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NNPC Sustains Oil Search in Chad Basin

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  • NNPC Sustains Oil Search in Chad Basin

Nigeria’s pursuit of an enlarged crude oil reserve is being sustained by the Nigerian National Petroleum Corporation, which recently indicated that it would resume its oil search in the Chad Basin following signals by the military that it was now safe to get back to the venture, writes Chineme Okafor, who also examines the possible impact on the economy.

Past reports on Nigeria’s oil exploration in the frontier basins had indicated that between 1977 and 1996, the Nigerian National Petroleum Corporation (NNPC) commenced exploration activities in the Chad Basin during which 23 wells were drilled and only two wells – Wadi-1 and Kinasar-1, recorded non-commercial gas discoveries before exploration was suspended in the Chad Basin in 2000 for lack of commercial finds.

Similarly on the Gongola Basin, the federal government had between 1993 and 2000 awarded blocks in the basin to Chevron, Total and Shell Nigeria Exploration and Production Company (SNEPCo), and they reportedly acquired 3,153km of 2D seismic data, drilled one well each and made a non-commercial gas discovery in one of the wells – Kolmani River-1, before they suspended operations and abandoned the blocks.

Nevertheless, the government did not give up on the venture, and rather continued in 2010 when the NNPC this time reportedly acquired 3D Seismic data for processing and interpretation of oil exploration in the Chad Basin.

At that time, the former Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke, reportedly insisted on an aggressive oil exploration in the Chad Basin even though she acknowledged there were inherent challenges to the venture in the basin.

She stated then at a meeting in Lagos that the fact that neighbouring countries such as Chad, and Niger, with similar topography, sharing the basin with Nigeria, could find and mine oil from there, meant that Nigeria could also explore the basin to augment her oil reserves.

“Though, it is too early to be categorical, there is a possibility that we may find oil in commercial quantity in the Chad Basin because of the discoveries of commercial hydrocarbon deposits in neighboring countries of Chad, Niger and Sudan which have similar structural settings with the Chad Basin. Therefore it is prudent to aggressively explore the Chad Basin for possible hydrocarbon deposits.

“Already the NNPC’s New Frontier Exploration Services Division which is leading the charge for the crude oil find in the entire Inland Basins is acquiring 3,550sq km of 3-D seismic data for processing and interpretation in addition to the already acquired 6000km of 2-D data that is currently being reprocessed,” Alison-Madueke stated then.

While the NNPC had used 2-D Data to drill 23 wells out of which two, Wadi-1 and Kinasar, were opened with non-commercial gas finding, Alison-Madueke however noted that the acquisition of the 3-D Seismic Data by NNPC could reinforce the country’s oil search and discovery in the Chad Basin.

Search Renewed

In 2016, the government of President Muhammadu Buhari, which took over from former President Goodluck Jonathan, renewed its desire to grow Nigeria’s oil reserves and said it would go back to exploration in the Chad Basin, and Benue Trough. It indicated these frontier basins could still be successfully prospected for oil.

As part of the renewed move, the NNPC subsequently announced it was stepping up measures to ensure a successful search for crude oil in the Chad Basin and other parts of the inland sedimentary basin.

It also explained that Buhari had asked it to investigate deeper into the prospectivity of some hitherto neglected finds in some areas in the North Eastern part of Nigeria with a view to taking them up for further development.

“You know that very close home, we have exploration activities on the frontier basin in the Chad and some areas close to the Kolmani River where Shell had made some indicative discovery of hydrocarbons and Mr. President has directed me to go into that area to reprove and further explore the magnitude and prospectivity of those finds.

“We are taking steps to re-strategise and get into those regions. We will re-invigorate the frontier exploration and see how they collaborate with NNDC (Northern Nigeria Development Commission) that is holding oil block 809, where some of the finds have been made and also Department for Petroleum Resources (DPR), for the other blocks that have not been assigned,’’ the Group Managing Director of NNPC, Dr. Maikanti Baru, told the Governor of Bauchi State, Mohammed Abubakar, when he visited his office in Abuja in 2016.

Baru made it clear to the governor that the renewed search was for real, and based on this, the NNPC subsequently mandated the Integrated Data Services Limited (IDSL), its subsidiary, which undertakes seismic data procession and interpretation, as well as reservoir management services in Nigeria’s oil and gas industry, to lead on the renewed search for oil.

