Opportunities in Nigeria’s brown and marginal fields could spur a boom in production of hydrocarbon resources in the West African petroleum play, according to analysts that will soon gather to offer technology option for small reserves in the region. According the experts who will be speaking at the ‘2015 Africa – Small & Marginal Oil Fields Development Conference’ in London this August, the right technology and tolerance for risk in exploitation of small reserves overlooked by major multinational and independent producers could make West Africa the next “North Sea,” possibly offsetting the balance of the world’s production hub. According to a director at Atlantis Offshore, an offshore technology company focused on well testing, production and drilling, Keith Millheim, the small offshore oilfields of West Africa, if exploited properly, could become the next big economical play even as oil prices hover around $60 a barrel.
He said all it takes is one adventurous company to get the ball rolling, adding that entrepreneurs created the small companies that grew the North Sea. On making West Africa’s marginal field plays economical, Millheim said the region’s small offshore oilfields, could be the next “North Sea scenario” if played correctly. Over the years, major oil companies have exploited the large oilfields of West Africa as they saw fit. The host countries never required that investments be made in internal technology centers or in research and development activities, Millheim said. Furthermore, the continent is welcoming of international investors, as the majority of its countries have done little to invest in the technology needed to extract their own hydrocarbons.
“Nigeria has some of the largest resources and a large population, but they have never really invested in the technology that is driving 80 percent or more of their economy,” he explained, lamenting that “that’s horrific.” As a result, West Africa remains ripe for investors who are willing to exploit smaller fields. “From the typical types of reservoirs encountered offshore to their size and how prolific they are, it’s really a dream,” he said, adding that “there is possibly more oil in the small fields in West Africa than in the reserves in the big fields. How do we change our thinking to make them work?”
He pointed out that many fields in Nigeria and the region are capable of producing 8,000 to 20,000 barrels of oil a day, saying that such assets could be growth drivers for firms that evolve the right production economics. “Unlike the North Sea, which comes with environmental challenges of rough weather and sea ice, the coast of West Africa is a more ideal place to work – more ideal than the Gulf of Mexico, which battles hurricanes and other destructive currents,” Millheim said. Also speaking on the issue, CEO of Energy & Corporate Africa, Mr. Sunny Oputa, told secondary sources that many oil multinationals operating in Africa, including Royal Dutch Shell plc and Chevron Corporation, have abandoned many oilfields considered small or marginal in Africa in search of larger ones because, he explained, the threshold for many major operators is roughly 200 to 300 million barrels of recoverable oil.
Mr. Oputa said the small pools of reserves overlooked by the deep pocket oil majors are still good for small, independent and indigenous companies, pointing out that some wells could produce for 10 to 15 years, enough production life to break even and make money. On the key challenges that face production of lean assets in the conventional and deep offshore terrains, Millheim explained that investors intrigued by Africa’s small, offshore fields are often wary of the cost and availability of innovative technology that can make exploiting small fields commercial, and the commerciality of producing small fields in deep water. However, he proffered, unconventional types of technology can be successfully applied to developing small, conventional deepwater oilfields, adding that deepwater locations should instead provide the advantage of distance from the disruptions associated with insurgency and militancy.
“Deepwater fields are far away enough to avoid problems of groups seizing facilities,” he added. “Whether they are indigenous companies or small companies that feel strong enough to play in West Africa, that’s where we will get our major activity from,” Millheim said, adding that “There are service companies and providers that can do it all.” In emphasising technical innovation make a small play commercial in West Africa, Millheim said “the key will be using existing technology in unconventional ways.” Just as horizontal drilling had been used for decades before its combination with hydraulic fracturing made it a powerhouse technology, he explained, the same type of application must take place in Africa for lucrative discoveries to be brought on production.
One way to help pave the road to a boom is to lower the cost of operations and infrastructure, Oputa contributed. An as example, he suggested riser technology that is connected directly to small production vessels called Floating Production Units (FPU) rather than relying on costly FPSO vessels. For reservoirs with geological challenges, hiring an adept reservoir engineer and implementing an effective reservoir management plan can be a good solution, Oputa said. “Innovation, innovation, innovation,” he added. “The oil industry will tell you that we are innovative, but that’s not necessarily so for the majors. New technology is often challenged. But at the end of the day it’s all about the profits. And there are profits to be made.” Bothe Oputa and Millheim agreed that players in the continent should toe the same track used decades ago by operators to overcome limitations in the North Sea.
The slew of development and production that take place in the North Sea, they pointed out, created a new oil supply hub far from the Middle East. Entrepreneurs such as the U.S.-owned Hamilton Brothers learned how to make small fields in the North Sea economical in the mid-1970s, specifically the Argyle Field off the coast of Scotland that brought Great Britain its first oil. The company’s game-changing technology was the first Floating Production Storage and Offloading (FPSO) vessel deployed for oil production. It changed the offshore industry forever. Small and midsized companies came into the North Sea with a new set of tools, such as FPSOs, to make small fields commercially viable.
Their key ingredients were their willingness to take risks, innovative technology and investors willing to back their ideas, Millheim said. With oil saturating the market again, they said, there is still room for surprise in the oil marketplace if the right set of risk bearers would repeat the North Sea experiment in West Africa. Countries including Norway and the United Kingdom opened their doors to major operators and required them to invest in the countries’ internal research entities and to train their people – thus creating a path to a self-sustaining industry. Just as entrepreneurs launched the discoveries in the North Sea as well as the shale boom in the United States, they also are likely to open the door for developing West Africa’s small fields, Millheim said, pointing out that “dynamite comes in small packages.”