Nigerian government and oil firms spent $ 33 bn on nine deepwater fields

The Federal Government and international oil companies have so far spent about $ 33 bn in the development of nine major deepwater discoveries, the Group Managing Director of the Nigerian National Petroleum Corporation, Mr Mohammed Sanusi Barkindo, said in Abuja.
Barkindo, who spoke at the Offshore West Africa Conference and Exhibition which opened in the nation's capital also noted that the absence of terms of operation was delaying the active exploitation of over 10 tcf of gas in the deepwater. The theme of the three-day conference is "Maximizing Deepwater Resources Offshore West Africa -- The Challenges Ahead."

According to him, "to date, about $ 33 bn has been spent in the development of nine major deepwater discoveries including (but not limited to) Agbami, Bonga Main, Erha, Nda, Okwori and Usan. The province now contributes about 40 % of Nigerian crude oil production following the commencement of production from Bonga, Erha, Abho, Agbara fields and the more recent Agbami in July 2008."
He stated that the Akpo fields would come on stream in April 2009 with a further production of about 175,000 bpd, adding that further development is ongoing in the Nigerian deep offshore.

"About $ 12 bn is being invested in the development of Bonga SW, Bonga NW, Usan and Bosi," Barkindo said. He projected that with the completion of these projects, deepwater production capacity would likely reach 1.3 mm bpd.
Listing the challenges facing the deepwater subsector, the NNPC boss said apart from security and funding, there was an urgent need to pass the Local Content Bill passed by the Senate but awaiting a similar rite in the House of Representatives.

Special Adviser to the President on Petroleum, Dr Emmanuel Egbogah, said one of the problems threatening to derail the national objectives of growing proven oil reserves to 40 bn barrels and attainment of daily oil production capacity of 4 mm bpd is the issue of funding. He explained that due to cash call shortfalls from government, the industry had resorted to rather expensive alternative funding approaches in financing some green field projects.
"These alternative funding approaches are short term and have not provided acceptable stable solution to the funding problem and cash call crisis," he noted. "Rather, the cash call shortfalls have steadily risen from a few hundred million to over $ 6 bn."

"The long-term solution," he said, "lies in the conversion of all Joint Ventures to Incorporated Joint Ventures (IJVs) which can obtain loans and/or go the capital market for funding."
According to him, the international oil companies (IOCs) in the existing Joint Venture arrangements had consistently complained that approved budgetary allocations for cash call purposes have often and chronically fallen short of requirements over the years.
"This is claimed to have negatively impacted capital expenditure requirements for increasing production levels from the existing Joint Venture fields as well as on the national targets of attaining daily production and reserves of 4 mm and 40 bn barrels respectively by 2010," Egbogah said.

He stated that each IJV will be a corporate entity to be incorporated under Nigerian laws, and that the incorporation process, including capitalisation and restructuring, will be carried out through negotiations with the respective IOCs during the reform transition period.
"Apart from immediately eliminating problems of cash call constraints, the IJV concept will free up funds, which will be available to the Federal Government to invest in other areas of social and economic development of the country," he said.