Royal Dutch Shell has again pushed further the calendar for a final investment decision on $12billion Bonga South West/Aparo development in an apparent uncertainty over its business in Nigeria which it says faces various risks and adverse conditions that could have a material adverse effect on its operational performance.
Recall last year that the oil company cited a need to keep costs down as a reason to delay the project in an environment where oil prices after falling to 20-year low, began a marginal recovery.
“Following the decision to delay the Bonga South West/Aparo project, a reframing exercise is under way to make this project economically viable in the current business environment. FID is not expected before 2019,” the company said in its 2017 annual report released today.
Shell did not give a specific reason for this decision but the report dwelt heavily on the risks it faces operating in Nigeria which seems to have worsened with the litigations on OPL 245, a controversial oil block it purchased which is being litigated in … countries
“In our Nigerian operations, we face various risks and adverse conditions. These include: security issues surrounding the safety of our people, host communities and operations; sabotage and theft; our ability to enforce existing contractual rights; litigation; limited infrastructure; potential legislation that could increase our taxes or costs of operations; the effect of lower oil and gas prices on the government budget; and regional instability created by militant activities. Any of these risks or adverse conditions could have a material adverse effect on our earnings, cash flows and financial condition,” the report said.
BusinessDay gathers that the BSWA project has a capacity generate some $50bn in revenue to government, rake in $3.5 bn in taxes, create some 3,500 direct jobs and 15,000 indirect jobs during construction.
Bonga gas reserves is estimated to be about 150-200 mmscf/d which if developed and made available to the domestic market, will boost electricity generation from gas fired plants.
The BSWA project includes the construction of a new floating production, storage and offloading (FPSO) facility with an expected peak production of 225 thousand barrels of oil per day. The BSWA field straddles Oil Mining Leases (OML) 118, OML132 and OML140.
SNEPCo is the Unit Operator of the BSWA Unitisation project pursuant to a Pre-Unit Agreement between the Nigerian National Petroleum Corporation, Esso Exploration & Production Nigeria (Deepwater) Ltd., Total E&P Nigeria Ltd., Nigerian Agip Exploration Ltd., Texaco Nigeria Outer Shelf Ltd., Star Ultra Deep Petroleum Ltd., Sasol Exploration and Production Nigeria Ltd. and Oil and Gas Nigeria Ltd.
The Bonga project itself, which began producing oil and gas in 2005, is Nigeria’s first deep-water development in water depths over 1,000 metres. In 2014, SNEPCo also started oil production at the Bonga North West deep-water development, with the oil transported by a new undersea pipeline to the existing Bonga FPSO and export facility.
In November 2014, SNEPCo announced plans to drill eight more wells in the Bonga field in the third phase of the Bonga Main development but these plans cannot progress until a FID is taken.
