Will Shell’s Divestment of Assets Brighten Future of Nigeria’s Deepwater Projects?
With Shell Nigeria Exploration and Production Company (SNEPCo)·s increasing divestment of onshore assets, Ejiofor Alike writes that the company should focus on development of new deepwater acreages to regain its leadership position in oͿshore assets and b
Shell had pioneered deepwater exploration and development in Nigeria, when its deepwater arm, Shell Nigeria Exploration and Production Company (SNEPCo) launched its 225,000 barrels per day capacity Bonga )loating Production Storage 2oading ()PS2) vessel in November 2005.
The development of the Bonga deepwater oilÀeld had increased Nigeria·s oil production by 10 per cent at the time and stimulated the growth of relevant support industry.
The development cost to Àrst oil for Bonga was $3.6 billion.
Located in Oil Mining Lease (OML) 118, formerly Oil Prospecting Lease (OPL) 212, the 60 sTuare Nilometre Àeld is situated in water depths of more than 1,000 metres.
The Bonga concession was awarded in 1993 during the Àrst round of bidding for Nigeria·s deepwater frontier acreage.
It is operated by SNEPCo (55 per cent) on behalf of the Nigeria National Petroleum Corporation (NNPC) under a Production Sharing Contract (PSC).
In OPL 212, SNEPCo has a Joint Operating Agreement (JOA) with Esso (20 per cent), NAE Nigerian Agip Exploration Ltd (12.5 per cent). and Elf Petroleum Nigeria Limited (12.5 per cent).
Production facilities in the project had comprised one of the world·s largest )PSO vessels and deepwater subsea infrastructure.
The Àeld·s initial 16 subsea oil producing and water injection wells were connected to the two million barrel storage capacity FPSO by production Áowlines, risers and control umbilicals.
Being the Àrst deepwater development in Nigeria, Bonga had scored Àrsts in many fronts.
The construction of Bonga FPSO was the Àrst time inconel clad Steel Catenary 5isers was used on an FPSO anywhere in the world.
It was also in Bonga tht the Àrst, largest and most technologically advanced polyester moored deepwater buoy was built in Nigeria.
Shell had also achieved many other technological feats with Bonga.
While Samsung Heavy Industries had constructed the 300,000 tonnes FPSO hull in South Korea, AMEC built and integrated the 22,000 tonnes oil processing topsides facilities.
The FPSO vessel·s capacity has since been upgraded in recent years, allowing SNEPCo to expand the Àeld with further drilling of wells in Bonga Phases 2 and 3, and through a subsea tie-back that unlocked the nearby Bonga North West Àeld, expected at peak production to contribute 40,000 barrels of oil equivalent per day (boe/d) to the Bonga development.
Bonga Phase 3 is an expansion of the Bonga Main development, with peak production expected to be some 50,000 barrels of oil equivalent.
The Nigerian National Petroleum Corporation (NNPC) and Shell had also recently signed an agreement with partners in the OML 118 licence, to unlock over $10 billion in investments.
Shell Lags Behind in Deepwater Projects
Despite pioneering the development of deepwater projects in Nigeria, Shell did not consolidate its leadership position and has since been overtaken by other IOCs.
Apart from the development and expansion of Bonga, the oil giant has not launched any other new deepwater project since Bonga came on stream in 2005.
While ExxonMobil had developed Erha in 2006, Chevron had developed Agbami in 2008.
To its credit, Total had also developed Akpo in 2009 and Egina in 2018.
The many Àrsts recorded by Total and its
contractor, Samsung Heavy Industries, in the development of Egina have since dwarfed the records set by Shell in Bonga.
Apart from being the largest FPSO in Nigeria, the Egina FPSO is the largest FPSO built anywhere in the world by the Total Group.
Chevron and ExxonMobil had also in 2012 announced the production of Àrst oil from their joint deepwater, 8san oͿshore development project.
Chevron controls 30 per cent stake in the project, while Total E&P Nigeria Limited is the operator on behalf of the NNPC with 20 per cent stakeholding.
While Esso E&P Nigeria (OͿshore East) Limited controls 30 per cent, while Nexen Petroleum Nigeria Limited has 20 per cent stake.
String of Divestments of Onshore Assets
While SNEPCo did not embark on ag- gressive exploration and development of oͿshore assets after its record-breaking achievements in Bonga in 2005, its sister company, Shell Petroleum Development Company (SPDC) had in 2010 opened the Áoodgates of assets sale by the international oil companies (IOCs) when it announced the transfer of its 30 per cent interest in Oil Mining Leases (OMLs) 4, 38 and 41 to Seplat Petroleum Development Company.
Total with 10 per cent and Eni with Àve per cent subsequently sold their stakes in the three leases to Seplat, thus raising the operator·s equity to 45 per cent, while NNPC retained 55 per cent, which it later transferred to its producing arm, the Nigerian Petroleum Development Company (NPDC).
