Daukoru Tells Majors To Drill More, Talk Less

In a statement that should resonate with Nigeria-Sao Tome Joint Development Zone bidders who wonder why Noble Energy and ERHC were chosen over Anadarko Petroleum to explore Block 4 of the JDZ, Nigeria's presidential petroleum advisor Dr. Edmund Daukoru told a conference that many large companies are reducing their buidgets for exploration and neglecting duiscoveries of vast pools oil as they produce ready oil from other fields.

"I urge our partners to take every necessary step to reverse this trend and restore exploration to the traditional level of activities judged commensurate with Development in the industry<" Daukoru said. No mention was made of his audience. Noble and ERHC reportedly won Block 4 in the second licensing round because the venture committed to sinking three wells in one year, wghile Andarko only committed to sinking one in three years. Anadarko was said to have a superior financial but inferior program profile. Here is the story from Nigeria's Business Day Website:

Government frowns at delays by oil companies
by Olusola Bello
2005-05-09 09:36:52

The federal government frowned at what it deescribed as "extended commitment" by oil companies in their exploration activities.

It said that in recent times, industry representatives have used every opportunity to alert the government of competing project portfolios in Russia, the Caspian and Middle East in particular, in their effort to obtain more favourable considerations.

According to Edmund Daukoru, even when improved terms are granted, government observes in many cases that operators are unable to meet promised aspirations of government, simply because of over commitment in other parts of the world.

The net result he said is that discovered oil and gas reserves are left unexploited but only carried in their operation books.

This he said may be good for stock market accounting but detrimental to the revenue base of government and supply commitments to the world market.

He urged the exploration and production companies to redress the gradual but steady reduction in the proportion of the companies' budgets devoted to exploration, in spite of the fact that it is acknowledged in the industry that much higher efforts in manpower and technology are required as exploration moves into more difficult and challenging terrains.

"I urge our partners to take every necessary step to reverse this trend and restore exploration to the traditional level of activities judged commensurate with Development in the industry.

He also bemoaned the incompetitive practices in the procurement practices from both the Joint Venture and Production Sharing Contract (PSC) operators which allows selection of services and material providers even for multi billion dollar projects from a small pool and sometimes only two contractors.

He said this can only lead to further increase in cost procurement, which are inimical to the ability of the sector to meet the objectives of both government and industry.