Firms shun oil blocs in Chad, Anambra basins
By Yakubu Lawal, Asst.Energy Editor
WITH about N40 million ($3.8 million) sunk into two oil wells, both of which drew blanks, multinational companies in the country have turned down the Federal Government's offer that they take on some fresh blocs in the Chad and Anambra basins.
The government had, through the Nigerian National Petroleum Corporation (NNPC), contacted some oil companies to consider the two basins, which will be declared open in the first quarter of next year.
Some of the oil chiefs, especially the joint venture operators, have, however, maintained that investment in the onshore area is not on their priority list. They are rather considering more investments in the deep offshore region of the Niger Delta area.
The joint venture operators are the Shell Petroleum Development Company of Nigeria Limited (SPDC), Mobil Producing Nigeria Unlimited (a subsidiary company of ExxonMobil) in Nigeria, Chevron Nigeria Limited, Nigerian Agip Oil Company (NAOC) and Elf Petroleum Nigeria Limited.
NNPC had drilled about 23 wells in the Chad basin but discovered oil in only two, Wadi 1 and Kinasar 1, that showed wet gas.
Not even SNEPCO's Kolmani-1 and Elf's Kuzari-1 proved the effort of the NNPC right as the venture resulted in dry holes after spending an average of N20 million (about $1.9 million) on each of the wells.
Sources disclosed that the NNPC also wants the oil companies to go into partnership with indigenous oil explorers with a view to involving more Nigerian companies in the upstream activities of the industry.
A senior official in the Department of Petroleum Resources (DPR) disclosed that no foreign company is willing to invest in the onshore field due to several factors, some of which border on community relations and prospects of the field.
According to the DPR source, previous investments in the onshore basins outside the Niger Delta region have not yielded positive results. The heavy investment by the NNPC in the Chad basin for over 23 years, for instance, ended non-commercial discoveries.
Community crises in the Niger Delta area, the shutdown of oil production and threat to workers' lives are a great disincentive for more ambitious investments.
The abundant opportunities in the deep offshore area and the Joint Development Zone between Nigeria and Sao Tome and Principe are already juicy enough for the operators. "It will be difficult for the companies to abandon those potentials and start seeking oil in the hinterland," a source said.
He added: "The technology and the terrain now is deepwater. Some big companies are even considering giving up their onshore concessions for deepwater. So, how do you think such move will see the light of day when everybody is now after world class discoveries in the deepwater?"
The blocs awarded to three oil multinationals in the Gongola and Benue trough did not justify the investment by the companies at that time as all the exploratory wells drilled by them yielded no commercial discovery.
SNEPCO, Chevron Nigeria Limited and Elf Petroleum Nigeria Limited were awarded oil blocs in these basins in early 1993 but all the exploratory activities in the areas ended up in mere adventures.
Although exploratory activities were carried out in the Anambra basin in the '70s, much of the discoveries made then was gas and not crude oil, a situation which makes further serious work there strictly for gas firms.
A source said: "The method used in 1993 by the government was that multinational companies that showed interest in the Gongola or Benue trough were given deep offshore blocs to explore. They all abandoned the blocs when they drilled dry holes."
He added: "Investment is all about adequate returns on investment. You cannot just say I am going to take bloc in Chad because if government asked me to do so, what is the economics?"
According to sources, following the rejection by the oil companies the government has resolved to exclude oil blocs from these onshore basins from the next bidding rounds scheduled for the first quarter of 2005. This will enable it fashion out appropriate strategies for the award of the blocs before the end of next year.
Presidential Adviser on Petroleum and Energy Matters, Dr. Edmund Daukoru, had revealed that about 27 oil blocs would be put on offer under a competitive bidding process early next year and that the exercise would be concentrated in the deepwater region of the Niger Delta.
Daukoru said that the government is poised to open more fields for oil and gas development with a view to increasing the nation's reserve level projected to hit 40 billion barrels by the year 2010 and production level of 4.5 million barrels per day within the same time frame.`