OTC: Nigeria seeks $60 billion in oil, gas investments

Uchenna Izundu
International Editor

HOUSTON, May 2 -- Nigeria expects to see $60 billion of oil and gas investment across a variety of operations through to 2008 and more thereafter, said Fisoye Delano, managing director of the Nigerian Petroleum Development Co. Ltd., on May 2 at the Offshore Technology Conference in Houston.

The country, which is estimated to hold 70% of the remaining reserves to be discovered in the Gulf of Guinea, is eager for investors to help develop its domestic gas infrastructure, Delano stressed at an industry breakfast. Nigeria's gas demand is expected to grow from 1 bcfd in 2006 to over 10 bcfd by 2010 driven by power generation and industrial development.

The government wants investors to develop gas pipeline infrastructure connecting the south of the country to the north and constructing an interconnector between the east and west grid. "We want gas processing plants, at least 3-4, to support growth," Delano said. "These plants will be able to strip NGLs." He said the government has put together an attractive package of incentives to attract investors.

Nigeria plans to meet its zero-gas-flaring target in 2008, Delano added. It presently flares 32% of its gas. Nigeria has established a number of projects to harness gas that otherwise would be flared, such as Nigeria LNG and the West African Gas Pipeline, the latter commissioned Apr.28, Delano told OGJ.

"Nigeria wants to grow its [oil] reserves to 40 billion bbl by 2010 and production capacity to 4.5 million b/d by 2010. We want our gas revenues to match crude oil revenues. The president has stressed that GDP growth is linked to oil," he said. Over 2 million b/d of additional production from offshore concessions in 2006-2011 is planned.

Deepwater exploration is the next major area of growth for Nigeria, which has had over 7 billion bbl of discoveries so far. However, Susan Farrell, senior director of corporate advisory services at PFC Energy, raised questions about whether deepwater exploration and production is on a cycle or has reached its peak. "As new discovery sizes fall and companies develop their portfolios faster than they find new fields, there is a predictable peak to current investment and production growth cycle from 2010-2014," she said.

Farrell said the geological potential of Nigeria is very promising with significant upside, but added that political risk will limit onshore/shallow prospects. "The political issues are the problem," she said. "Nigeria has 500,000 b/d of oil shut in, and we think it will stay offline until the end of the year." According to PFC's analysis, there is a small window of opportunity to bring it back onstream because of the rainy season and the time needed to repair infrastructure and restart operations.

Delano assured delegates that the government is working to engage the Niger Delta communities and share value from the oil and gas developments in their areas. "We want to install the appropriate infrastructure to stimulate economic growth," he said.

The Niger Delta only receives a 13% share of the wealth generated from oil and gas in their region. Militants from the Niger Delta are pressing for 50% of the proceeds while the government has proposed 18%. The key question is whether the parties can agree a compromise and if so, when.

Contact Uchenna Izundu at uchennai@pennwell.com.