Nigerian projects progress amid turmoil

Sept. 27, 1999
Amid the continuing furor over the Nigerian government's cancellation of exploration and production licenses, foreign operators are moving forward with projects.

Amid the continuing furor over the Nigerian government's cancellation of exploration and production licenses, foreign operators are moving forward with projects.

Elf Petroleum Nigeria Ltd. spudded the Kuzari-1 wildcat well in the Bauchi-Gombe area of northern Nigeria, where it holds three oil prospecting leases: OPLs 803, 806, and 809.

The well is the second of three slated in the area by foreign operators and is expected to cost $18 million. In April, Shell Nigeria Exploration & Production Co. Ltd. (Snepco) drilled a well in the Kolmani River area, while Chevron Nigeria Ltd. plans a well during January-March 2000.

Snepco found noncommercial quantities of crude oil but a significant amount of natural gas. Elf took over the Agbon-1 drilling rig from Snepco to drill Kuzari-1.

The rig is owned by indigenous company Lonestar Drilling Nigeria Ltd. The intended depth of the latest well was not disclosed, but the Kolmani River well was drilled to 2,900 m.

Meanwhile, the Lagos government and foreign partners in the $2.5 billion aluminum smelter project at Ikot Abasi, Akwa Ibom state, requested Mobil Producing Nigeria Ltd. to bid for gas supply to the plant. The smelter would require a supply of 100 MMcfd of gas to produce at full capacity. A 1991 agreement between the Aluminum Smelter Co. of Nigeria (Alscon), Nigerian Gas Co. (NGC), and Shell provides for the supply of 22 MMcfd of gas.

But the smelter, with a design capacity of 200,000 metric tons/year, was shut down in June 1998 because of inadequate gas supplies and a shortage of cash. The owners plan to build the plant up to full-scale operation.

Following a recent spate of crude oil discoveries, Nigeria's deepwater blocks have become a hot play, but the government's cancellation earlier this year of 16 deepwater licenses awarded by the previous regime has dampened optimism.

A plan by Nigerian National Petroleum Corp. (NNPC) to bid for some of the 44 blocks in the basin has raised speculation that the cancellations could lead to the government shelving its plan to throw open the deepwater blocks to international bidding.

Discoveries in 200-1,500 m of water off Nigeria include Agbami by indigenous operator Famfa Oil, Bonga and Ngoto by Snepco, Anwa and Utok by Elf, Chota by Conoco Inc., and Erhua by Exxon Corp. None of these companies had their licenses revoked.

Meanwhile, the future of Nigeria's oil and gas sector is the subject of frenzied speculation. Some sources say Lagos hopes to secure $80 million for each of the 44 blocks slated for further bidding. More contentiously, NNPC officials are believed to have reached an understanding with an unnamed U.S. oil major to operate any concession NNPC secures in bidding.