17 January 2017, Sweetcrude, Lagos — Besides the vagueness of discovering the commercial quantity of crude oil, financial experts are of the opinion that oil exploration, discovery and production in the Chad Basin frontier also have serious financial implications for the Nigerian National Petroleum Corporation, NNPC.
Meanwhile, the search for crude oil in the frontier inland basins has started impacting NNPC’s monthly trading financial and operations report.
NNPC’s financial and operation report in November 2016 disclosed that the state oil corporation incurred an additional cost of N1.87 billion over the October figures, pushing the deficit in the review month to N18.72 billion.
The monthly report, released recently, stated that Integrated Data Services Limited, IDSL, NNPC’s subsidiary, which is in charge of hydrocarbon exploration services and provision of seismic data acquisition, has witnessed an increase in its operating costs, following oil search activities in the frontier basins.
The report stated that despite an improved revenue generation profile, upholding its oil finds in the frontier basins contributed to the deficits recorded by the NNPC in the month.
Financial analyst, Mr. Johnson Chukwu in an interview with Sweetcrude Reports said what is critical about a fresh search for oil in the Chad Basin is the viability of such exploration and particularly the cost of drilling the cost of transporting the crude if we get the commercial quantity of crude.
“If you look at the rock formation of Chad Basin which has the same characteristic of country’s where oil has been discovered, there are chances that oil will be found in the Chad Basin but we will not achieve the same level of deposit that we have in the Niger Delta regions.
“The other major constrain will be the cost of building transportation mechanism from the Chad Basin in the northern part of the country to the sea ports. That will be very expensive to export the crude assuming we achieved a commercial quantity of crude deposit.
If oil is discovered in commercial quantity in the Chad Basin, Mr. Chukwu suggested that Nigeria might end up building modular refineries within the same zones to refine the product stressing that “I don’t think we would achieve deposit in single wells that are commercially viable that will support constructing transportation infrastructure from the northern part of the country to the sea ports.”
Other experts have advised that the NNPC should not take the risk by getting involved in the process, rather, private sector operators and International Oil Companies, IOCs should be the ones driving the process that would eventually lead to oil discovery and subsequent exploration activities.
They argued that it would not be economically rational for the nation’s leadership to commit to financing exploratory activities in the North East with the staggering economic headwinds buffeting the nation.
Director, Centre for Petroleum Economics and Energy Law, University of Ibadan, Prof. Adeola Adenikinju, said considering the huge financial obligation of the NNPC, adding the burden of oil exploration in the Chad Basin would be foolery.
He specifically mentioned the inability of the NNPC to manage its upstream assets in the Nigerian Petroleum Development Corporation (NPDC), coupled with its failure to meet up with its cash call obligations currently put at about $6 billion in its various Joint Venture (JV) operations with IOCs.