N’East hydrocarbon search: Controversies trail FG’s $340m investment

By Adewale Sanyaolu

The death of 48 people, including five lecturers of University of Maiduguri (UNIMAID), about 15 soldiers, 11 members of the Civilian Joint Task Force and consultants from the Nigerian National Petroleum Corporation (NNPC), Integrated Data Services Limited (IDSL), a subsidiary of NNPC on Frontier Exploration Services/Surface Geochemistry Sampling team, penultimate Thursday on their way to Barno Yasu in the Magumeri Local Government Area of Borno State, has raised fresh dust among oil and gas stakeholders.

These stakeholders are divided in the argument on the continuous search for oil in the Chad Basin. While some are of the view that exploration should continue, others posit that the country’s resources cannot continue to be wasted on what they described as an “uneconomical expedition”.

The resumption of oil search in the Chad Basin is sequel to the directive by President Muhammadu Buhari, to the NNPC to continue its oil search in the Chad Basin and other parts of the North East.

The President’s directive came after the Federal Government had burnt a whopping N27 billion and $340 million in the three decades of search for oil in the region without commensurate result.

However, those who are conversant with investments in the sector say the NNPC’s plan to resume exploratory activities in the Chad Basin may not be a viable option for an economy in recession, at least, in the short and medium term.

Past efforts on Chad Basin

Studies have indicated that the Nigerian end of the Chad Basin has little potential for commercial oil deposits and would require huge expenditure in addition to security challenges in the zone. In an era of low crude oil prices, international oil companies would be very unwilling to commit resources to drill in the North, particularly as prospects of commercial finds look largely slim.

“While there are about 37 billion barrels of proven oil reserves and about 187 trillion standard cubic feet of gas in the South South of Nigeria, what we want to explore in the North is an unproven reserve of about 2.3 billion barrels of oil reserves and about 14.65 trillion standard cubic feet of natural gas available for four or more countries in the Chad Basin,” the study asserted.

“If you do the cost benefit analysis, you can see that it is not viable in the short and medium term,” said Henry Boise, Petroleum Economics, Management and Policy Researcher at Emerald Institute for Petroleum and Energy Economics, Policy Strategy, University of Port Harcourt.

Boise, however, insisted that exploration is an expensive activity, adding that one can explore an entire field and might not find anything, stressing that oil has been found in the Chad region where the water is deeper but the Nigerian region has shallow waters.

Should NNPC be involved?

Having explored the Chad Basin for some decades without any success in oil discovery, experts have advised that the NNPC should not take the risk of getting involved in the process. The advice has been that private sector operators and International Oil Companies (IOCs) should be the ones driving the process that would eventually lead to oil discovery and subsequent exploration activities.

They argued that it would be economically irrational for the nation’s leadership to commit to financing exploratory activities in the North East with the staggering economic headwinds buffeting the nation.

A retired Geo Scientist from Exxonmobil and former President of the highest body of petroleum explorationists, Nigerian Association of Petroleum Explorationists (NAPE), Mr. Chikwe Edoziem, said the seismic shooting by NNPC is in order but frowned at the involvement of the Corporation in the entire process.

Edoziem said the NNPC should allow private investors with the needed expertise to take the lead and commit their resources to the oil find.

‘‘What I expect the government to do is to encourage entrepreneurs to move in and take the risk of exploration. Once they get to that stage, it should not be government. And such activity must be backed up with good incentives to encourage exploration companies interested in moving into that region,’’ he said.

Director, Centre for Petroleum Economics and Energy Law, University of Ibadan, Prof. Adeola Adenikinju, said considering the huge financial obligation of the NNPC, adding the burden of oil exploration in the Chad Basin would be foolery.

He specifically mentioned the inability of the NNPC to manage its upstream assets in the Nigerian Petroleum Development Corporation (NPDC), coupled with its failure to meet up with its cash call obligations in its various Joint Venture (JV) operations with IOCs.

