Nigeria Aims At $6 Per Barrel Deep Offshore Production Cost

Nigeria has begun a planning initiative that it hopes will reduce the cost of extracting a barrel of oil from its rich deepwater reserves from $10 to $6 by a new system of oil platforms and pipelines, the country's Business Day Website reports.

The paper said that currently it takes about 120 years to move from exploration to actual production of crude, and that new developments in floating offshore oil production platforms (FPSOs) can cut the time to a minimum of two three years, the Internet-based publication reported.

Success of the initiative could have far-reaching impact for ERHC investors, who after awards in the deepwater Nigeria-Sao Tome and Principe Joint Development Zone may control at least 560 million bbls of crude in five of the blocks on offer in the current licensing round.

The article also reinforces Nigeria's continuing interest in recouping oil royalties more quickly than it does at present. Noble Energy, ERHC Energy's partner in a $41 million bid for rights in Block 4, has promised to drill three wells in the course of one year, while competing bidder Anadarko has reportedly offered to sink one well in three years, and Noble's capacity to carry out that promise is one reason many believe its joint bid for Block 4 may win.

Here is the Business Day article:

Terminals and pipeline coming
2005-04-11
09:18:32

Nigeria’s quest to assume leadership in deep offshore exploration production and infrastructural development within the African region from year 2009 and beyond will be further boosted with its planned policy shift from dotting its deep offshore with floating, Production offloading and storage vessels (FPSO) to the construction of select terminals in the deep offshore linked to various producing fields via a vast network of pipelines.
The new thinking in government circles is informed by the need to produce cheaply, crude oil from the deep offshore, whose current unit cost is estimated at $10 per barrel.

Government believes that with the new proposal, which is said to be in existence in the deep offshore fields of Mexico, the high cost of deepwater development will be cut drastically to between $1.5 to $2.5 billion, to be put in operation from hull construction, to integration of topsides and the tiebacks, mooring and umbilical among others.

In addition, the long gestation period between exploration and development, which is put at 10 years for deepwater development in Nigeria, will also enable first oil to be realized much earlier as construction of FPSO and its ancillary facilities take between two to three years at the minimum.

Edmund Ayoola, Group Executive Director, Exploration and Production Nigerian National petroleum Corporation (NNPC) told a recent NAPE technical meeting that the aim of the proposed government policy was to arrive at a lower cost of $6 per barrel for deep offshore crude in the future.

Speaking through the General Manager, Production Sharing Contract (PSC) of the National Petroleum Investment management Services (NAPIMS), Mr. Kunle Olasebikan, the NNPC GED explained that although the deep offshore development strategies used in Nigeria has revolved round the use of FPSOs tied-down top subsea wells as the major development concepts, but other strategies through which production can be brought on is being focused upon in the last few months.

Part of the new focus is to have independent infrastructure investors who will provide pipeline network in the deep offshore for a fee and therefore lessen the burden of development.

Another option being canvassed is to have offshore terminals, just as it obtains in the Gulf of Mexico, therefore limit the proliferation of FPSOs and also reduce the cost of deepwater production.