IDSL was reportedly given the job to acquire over 500 square kilometres of 3D seismic data acquisition in the first instance from the basins.

Costly Search

While on the venture, the corporation in November 2016 however reported that Nigeria’s renewed search for crude oil in the frontier inland basins had impacted on its monthly trading financials. It reported in one of its monthly financial report for November 2016, that the IDSL had witnessed an increase in its operating costs following its oil search activities in the frontier basins.

The NNPC report stated then that despite an improved revenue generation profile which the corporation had for that period, upholding its oil finds in the frontier basins had contributed to the deficits it recorded in November 2016.

“The corporation has been operating in challenging situations which limits its aspiration to profitability. This 16th publication of NNPC monthly financial and operations report indicates a trading deficit of N18.72 billion. This represents an increase of N1.87 billion in trading deficit as against October, 2016.

“The marginal increase in the trading deficit was due to an upsurge in IDSL operating costs attributed to the ongoing mobilisation activities in both Benue Trough seismic data project located in Bauchi and Party 05 in Elele, Rivers state, despite an improved revenue generation,” said the report.

Hands Still on the Plough

Despite the cost implication of the venture on its November 2016 financials as well as the holdback occasioned by security challenges in the North-east, the NNPC still kept faith with its search for oil in the Chad Basin.

On a recent meeting in Borno State, Baru reiterated this when he announced that the corporation will resume oil exploration activities in the Chad Basin, on the heels of improved security situation in the North-east. He said the decision of the country to increase its oil production to 3 million barrels per day (mbpd) by 2020 as well as grow its reserves, were chiefly responsible for the continued search.
According to him, the NNPC was waiting on the military to give it the go-ahead to resume the venture within the next six weeks.

“We have been discussing with military authorities in the area and they have assured us of improved security. Once they give us the green light, we would resume operations in the area within six weeks,” Baru stated.

Notwithstanding the corporation’s commitment to a commercial oil finds in the Chad Basin, which ordinarily should be good for the economy of Nigeria and its energy security going by the disruptions in oil production in the Niger Delta region by militants, experts in the industry still feel the venture would rather come too expensive and illogical to embark on at a time they said countries were finding and producing oil from new oil fields at slightly cheap costs.

According to the random views expressed by these experts, the corporation was still slightly involved in a ‘political search’ than it should be a ‘commercial/technical search’ for oil in the Chad Basin. They also noted that the low prices of oil would play a role in the decisions of investors on the venture if the government ever invites them to the basin.

Additionally, they opined that Niger which has made some discoveries in the basin, currently has an estimated reserve of about one billion barrels, and a daily production of 20,000 barrels, indicating that it may not be strategically viable in the long-term for Nigeria to spend so much in search of oil in the basin.

They also pointed out that while investors or oil companies are currently involved in finding and investing in new oil and gas fields in regions like the Niger Delta and other highly prospective regions of the world because of their relatively low investment costs, finding oil in the Chad Basin could be much more expensive than it would be in comparison with other oil-bearing regions, and thus less attractive to them.

This, they added, was equally in consideration of the security threats posed by the rebellious Boko Haram sect, which has for more than seven years disrupted the security of lives and investments in the North-east.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

Economy

Nigeria’s Q3 Foreign Trade Skyrockets: Crude Oil Revenue Surges by 83.23% to N8.54tn

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Nigeria’s foreign trade expanded by 53.16% year-on-year to N18.80 trillion in the third quarter (Q3) of 2023.

The surge was primarily propelled by an impressive 83.23% spike in crude oil revenue to N8.54 trillion, a substantial increase from N4.66 trillion recorded in the same quarter of the previous year.

This was reported by the National Bureau of Statistics (NBS) in its ‘Foreign Trade in Goods Statistics (Q3 2023)’ that highlighted the nation’s trade balance and economic outlook.

The report noted that total exports rose by 60.78% to N10.35 trillion.

Mr. Gbenga Komolafe, CEO of the Nigerian Upstream Petroleum Regulatory Commission, emphasized the importance of viability in retaining exploration leases.

He said, “Based on PIA (Petroleum Industry Act), the commission is focused on delivering value for the nation so only firms that are technically and financially viable will keep their leases.”

The report outlined the dominance of crude oil in exports, constituting 82.50% of total exports, while non-crude oil products contributed N677.57 billion or 6.55% of total exports. The positive trade balance stood at N1.89 trillion.

