Nigeria needs $ 10 bn to develop deep water oil blocks

Apr 19, 2005 02:00 AM

Developing Nigeria's deep water oil blocks will cost $ 10 bn through 2009, an official at the state-run oil company said.
But rising oil prices will shore up development of the offshore oil fields, Abiye Membere, general manager in charge of production sharing contracts at the Nigerian National Petroleum Corp. (NNPC) said at an industry conference.

Development costs will rise as companies expand projects in the Gulf of Guinea, moving away from already tapped onshore or shallow water oil fields off the coast of the oil-rich Niger Delta, he said. Nigeria is marketing 61 oil blocks, including about a dozen in deep waters. He said Nigeria has set a target of keeping the cost of production from these fields within the range of $ 6.50-$ 10 a barrel of crude oil.
"If the cost is above that, we have to look for ways to reduce them," he said.

Nigeria's entry in to the deep water region began in the late 1980s, when the government awarded deep offshore blocks to companies. But first oil has been held up by technical and political problems, with only two already in production -- the Abo field, operated by ENI unit Nigerian Agip Oil, and the Okwori field operated by Addax.
He blamed the long lead time on "our learning curve. We entered into the deep water recently and we needed to do it right."

Low oil prices below $ 28 a barrel made "the economics most of the blocks bad," at the time, he said. With prices now higher, he said Nigeria was set to get the real value of these blocks.
Other deep water blocks scheduled to commence operation soon include Erha field, operated by ExxonMobil, which is expected to come on stream in March next year, and Agbami, operated by ChevronTexaco, also scheduled to begin production next year.

Shell's Bonga field is slated for a mid-2005 start. Membere said limitation imposed by the country's OPEC quota had also impeded the development of the Nigerian deep water region. To overcome this, he said Nigeria would request for increased production quota from thegroup.
Under the rules governing offshore oil development, oil companies bear development costs, which they can recoup from the sale of crude oil. Costs for onshore oil fields are split between oil companies and the state according to joint venture agreements.

Source: Dow Jones
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