International Oil Companies (IOC) including Shell and Chevron Corp., are shifting their efforts in Nigeria from land-based operations to offshore fields, where the risk of kidnapping, sabotage and crude oil theft is lower.
You would recall that Shell locked its compound in Warri since the oil company closed its operations in March after more than 40 years.
“Due to the increased level of oil theft and disruptions, a number of oil companies have started selling blocks in the troubled areas and moving to deep water offshore blocks”, Rolake Akinkugbe, a London-based head of oil and gas at Ecobank Research, said in an e-mailed response to questions. “The move offshore is being viewed as a longer-term solution to the challenge faced onshore and in shallow waters”.
You would recall that deep-water fields, which began production 10 years ago, now account for more than half of Nigeria’s production. With output suspended at about 40 land-based fields after armed attacks, Nigeria has compensated for the loss by increasing offshore projects, according to data from the petroleum ministry. Bonny light crude, one of the country’s main export grades, rose 0.1% to $109.98 as of 8.45am in London, according to Bloomberg report.
Chevron, Shell, Exxon Mobil Corp, France’s Total SA and Italy’s Eni SpA run joint ventures with the state-owned Nigerian National Petroleum Corporation .
Shell sold 8 oil leases in 3 years; Chevron said it wants to sell 5 fields in shallow waters in the western delta and swamps in the east.
Precious Okolokobo, a spokesman for Shell in Nigeria, said he could not comment on the company’s policy on onshore and offshore oil fields when contacted. Shell is undertaking “a strategic review” of its Nigerian business and may “exit from the interest it holds in some further onshore leases”, the local unit said in a statement on June 21.
Chevron is also reviewing its business plan in Nigeria and adopting new approaches to investment due to the current situation, James Craig, a Houston-based spokesman said on July 24 in an emailed response to questions.
“The emerging situation brings with it some important challenges to our traditional way of doing business and also provides some attractive business opportunities”. He continued “Our commitment to Nigeria remains strong. We have been in Nigeria for over 50 years”.
Total and Eni have also sold interests in some onshore assets they jointly own with Shell.
As the large companies leave Nigeria, their onshore fields are bought mostly by smaller Nigerian companies.
Exxon Mobil, whose operations were limited to the shallow and deep offshore waters of the South-eastern Coast, has recorded the lowest number of output disruptions, with only 3 attacks in the last decade, compared with the 945 recorded by Shell between 2007-2012.
Shell pioneered offshore oil exploration in Nigeria with the discovery of the Bonga field located 120km (75 miles) at sea in 1995. With reserve estimates of about 1 billion barrels, it has capacity for 220,000 barrels daily, producing into a floating production, storage and off-loading vessel moored in the Sea.
Other discoveries followed quickly. These include Chevron’s Agbami field estimated at over a billion barrels. Total’s Amenam and Akpo fields and Exxon Mobil’s Erha and Yoho fields. Other discoveries such as Egina, Bonga North, Bonga Southwest and Aparo, have been added.
Shell and Eni went ahead in 2011, to pay $1.1 billion to acquire a deep water field from Malabu Oil and Gas Limited. The field is estimated to hold reserves of more than 9 billion barrels.