Shell Nigeria Exploration and Production Company (SNEPCo) achieved significant savings in the cost of subsea equipment through an initiative which has seen the refurbishment of five Subsea Trees in-country led by Nigerian engineers, thus setting a new record in the federal government’s local content policy in the oil and gas industry.
The Nigerian Oil and Gas Industry Content Development Act of 2010 seeks to domesticate a large chunk of oil and gas industry jobs within Nigeria to build local capacity and capability, curb capital flight and boost the country’s economy.
A Subsea Tree is an arrangement of valves and other components installed at the wellhead to control and monitor crude oil and gas production and injection flow.
SNEPCo embarked on a Tree Refurbishment initiative in 2013 to ensure timely delivery of the equipment at lower cost for the Bonga Phase 2 project, which comprises drilling and hook-up of in-field wells within Bonga.
The Managing Director of SNEPCo, Mr. Bayo Ojulari said in a statement at the weekend that apart from saving costs, his company embarked on the local refurbishment to help local engineers to acquire skills
“Beyond cost consideration, we were also looking to indigenise the know-how so that Nigerian engineers can acquire the necessary skills. We are pleased with this success story. The first Subsea Tree under the programme was installed on schedule in May 2015. This was the first of its kind re-using a Subsea Tree fully stripped down and refurbished locally in Nigeria, with all of its original functionality restored,” said Ojulari.
SNEPCo saves about $6 million for every refurbished Subsea Tree, and this is delivered within 15 months as against 36 months for newly manufactured ones.
SNEPCo’s Engineering Manager in charge of Subsea and Pipelines, Mr. ‘Debo Oladunjoye, who led the refurbishment team described the scope of work to entail “the retrieval of Subsea Trees for disassembly, repair and rebuild following procedures developed by the Original Equipment Manufacturer (OEM) to international standards and codes”.
“The work is done at the OEM/SNEPCo logistics base at Onne in Rivers State with Nigerian engineers and technicians playing key roles. The expenditure on this work in Nigeria aligns with the cost of similar Subsea Tree refurbishment in Europe. We are currently refurbishing three Subsea Trees,” Oladunoye added.
SNEPCo helped to create the first generation of Nigerian deep water professionals through the Bonga project which started production in 2005, as Nigeria’s first deep water oil and gas production project in more than 1,000 metres of water.
To sustain production and keep the Bonga Floating Production Storage Offloading (FPSO) vessel full, additional in-field wells have been delivered as part of the Bonga Phases 2, 3 and Bonga North West projects, all producing through the Bonga FPSO.
SNEPCo operates Bonga field on behalf of the Nigerian National Petroleum Corporation (NNPC) in partnership with Esso Exploration and Production (Deepwater Ltd)–Exxon, Total E&P Nigeria Ltd – Total and Nigerian Agip Exploration Ltd – ENI.
Oil Prices Recover Slightly Amidst Demand Concerns in U.S. and China
Oil Prices Continue Slide as Market Skepticism Grows Over OPEC+ Cuts
Global oil markets witnessed a continued decline on Wednesday as investors assessed the impact of extended OPEC+ cuts against a backdrop of diminishing demand prospects in China.
Brent crude oil, the international benchmark for Nigerian crude oil, declined by 63 cents to $76.57 a barrel while U.S. WTI crude oil lost 58 cents to $71.74 a barrel.
Last week, the Organization of the Petroleum Exporting Countries and its allies, collectively known as OPEC+, agreed to maintain voluntary output cuts of approximately 2.2 million barrels per day through the first quarter of 2024.
Despite this effort to tighten supply, market sentiment remains unresponsive.
“The decision to further reduce output from January failed to stimulate the market, and the recent, seemingly coordinated, assurances from Saudi Arabia and Russia to extend the constraints beyond 1Q 2024 or even deepen the cuts if needed have also fallen to deaf ears,” noted PVM analyst Tamas Varga.
Adding to the unease, Saudi Arabia’s decision to cut its official selling price (OSP) for flagship Arab Light to Asia in January for the first time in seven months raises concerns about the struggling demand for oil.
Amid the market turmoil, concerns over China’s economic health cast a shadow, potentially limiting fuel demand in the world’s second-largest oil consumer.
Moody’s recent decision to lower China’s A1 rating outlook from stable to negative further contributes to the apprehension.
Analysts will closely watch China’s preliminary trade data, including crude oil import figures, set to be released on Thursday.
The outcome will provide insights into the trajectory of China’s refinery runs, with expectations leaning towards a decline in November.
Russian President Vladimir Putin’s diplomatic visit to the United Arab Emirates and Saudi Arabia has added an extra layer of complexity to the oil market dynamics.
Discussions centered around the cooperation between Russia, the UAE, and OPEC+ in major oil and gas projects, highlighting the intricate geopolitical factors influencing oil prices.
U.S. Crude Production Hits Another Record, Posing Challenges for OPEC
U.S. crude oil production reached a new record in September, surging by 224,000 barrels per day to 13.24 million barrels per day.
The U.S. Energy Information Administration reported a consecutive monthly increase, adding 342,000 barrels per day over the previous three months, marking an annualized growth rate of 11%.
The surge in domestic production has led to a buildup of crude inventories and a softening of prices, challenging OPEC⁺ efforts to stabilize the market.
Despite a decrease in the number of active drilling rigs over the past year, U.S. production continues to rise.
This growth is attributed to enhanced drilling efficiency, with producers focusing on promising sites and drilling longer horizontal well sections to maximize contact with oil-bearing rock.
While OPEC⁺ production cuts have stabilized prices at relatively high levels, U.S. producers are benefiting from this stability.
The current strategy seems to embrace non-OPEC non-shale (NONS) producers, similar to how North Sea producers did in the 1980s.
Saudi Arabia, along with its OPEC⁺ partners, is resuming its role as a swing producer, balancing the market by adjusting its output.
Despite OPEC’s inability to formally collaborate with U.S. shale producers due to antitrust laws, efforts are made to include other NONS producers like Brazil in the coordination system.
This outreach aligns with the historical pattern of embracing rival producers to maintain control over a significant share of global production.
In contrast, U.S. gas production hit a seasonal record high in September, reaching 3,126 billion cubic feet.
However, unlike crude, there are signs that gas production growth is slowing due to very low prices and the absence of a swing producer.
Gas production increased by only 1.8% in September 2023 compared to the same month the previous year.
While the gas market is in the process of rebalancing, excess inventories may persist, keeping prices low.
The impact of a strengthening El Niño in the central and eastern Pacific Ocean could further influence temperatures and reduce nationwide heating demand, impacting gas prices in the coming months.
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