Renew deepwater lease, IOCs tell FG

Shell 302 April 2014, Lagos – International oil companies, IOCs operating in Nigeria have called on the Federal Government to intervene in the extension of the period within which deepwater acreage lease is due for renewal.

The Vice-President, Nigeria-Gabon Shell Upstream International, Mr. Markus Droll, who spoke on behalf of the oil majors at the just concluded Nigeria Oil and Gas conference, Abuja, said government’s intervention is needed as lease renewal would engender growth in the industry.

According to Droll, “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 assets, the industry often needs 10-15 years or more to make confident investment decisions, especially when we are talking about Greenfield type of developments.”

Droll also explained that IOCs such as Shell, Chevron, Mobil, Total and others pay their dues on deepwater acreage lease and as such should be encouraged by the Federal Government.

He further said, “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.”

Droll also listed insecurity, funding, crude oil theft, production leases and fiscal environment as some of the operational challenges facing Nigeria.

According to him, “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 fulfill 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.”

Speaking on BongaSouth West, Shell’s current deepwater project, Droll said the final investment decision, FID, would be taken by the end this year.

“In the deepwater, 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.

He explained that the Bonga South West project situated 135 kilometres off the coast of Nigeria in the Niger Delta region, with a capacity of 225,000 barrels per day is expected to start production in 2020.

According to him, Bonga South West project is located in Oil Mining Lease, OML 118, and also includes the Bonga field that has been producing since 2005.

“It is 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 44 wells (22 producers and 22 water injectors),” he said.

– Vanguard

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