OPERATORS JUMPING E&D SPENDING IN NIGERIAN PROGRAMS

Nigeria's campaign to increase foreign investment in its petroleum industry and boost oil and gas productive capacity continues to gather steam.

Critical to that effort is a continuing push by the government to offer more attractive fiscal and concession terms to private domestic and foreign companies.

Nigeria's petroleum ministry has submitted a new draft petroleum policy for government approval.

The campaign is getting results, if responses by key foreign operators are any indication.

Chevron Corp. cites renewed confidence in Nigerian upstream investment and plans to restore its Nigerian production to its 1979 peak.

And Nigerian National Petroleum Corp. in joint ventures with Shell Petroleum Development Co. of Nigeria Ltd. and Mobil Oil Nigeria Ltd. plans sharply increased E&D spending.

Meantime, the changing investment climate in Nigeria is attracting more outside financing.

Mobil's big Oso condensate development project has received a loan, and International Finance Corp. has offered to provide partial financing to new Nigerian companies for development programs.

PETROLEUM POLICY

A draft petroleum policy submitted for government approval covers all aspects of the petroleum industry, Nigerian Minister of Petroleum Resources Jibril Aminu told OPEC News Agency.

The policy includes standardizing the size of acreage blocks and opens offshore deepwater areas for exploration, Aminu said. It also opens the Anambra, Benue, and Dahomey onshore basins for exploration.

The government is encouraging the opening of Chad basin for exploration by NNPC's Direct Exploration Services Department, Aminu said. Marginal fields are also being studied for development potential.

Aminu told Opecna operators in the country had been consulted prior to forming the draft policy and noted discussions continue with oil companies about creating more fiscal reforms to attract investment.

The campaign is critical to the developing nation's economic health. Oil exports account for more than 90% of Nigeria's foreign exchange earnings and more than 70% of government revenues. The government collected about $3 billion in taxes from crude oil production during the first 9 months of 1991, about $700 million more than projected in the budget (OGJ, Jan. 6, 1992, p. 87).

Nigeria has set goals of reaching 2.5 million b/d of productive capacity in the mid-1990s vs. about 2 million b/d at present and boosting reserves to 20 billion bbl from about 16 billion bbl.

CHEVRON STRATEGY

Chevron plans to return its productive capacity in Nigeria to the previous peak of 406,000 b/d in 1979 from the current 300,000 b/d, Opecna reported.

The company plans to increase spending to $370 million in 1993 from $270 million in 1991 as eight new fields are brought on stream (OGJ, Jan. 6, p. 88).

The Financial Guardian newspaper quoted Chevron Managing Director Don Mahura as saying the decline in world oil prices slashed Chevron crude production in Nigeria to as low as 200,000 b/d in 1987.

Mahura said increased emphasis on exploration and production brought the company's production back to a post-1979 record of 307,000 b/d last October.

He said the company plans to add three drilling rigs to its Nigerian fleet by 1993, It currently has five rigs in Nigeria. Seismic crews are to be increased to four from the current two operating in Nigeria.

NNPC-SHELL

The NNPC-Shell joint venture plans to spend $9 billion on exploration and production the next 5 years as part of an effort to boost its productive capacity to 1.3 million b/d by 1996.

The Ministry of Petroleum Resources recently awarded two deepwater blocks to Shell. Commercial discoveries will be developed under a production sharing contract with NNPC. Phillip Watts, Shell managing director, said during the last 3 years the joint venture has tripled spending to $1.5 billion in 1991.

Opecna quoted a company official as saying the company produced as much as 1 million b/d on a number of occasions in 1991, but average production for the year will be closer to the venture's official quota of about 950,000 b/d.

NNPC-MOBIL

The NNPC-Mobil combine plans to double its oil production to 600,000 b/d by 1994 and add about 530 million bbl to the country's proved reserves.

Aminu said the venture has proposed a gas processing plant in Nigeria and is considering venturing into methanol and methyl tertiary butyl ether production.

Aminu also confirmed reports of a combined 450 million bbl of potential oil reserves estimated for two discoveries off Akwa Ibom state, 1 Yoho and 1 Oman. He further cited recently commissioned Edop field, describing it as Nigeria's biggest field and saying it is expected to produce 165,000 b/d near term, increasing to 250,000 b/d within 3 years (OGJ, Nov. 18, 1991, p. 28). Edop, being developed at a cost of $500 million, is thought to hold 730 million bbl of reserves.

In spite of the progress, Mobil Nigeria Managing Director Alfred Koch cautions Nigeria should look beyond its 4 year plan to increase its reserve base by 25% and focus on the need for steady growth beyond 1995.

He recommended that the government offer special incentives as needed to reflect the fact that most of Nigeria's easily developed reserves have been discovered, and future discoveries are likely to be in geologically complex river basins and deepwater offshore basins. Exploration and development in Nigeria's frontiers calls for huge investments, especially offshore, and advanced technology, Koch said.

Meantime, officials of BP Exploration and NNPC met in mid-December to formalize BP's return to the Nigerian industry after a break of more than 10 years (OGJ, July 29, 1991, p. 32). BP plans to spend about $250 million for exploration in Nigeria.

FINANCING AVAILABLE

The European Investment Bank agreed to provide a loan valued at 55 million European Community units (ECUs) for Mobil's Oso condensate project.

ECUs will be the official currency among members of the European Community when that group adopts a single currency as early as 1997 and no later than Jan. 1, 1999, for countries meeting criteria for economic union.

The loan, payable in 15 years and with 4 percentage points of its interest subsidized by EIB, will be used to build four wellhead platforms and one central offshore complex, a subsea pipeline, and an onshore storage and loading facility.

The Oso project, expected on stream in 1993, will add 100,000 b/d of condensate to Nigeria's production, a volume excluded from its crude production quota set by the Organization of Petroleum Exporting Countries.

IFC has offered to partly fund development activities of new domestic companies being formed in Nigeria under the moves to open the country's oil market. IFC told the Financial Guardian as much as 25% of individual capital requirements would be made available to independents on a participating equity interest basis. As many as 21 new companies have been allocated blocks under oil prospecting licenses (OPLS) by the Nigerian government, IFC noted.

Two of those companies, Consolidated Oil Co. and Summit Oil Co., expect to begin drilling wildcats on their respective blocks within 1 year of receiving OPLS. Consolidated planned to spud its wildcat by yearend 1991 at last report, and Summit will begin drilling early in 1992. Ebi Omotshola, Consolidated chief executive officer, estimated a typical exploration program in Nigeria would call for about $5 million for seismic and other preliminary exploratory work and about $5-7 million to drill a well.