The top five export destinations for Nigeria included Spain, India, The Netherlands, Indonesia, and France, collectively accounting for 45.98% of total export value.

On the import side, China, Belgium, India, Malta, and the United States were the major sources, comprising 57.18% of total imports, valued at N4.84 trillion.

While these promising trade figures indicate a robust economic performance, challenges in the oil sector persist, with the country’s crude oil production below the 2023 target.

The government’s commitment to increasing production aims to boost revenue and fund strategic national projects, as highlighted by Minister of State for Petroleum Resources (Oil), Heineken Lokpobiri.

The surge in exports, possibly linked to the recent naira devaluation, underscores the intricate relationship between economic policies and trade dynamics, shaping Nigeria’s economic trajectory.

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Economy

Federal Government to Earn Over $500 Million in INTELS Deal

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The Nigerian Ports Authority (NPA) has unveiled an agreement with INTELS Nigeria Limited that is set to bring substantial financial gains to the federal government.

The comprehensive deal, negotiated over weeks, not only resolves a contentious pilotage contract but also promises to bolster Nigeria’s coffers by over $500 million.

The accord encompasses a multifaceted approach to financial benefits, including an interest waiver of $193,317,556 and a significant reduction in the interest rate on outstanding debt.

The debt, originally at a six-month London Interbank Offer Rate (LIBOR) + 6.5%, has been revised to a more favorable six months Secured Overnight Financing Rate (SOFR) + 3%.

Such financial restructuring is anticipated to save the government a staggering $326.8 million over the next 15 years.

NPA, in a detailed breakdown, elucidated that the agreement further involves spreading the debt repayment over 15 years, with the initial two years being interest-free.

Additionally, there is a commendable reduction in the commission percentage, dropping from 28% to 24.5%, a move that aligns with the government’s commitment to optimizing financial resources.

The Minister of Marine and Blue Economy, Adegboyega Oyetola, received accolades for his tireless efforts in steering the negotiations to a successful conclusion. NPA expressed gratitude for his commitment to putting Nigeria first, emphasizing the critical role played by the minister in resolving the long-standing INTELS dispute.

Former Vice President Atiku Abubakar, however, denied benefiting from the reinstatement of INTELS contracts.

He clarified that his divestment from the company remains unchanged, emphasizing that he cannot be a beneficiary of the restored pilotage monitoring business.

NPA’s move to ensure a resolution with INTELS is not only seen as a financial triumph but also as a strategic step towards fostering economic stability.

The agreement is poised to have a positive ripple effect on revenue generation and underscores the government’s commitment to diplomatic and economically viable solutions.

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Economy

Nigeria’s Refinery Output Plummets by 92% in a Decade

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Nigeria’s local refineries recorded a 92% decline in output over the past decade, according to the Statistical Review of the World Energy 2023 report.

The data unveils a drastic drop in refining capacity, plummeting from 92,000 barrels per day (bpd) in 2012 to a mere 6,000 bpd in 2022.

This disconcerting revelation is echoed in the Organisation of the Petroleum Exporting Countries’ (OPEC) Annual Statistical Bulletin 2023, which underscores an 81% reduction in Nigeria’s crude oil refining capacity, falling from 33,000 bpd in 2018 to 6,000 bpd in 2022.

Despite owning four government-owned refineries, located in Port Harcourt, Warri, and Kaduna, with a collective capacity of around 4.45 million bpd, Nigeria continues to heavily rely on importing refined petroleum products.

This dependency raises questions about the nation’s resilience and self-sufficiency in the energy sector.

Minister of State for Petroleum, Heineken Lokpobiri, had previously announced plans for the Port Harcourt refinery to commence operations by the end of the current year, with the Warri and Kaduna refineries expected to follow suit in early 2024.

This revelation comes amid rising concerns over Nigeria’s continued reliance on importing refined petroleum products, even with substantial investments in refinery infrastructure.

The decline in local refining exacerbates the challenge, leading to soaring petrol prices and a strain on the nation’s economic landscape.

Industry experts stress the urgency of revitalizing local refineries, emphasizing that dependence on imports is neither sustainable nor conducive to the country’s economic well-being.

As Nigeria grapples with the complexities of its energy dynamics, the impending revival of local refineries stands out as a crucial solution to navigate these challenging times.

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