The petroleum economist explained that committing huge resources for oil search in that region at a time the global oil market is going through difficult times would not be a good investment decision for the country to take.

‘‘I doubt if NNPC has the resources to commit to such cause. Again, this is where the issue of political interference comes in. This is not an issue of politics but business. Directing the NNPC to resume oil search in that region is not good for the corporation. The corporation should run as an independent business en-tity devoid of political interference. They should be able to determine whether to resume oil search or not, and not the government telling them what to do,’’ he warned.

His views were equally supported by the publisher of Africa Oil and Gas Report, a magazine focusing on the petroleum sector, Mr. Toyin Akinosho, who warned against the involvement of NNPC in the resumed search for oil prospects in the Chad Basin.

Akinosho said the IOCs were not interested to get involved in exploration activities in that region because they prefer to concentrate their energy and resources in deep water operations, having gradually moved out of onshore prospects as a result of attendant security challenges.

The publisher who is also a geologist with several years of working experience with Chevron, advised NNPC to allow those that are more experienced in that terrain to develop the assets and then pay returns to government, stressing it would be a more sustainable approach.

The search: To be or not to be

Going down memory lane, Edoziem said the country should suspend further deployment of the nation’s resources to the Chad Basin, explaining that Exxonmobil was one of the early IOCs that moved into the Chad Basin but came out without getting the required result.

He said all the past analysis conducted in that region has proved to be economically unviable till date, questioning if the new expeditors brought in new technology that could have surpassed the technology of old or if they are exploring a new section of the Chad Basin. That, he said, he could not speak on, since he needed to find out what exactly they are doing in that regard.

‘‘But if it is the same thing that has been evaluated before that we are spending our money on, then I don’t think it is a good venture right now. Or maybe the government is trying to prove something or it is a deliberate effort to probably score a political point. That is my own personal technology,’’ he said.

On his part, Adenikinju said what the NNPC should do is to complete the seismic programme to actually determine if there is oil in that region, and having done that, share them among IOCs and other interested investors, who may be willing to take the risk having seen the prospect inherent in the re-gion based on the result of the seismic operation.

He equally advised that the NNPC should quickly complete the seismic operations programme and bring the data for experts at NAPE to subject it to analyses and scrutiny.

Head of Energy Research, Ecobank Transnational Corporation, Mr. Dolapo Oni, said the NNPC has spent quite some time prospecting for oil in that region to no avail and needs to consider deploying the funds to developing reserves in other parts of the country – offshore Lagos, onshore Ondo, Southeast of the Niger Delta – areas where there are less security issues or spend the funds on creating infrastructure to provide alternate routes for oil and gas fields to move their products when facilities are damaged.

But Akinosho insisted that the search should continue, charging government to ensure that it ups its ante in the area of intelligence gathering to forestall a re-occurrence of the recent incident where some personnel were killed in their bid to prospect for oil in the Chad Basin.

‘‘We are not certainly looking for oil in the Chad Basin but gas. Again, asking a geologist if the search should continue will definitely be a yes because we have to continue in that line. There is nothing wrong in keeping on looking. For me, I don’t care which region they are prospecting from but I will never say no. I support whole heartedly the continuous search for hydrocarbon in the Chad Basin.”

Akinosho said it was a good idea for government to make new dis-coveries through exploration activi-ties because exploration is all about knowledge seeking and not necessarily about discovery of oil because it creates a lead to solving other prob-lems.

He explained that in trying to ex-plore for oil in the Chad Basin, gas could be discovered in the process, and such could be used to generate about 100 megawatts of electricity for that region, which, he said, is value addi-tion since that was not the original intention.

He disclosed that there are sev-eral smaller oil and gas companies operating in Kenya, Sudan, Angola and some other parts of the world that have taken on similar projects located in the desert just as the Chad Basin, that are giving good returns to the owners of the assets.

(c) 2017 The Sun Publishing Limited. All Rights Reserved. Provided by SyndiGate Media Inc. (Syndigate.info)., source Middle East & North African Newspapers

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