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Over 30 % of Nigeria’s Oil, Gas Reserves Stranded

Small oil and gas discoveries onshore, shallow water and deep offshore Niger Delta may permanently remain untapped if government fails to drive development of common infrastructure in the upstream petroleum industry.

Significant part of Nigeria’s famed crude oil and natural gas reserves may not be produced if conscious efforts are not made to develop a pan-industry upstream pipeline infrastructure that would confer commerciality on small and marginal assets in the industry. A team of industry experts that participated in a policy debate hosted in Lagos agreed that nearly 40 percent of the country’s highly advertised 187 trillion cubic feet of natural gas and 36 billion barrels of crude oil reserves exist as pockets of small reserves that are scattered across the Niger Delta.

With no proximate industry infrastructure to enhance development and production of the small fields, the small pools of oil, condensate and natural gas which have been already confirmed to exist in the fields might not attract commercial investment. With low oil prices, high cost of funding and challenging operating environment, experts say, the commerciality of those fields remain in doubt and unsupportive of additional investments in infrastructure necessary for output evacuation.

Managing Director of Seplat Petroleum, Mr Austin Avuru, whoi decried the situation in a chat with the UNION stated that that the absence of common infrastructure in the industry has not only limited access to stranded assets but also contributed to cost escalation in existing operations.

According to him, stand alone infrastructure development in the industry in the past 50 years has produced uncoordinated fieldspecific units of infrastructure that has left connection gaps between assets operated by different companies. “You are referring to a situation where it doesn’t matter where you find oil and you want to produce 200 barrels per day.

You should be able to hook up to a pipeline and get to some export pipeline. Yes, so in the past 50 years that was left at the discretion of those who were developing their own assets. And you didn’t expect them to develop a national infrastructure network. They did enough infrastructure that was good for their own business.”

“So you find a situation where Shell could have a field there and put a pipeline five times the cost to their nearest infrastructure whereas Chevron is just nearby. That is the kind of thing we saw in the past.

So, to answer your question, even part of the solution to the Niger Delta question is to take away infrastructure for gas and oil as a separate business. Government’s role is merely to facilitate a separate business that guarantees ease of access to all players, big and small.

“Second, the infrastructure must guarantee availability. And guaranteeing availability means that those who run that infrastructure have a plan for dealing with communities and empowering the communities that they don’t become a nuisance.

“We see it in our own pipeline network. In the past three years we haven’t seen any vandalism on our own pipeline network. So it can be done! If that is the business you do and you know that 90 percent availability means 98 percent revenue, you will do what it required to keep the pipelines open to everyone who has need to use it.

“We have passed the stage where infrastructure development in Nigeria is done at the whims and caprices of individual producers. It has now has to be a national infrastructure network for safe, easy and efficient delivery of natural gas and crude oil to their destinations.

“I think that one of the urgent tasks of this government is to take oil and gas infrastructure development as a separate problem that must be solved not just adequately but quickly,” he stressed.” Mr. Avuru who also chairs the board of Platform Petroleum, the marginal field operator that forms one of the partnership tripods of Seplat, noted that the infrastructure gap in the industry is also works against the nation’s power sector programmes, explaining that stranded gas fields are currently not producible due to commerciality issues associated with cost of field development, evacuation channels and pricing regime.

“You hit the nail on the head. By the end of 2018, minus heavy industries the power sector domestic demand for gas will be about three billion standard cubic feet per day (3.0Bcf). Even if all of us can produce the 3.0 Bcf, we need the infrastructure to deliver the last molecule of gas to whoever needs it.

“I know that NNPC keeps talking about gas masterplan here and there. Even if they award all the contracts and build the entire pipeline, we are talking about a network where somebody will put in gas in Eket and somebody is using it in Papalanto. That is the meaning of gas infrastructure.

It is a grid in the UK: properly run, computerised,” he said. Erstwhile Director of Department of Petroleum Resources (DPR), Mr. George Osahon, had while he was the Group General Manager of Nigerian Petroleum Investment Management Services (NAPIMS) charged the operators of the industry to refrain from exclusive use of integrated floating production vessels for development of offshore fields, arguing that such a model would permanently leave marginal assets in the deepwater sub-commercial for development investments. Apart from developing infrastructure that could be easily linked up to form a common pan-industry upstream f

low grid system, he also pointed that adoption of other models of offshore field development would avail the Nigerian players of a variety of offshore industry technology and development options.

Some of the models, according to Mr. Emeka Ene, whose Oidata group, provides technology solutions to industry operations challenges, advised lean asset operators in infrastructure bereft environment could adopt modular and mobile equipments and facilities in integrated models that would address production, processing and evacuation.

He prescribed models that would not require funding outlay for additional investment in permanent infrastructure like modular refineries and gas processing plants for onsite production, processing and conversion.

It is possible, he said, for an operator to produce an offshore marginal field with a floating unit that integrates crude production, processing and refining as well as a gas processing and conversion plant. He said all the operator had to do was ship products like petrol, diesel and other crude oil derivatives from the production site and head to the market for immediate financial returns.

For gas prone fields, he advised operators to also integrate gas compression plants in their field development plans for stripping the gas of essential liquids and subsequent conversion of lean gas to compressed natural gas (CNG) which, according to him could be stored in steel bottles for ease of transportation to the market.

However, Mr. Avuru said modular and mobile option might bridge immediate short term gaps but cannot sustain operations beyond marginal output. He said permanent industry infrastructure remains inevitable for realization of the country’s long term aspirations across the full value chain in the industry.

According to industry data available at DPR, significant portion of the nation’s confirmed oil and gas discoveries in the conventional and deepwater terrains are classified marginal and un-commercial mainly because of absence of basic infrastructure to enhance field development and production.

According to the agency which regulates activity in the industry, robust infrastructure as obtainable in other peer oil producing countries would automatically enhance the commerciality of the stranded assets and solidify running programmes to grow the nation’s oil production capacity to target 4.0 million barrels per day.



– Sopuruchi Onwuka 

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