Contrary to expectations that International Oil Companies (IOCs) would engage in exploration activities to increase production levels, their focus for now is rather to reactivate their shut -in wells which have been abandoned because of technical problems.
Though encouraged to engage in exploratory activities to make new findings, stakeholders believe that reactivation of shut-in wells would be a quick and easy way to increase production, hence the current incentives the government has given the companies to source for funds for their explorations and productions activities.
According to sources close to the Department of Petroleum Resources (DPR), going back to some of the shut–in wells is the best option to boost the nation’s production level.
Our sources said with that the current incentives, the owners of the fields could drill more wells in those existing fields and boost their production capacity.
They said a lot of the shut-in wells have great potential for boosting the nation’s daily production but that the companies have abandoned them because government has failed to honour its part of the cash call bargain.
Asides from the arrangement on the joint venture fields, the offshore is dominated by the same majors, with ExxonMobil estimated to be the largest spender towards 2019 with around USD$18 billion. The company is expected to focus on fields currently in production, such as Usan-Ukot and Erha.
Total, with its upcoming Egina field is expected to be the second largest operator with around USD$17 billion towards the end of the period. Furthermore, Shell and Chevron are estimated to spend around USD$9-10 billion each, with important projects being Forcados Yokri (redevelopment), Bonga and Bonga-Southwest-Aporo (Shell) and Agbami-Ekoli (Chevron). Eni is expected to focus on its Etan/Zabazaba field, and is estimated to spend around USD$3 billion offshore towards 2019.
The Federal Government reached an outline settlement to resolve a protracted dispute with five international oil companies (IOCs), under which the oil firms will be paid $5 billion as arrears of cash calls, to cover exploration and production costs.
According to Kachikwu, the $5 billion payment will be made in the form of barrels of new crude production over the next five years.
The settlement also addresses $1billion which the western companies say is due to them from the NNPC. The firms are expected to receive a one-off cash payment from the Federal Government to cover this amount.
Both the government and the IOCs agreed in principle to new financing arrangements, starting from 2017 which involve the setting up of an escrow account for each joint venture, from which costs can be recovered and taxes paid to the government.
Olusola Bello
