25 August 2016, Lagos – As the Federal Government’s drive for oil and gas exploration in the nation’s inland basins gathers momentum, the need for the right policy to encourage private investment has come to the fore.
Last week, President Muhammadu Buhari directed the Nigerian National Petroleum Corporation to commence exploration activities in the Benue Trough, a major geological formation underlying a large part of Nigeria, extending about 1,000km North-East from the Bight of Benin to Lake Chad.
About four weeks ago, the President had directed the corporation to speed up its prospect for oil in the Chad Basin and Kolmani River, following the reported discovery of hydrocarbons by Shell near that area.
The Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, had in May said the Federal Government and the NNPC were committed to exploring for oil and gas in the inland basins especially the Chad Basin and Benue Trough.
According to him, the NNPC through its Frontier Exploration Services and Renewable Energy Division had progressed reasonably with seismic acquisition activities in the Chad Basin frontier area up until insurgency necessitated the suspension of operation there.
Kachikwu noted that the purpose of oil exploration in the Chad Basin is to increase Nigeria’s oil and gas reserves, add value to the hydrocarbon potential of the Nigerian inland basin, provide investment opportunities, boost the economy as well as create millions of new jobs.
But a former NNPC board member, and ex-Project Director for the Uquo gas field development, Alhaji Abdullahi Bukar, stressed the need for a well-thought-out policy that would attract private sector players to invest in the inland basins.
He said, “It is good for the government to come up with policies, but it is also good to make sure that those policies will yield the desired results. It is not to search; it is to find something, and then use it for the benefit of the population.
“People have been looking for oil in the Bida Basin, Sokoto Basin, the Benue Trough, Anambra Basin and the northeast’s Lake Chad Basin. Niger Republic has found oil in the same general geologic trend that extends into our own northeast’s Chad basin, and drilling activities in the Bauchi and Benue troughs have indicated hydrocarbon presence.”
Bukar described as welcome any effort to increase the nation’s oil and gas reserves, adding, considering the increase in the population.
“And the important thing is to put in place policies such that it can be done thoroughly and can also result in commercial projects that will aid the Nigerian economy.”
He said the NNPC drilled a few wells in the Chad Basin in the early 1980’s, while oil majors such as Mobil, Shell, Agip, Gulf Oil, and Total or Elf as it was then called, were focusing on the Niger Delta.
Bukar said, “When Production Sharing Contracts were issued later for people to check both offshore and in the inland basins and develop them, unfortunately people kept the letter but not the spirit of the law. So, they drilled and found oil offshore and then forgot about the inland basins.”
He said they only did the minimum work required to say that they had done something, which was a little bit of 2D seismic and one or two wells.
“In fact, some people never went close to drilling, but they went on to develop the Agbamis, the Bongas, and the Erahs,” he added.
Bukar said the government should put in place the right policies and the right incentives to allow the people who wish to invest to have bankable projects to do it.
“The best thing is to make sure that they are done on a commercial basis right from the beginning, and that incentives are given to people to do the work and to reap the benefits of what they have invested in.”
He said the lack of fiscal terms for inland basin and offshore gas was hampering investment.
He said, “There are quite a number of wells, for example, in Anambra Basin around Enugu, going all the way from around Ihandiagwu, all the way from the Delta, where Orient Petroleum has found something. And way back in the good old days of Sapraf, which later became Elf, they have also found something in Ihandiagwu and areas surrounding Nsukka.”
“If you look at the current Nigerian Oil Mining Lease and Oil Prospecting Licence map, you will see them. The thing is that all these are to be given as PSCs, which is fine. But PSCs do not have terms that will make them work now in the current environment, especially for gas because they are no PSC terms for gas inland or offshore.”
He said the government should give incentives that will attract, first and foremost, Nigerians and others “who think that the country’s plans and programmes are credible and are willing to invest.”
“If I have got an OML or OPL inland that I would like to spend money on, I cannot make a bankable project because I don’t know what the economic incentives and what the fiscal regime in this country will be. So, those are some of the things that need to be set up first,” he said.
The inland basins in the country include the Anambra Basin, the lower, middle, and upper Benue Trough, the south eastern sector of the Chad Basin, the Mid-Niger (Bida) Basin, and the Sokoto Basin.
The Head of Energy Research, Ecobank Capital, Mr. Dolapo Oni, said exploration in the inland basins had not really been the focus of many Nigerian companies because of the risks associated with it, coupled with capital constraint.
On the lack of fiscal terms for PSC gas, he said, “It is a problem, and I have spoken to a few companies they have expressed the same fear because there is no clarity on how government is going to tax gas.”
- ‘Femi Asu, The Punch