The gale of divestments of onshore assets continued in 2011 when Neconde Energy paid $585 million to Shell, Total and Eni to acquire their 45 per cent stake in OML 42. Shoreline Energy 5esources paid $850 million to Shell and its partners for their 45 per cent stake in OML 30; Eland Oil paid $154 million for Shell, Total and Eni·s 45 per cent stake in OML 40; ND Western paid $600 million for the gas-rich OML 34; while First Hydrocarbon Nigeria, partly owned by Afren paid $98 million to acquire Shell·s 30 per cent interest in OML 26.
Also First E & P paid $300 million to Shell and partners for 45 per cent stake in OML 71 and 72. Under the divestment by Shell, Total and Agip, Erotron Consortium paid $1.2 billion for 45 per cent stake in OML 18; Pan Ocean paid $900 million for OML 24; while Creststar Consortium paid initial deposit of $100 million of the $500 million bid price for OML 25 before the NNPC came forward to exercise its right of Àrst refusal, an action that was challenged in the court by the Canadian Àrm-backed consortium.
The Aiteo-led consortium paid $2.562 billion to Shell, Total and Agip for OML 29 and the Nembe Creek Trunkline.
Chevron, which has 40 per cent stake in the joint venture with the NNPC, was not left out in the string of divestments of onshore and shallow water assets by the IOCs as it also sold its 40 per cent stake in OML 83 and 85 to First E & P for $68 million.
The company also sold its 40 per cent stake in OMLs 52, 53 and 55 to Seplat Petroleum; Belemaoil and Amni Petroleum.
However, the bid value for OMLs 52 and 55 was not made public but the entire transaction was said to be worth about $900 million.
Seplat paid $259.4 million for OML 53 and an additional $132 million to acquire a 22.5 per cent stake in OML 55 from Belemaoil while Amni acquired OML 52.
Since then, the IOCs, particularly Shell has announced a string of other divestments of onshore assets, a development that has been misinterpreted as part of its plan to pull out from Nigeria.
Shell, Total and Agip had also in early this year sold stake in OML 17 to Tony Elumelu·s TNOG for $533 million
Increasing Nigeria’s Crude Oil Output from Deep O;shore Projects
With the IOC·s divestment of onshore assets, the companies should focus on deepwater projects, which are far more secured from militant attacks and oil thieves than onshore and shallow water assets.
The Petroleum Industry Bill (PIB) has removed the uncertainty in the operating environment and enthrone clearer terms for operations in the deep water.
Having handed over the assets more prone to attacks to indigenous players who are better positioned to engage the restive host communities, the oil majors should invest heavily in exploration and production of oil in the more proliÀc deepwater to boost Nigeria·s production.
With their proliÀc nature, oͿshore projects will help Nigeria·s quest to attain daily production level of four million barrels and also meet the country·s targeted 40 billion barrels of oil reserves.
To this end, the Àrst female Managing Director of SNEPCo, Mrs. Elohor Aiboni should focus on the exploration and development of oͿshore assets to regain the company·s leadership position in the deep oͿshore acreages and increase Nigeria·s oil production.
Elohor was the Àrst female to lead the Shell exploration company in the more than six decades of Shell·s operations in Nigeria.
She succeeded Mr. Bayo Ojulari, who retired on July 31 after Àve years as SNEPCO MD, having served the Shell group for more than 30 years.
Shortly before her recent appointment, the company had reiterated its plan to divest from its onshore and shallow waters operations to concentrate on deep oͿshore business.
Elohor, who is on a familiar terrain, was until her new appointment, the Bonga Asset Manager responsible for overseeing end-toend production delivery for Nigeria·s pioneer deepwater FPSO vessel, Bonga, which had produced over 900 million barrels of oil since the beginning of its operations in 2005.
Prior to her role as Bonga Asset Manager, Elohor had led production delivery for shallow oͿshore as Asset Manager for Sea Eagle FPSO in Nigeria·s Niger Delta.
While the previous SNEPCo MDs - Chima Ibeneche, Chike Onyejekwe, Tony Attah and Ojulari had played their part successfully in the development, production and expansion of the Bonga oilÀeld, Elohor should focus on new deepwater projects to regain the company·s glory in pioneering oͿshore technology so as to also help Nigeria attain her set targets in the oil and gas industry.
“We take pride in our intention of being one of the most diverse and inclusive organisations in the world, and focus on further improving inclusion and representation in critical areas, including gender,µ Shell·s Senior 9ice President for Nigeria, Marno de Jong, was quoted as saying, on Elohor·s appointment.
Elohor was at a time the Business Adviser to the Executive 9ice President for Shell Sub-Saharan Africa, and had also managed third-party interface across several Shell assets in Nigeria and Kazakhstan.