DPR: Nigeria’s Crude Oil Reserves Decline by 2bn Barrels

Nigeria’s Crude Oil Reserves

Chineme Okafor 

The Department of Petroleum Resources (DPR), Tuesday disclosed that Nigeria’s crude oil reserves now stand at 35 billion barrels, thus dropping by 2billion barrels or about 5.4 per cent, from an initial level of 37 billion barrels.

Director of DPR, Mr. George Osahon, stated this at a session during the ongoing 2014 edition of the Nigerian Oil and Gas (NOG-14) conference in Abuja.

The session, which had the Vice President of Shell Upstream International, Markus Droll; Managing Director of the Nigeria Liquefied Natural Gas (NLNG), Babs Omotowa; and the Group Chief Executive Officer of Oando Plc, Wale Tinubu in attendance, revolved around Nigeria’s growth strategies for her oil and gas industry, with specific emphasis on what the nation needs to do to retain its current position as Africa’s leading crude oil producer.

Osahon in his presentation raised the alarm on declining reserves, stressing that the federal government was relying on operators in the country’s oil and gas sector to swiftly commit to greater Exploration and Production (E&P) activities in the petroleum industry in view of dipping reserves.

He however stated that the drop from 37 billion barrels to 35 billion barrels was occasioned by operators' seeming lack of E&P activities in the sector, adding that the development remained hugely undesirable in the country’s hydrocarbon industry.

But his indication that operators were perhaps shying away from E&P activities in the country’s petroleum sector were however contradicted by Droll who noted that the existence of various forms of operational challenges were rather largely responsible for such drop in the country’s reserves.

Droll then disclosed that Shell was poised to take a Final Investment Decision (FID), on its new deep water project in Nigeria's Bonga South west by the end of 2014, as part of its drive to improve the country’s reserve.

He enumerated some operational challenges that are peculiar to Nigeria to include, crude oil theft, security, funding, production leases and fiscal environment.

According to him, “Nigeria has a lot going for it. It is blessed with great natural resources, it has human resources of high caliber. In the Shell companies in Nigeria these days, our staff are mainly Nigerians, around 95 per cent, including the majority of senior executives and we are proud of having developed such strong Nigerian workforce over the decades.

However, we also know that there are some serious challenges in the country. Let me speak about some of them and how we might be able to resolve them. A difficult growing problem is the issue of oil theft. 2013’s production was badly affected by the direct impact of thieves placing illegal oil tapping connections on crude oil infrastructure,” Droll said.

He further noted that “the next issue is around security. Security is a concern for many of us on a daily basis. Over the years, the industry has learned and adapted well to the threats but it comes at a cost. It is hard to put an accurate figure on this issue but clearly both development and then operating costs are substantially higher than in many other operating environments due to this issue.

Our belief is that for Nigeria to fulfil its oil and gas potential, more funding is required by the industry than we have seen in recent years. We are in a high cost environment and in order to collectively climb towards significantly higher production levels, we do need to find better ways to fund development.”

Droll also talked about challenges in production leases and fiscal environment saying: “Nigeria has been a major oil and gas player for a long time. When we look around the industry, we see that there are many leases that will expire in a few years. Given the length of time required for developing resources and then the time required for recovering costs, the industry often needs 10-15 years or more to make confident investment decisions, especially when we are talking about greenfield type of developments.

Fiscal stability and predictability are absolutely key in ensuring investors of all sizes can commit confidently, government revenues can be forecast reliably and capable service industry is maintained with a steady workload.”

On Shell’s latest deep water project, Droll said: “Let me take the opportunity to mention a few very large investment projects we are currently working. In the deep water, we are pushing forward to have the world-scale Bonga South West project FID ready by the end of 2014.We continue with a strong suite of infill drilling projects on the original Bonga FPSO, so that we can keep this facility generating returns for partners and government alike.”

He said with a design capacity of 225,000 barrels per day, the Bonga South West offshore project, which is been developed in partnership with Total is scheduled to yield first oil by 2020.

Droll stated that the asset was discovered in May 2001 and it is 135 kilometres off the coast of Nigeria in the Niger Delta, at a water depth of 1,300 meters, adding that the Bonga South West is located on Oil Mining Lease (OML) 118 and also includes the Bonga field that has been producing since 2005 at a rate of 225,000 barrels per day.

"It is also reported that development plan currently under study will entail the construction of a Floating Production, Storage and Offloading (FPSO) vessel with a production capacity of 225,000 barrels per day and two phases of drilling of a total of 44 wells (22 producers and 22 water injectors).

"The project will also require the deployment of a subsea production system with 85 kilometers of pipe-in-pipe, 65 kilometers of umbilicals, three water injection lines and four production loops," he said.