Oil sector investors heaved a sigh of relief, Tuesday, following the resumption of production on Oil Mining Lease (OML) 40, otherwise known as Opuama field, after several faulty attempts by the Nigerian Petroleum Development Company (NPDC). This is coming after more than two years of inactivity.
Industry watchers say though this is a marginal leap in the crude oil portfolio of the country, it speaks volumes in terms of corporate governance and is a statement to investors that government truly means to move the industry forward.
The field is now producing 2,500 barrels per day and this is expected to grow to 5,000 barrels by the end of the year.
OML40 was one of the four fields that the Shell Petroleum Development Company (SPDC) divested from years back.
The field is now operated by the NPDC, a subsidiary of the Nigerian National Petroleum Corporation (NNPC), on behalf of a group of private-sector stakeholders including Eland.
International oil companies have been selling off their assets onshore to concentrate on the deepwater just to avoid the incessant attacks and damage to their facilities as well theft of oil from there.
Oil production has been on the decline for some time because of the activities of vandals and crude oil thieves. This reduced the Federal Government expected projection of about 2.5 million barrels per day to between 1.5 and 1.7 million barrels per day in 2012.
Aside from the above, there is the contention between NNPC and the Central Bank of Nigeria (CBN) over NPDC remittances of revenue accruing to the Federation Account.
Stakeholders say the resumed production at OML 40 is coming rather late, compared to other assets which were taken over by other investors about the same time. They say had the resumption been timely, production on the field would have hit between 10,000 and 12,000 barrels by now.
But because the operator was encumbered by bureaucratic processes, the decision-making process became too slow, they add.
Following the successful testing and commissioning of the field facilities, oil production from the Opuama field (“Opuama”) started on February 4, 2014. Production has recommenced through the successful re-commissioning of existing infrastructure and the re-opening of two existing wells.
Gross output from these two wells is expected to stabilise in aggregate at around 2,500 barrels of oil per day. The crude oil produced will be delivered to the Shell Forcados export terminal via its recently re-commissioned flowstation and export pipeline, with a capacity to export up to 30,000 barrels a day.
The field, which has gross recoverable 2P reserves of 54.2 MMbbl, was in production between 1975 and 2006 before SPDC undertook a controlled shutdown of the facilities.
NPDC holds a 55 percent interest in OML 40. The remaining 45 percent interest is owned by Eland’s joint venture company, Elcrest Exploration and Production Nigeria Ltd.
Reacting to this development, Les Blair, CEO of Eland Oil & Gas, said: “The commencement of production on OML 40 has been much anticipated by management and investors alike, and indeed by all stakeholders. It is a testament to the dedication and hard work of all stakeholders in OML 40 and is a hugely significant milestone for Eland.
“We look forward enthusiastically to the prospect of building on this pivotal turning point by materially increasing the daily production through the planned development drilling during 2014.”
Victor Briggs, managing director of NPDC, had disclosed to BusinessDay last week that the first oil was expected to be delivered from OML 40 last week.
“It would deliver between 2,000 and 2,500 barrels per day. This is expected to increase to 5,000 barrels after it would have successfully drilled two wells this year,” he had said.
Production from OML 40, and four other fields namely 30, 26, 42, and 34, is expected to hit 70,000 barrels per day this year.
Already, one of the fields, Oil Mining License (OML) 30, which is the biggest of all the fields, is now producing 50,000 barrels per day, 10,000 barrels above its initial capacity. This was after its production went to zero level owing to some technical issues and community crisis.
Explaining the reasons behind the delay in the production of the fields to BusinessDay, Briggs said that the state of the facilities when his company took over those assets was appalling and that the company had to engage a quick-fix approach to ensure that the assets began to produce.
By: Olusola Bello
