producing companies are operating under a PSC arrangement and yet suffered neglect in terms of allocation of production level by the NNPC.
The operator said in most cases, if a company under a PSC arrangement has potential for 15,000 bpd, such a company usually ends up being granted 10,000 barrels, adding that while it is imperative for the government to seek higher production quota from OPEC, the question of preferential treatment for the operators of the giant fields will be to the disadvantage of indigenous firms.
Nigeria occupies the sixth position in OPEC, with a quota of about 2,075,000 bpd early in the year but reduced by 82,000 barrels in March 2001 due to OPEC restrictions. It now produces about 1,993 mm bpd. The reduction is part of OPEC's strategy to stabilise the global oil market.
Meanwhile, Niger Delta Development Commission (NDDC) Chairman, Chief Onyema Ugochukwu has said "the level of oil production will be a major criterion in determining the number of persons it will engage from each state. He, however, stated that the commission has introduced a measure of equality of states and local governments to enable low oil producers also benefit from the policy.
"As you are all probably aware, we have advertised for vacancies in the commission both at the management and senior cadres. The applications are already being processed. We will be fair to all states in the recruitment exercise," he said.

The NDDC chairman who spoke in Owerri, Imo State at the stakeholders' consultative forum recently further noted that to ensure fairness and probity, former members of staff of the defunct Oil Minerals Producing Areas Development Commission (OMPADEC) have been interviewed and screened. "A great majority of them are going to be re-absorbed into the NDDC because most of them are from the Niger Delta region."
He also disclosed that the commission would not take over institutional responsibilities of any tier of government, adding that there are 35 OMPADEC projects in Imo State. They range from water supply schemes, rural electricity, classroom blocks to clinics. Ugochukwu said about 13 of them have been completed while many have not been commissioned to enable them serve the communities. He added that 22 of the projects are yet to be completed and pointed out that "we shall start work on some of these projects."

Source: The Guardian
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