NNPC and New Oil Discoveries

To the admiration of industry players and analysts, the Nigerian National Petroleum Company Limited has remained consistent in its search for new oil deposits to achieve its target of raising the nation’s oil reserve to 40 billion barrels by 2025 as well as the boost the country’s revenue, writes Peter Uzoho

Africa’s largest national oil company, the Nigerian National Petroleum Company Limited (NNPC) has been on the news in the last couple of days for the right reasons.

The company has sustained its aggressive search for oil to boost the nation’s oil reserve with the drilling in the northeast and other basins going on unabated.

President Muhammadu Buhari has remained supportive of the national oil company in its quest to deliver on its mandate of growing the nation’s oil reserve through aggressive exploration activities across the basins of the country.

THISDAY reported that the president was expected to officially kick off the drilling of crude oil in the northeast on Tuesday (tomorrow) where he would conduct the ground-breaking ceremony of the Kolmani Oil Prospecting Lease (OPLs) 809 and 810 at the Kolmani field site located in Bauchi and Gombe States.

Buhari had conducted his first supervision of the drilling exercise in October 2019 during which the Nigerian National Petroleum Company Limited (NNPC), then a corporation, announced the encountering of oil in “commercial quantities at the Kolmani River Well II.

This time, he is expected to carry out the drilling supervision with the support of the Minister of State for Petroleum, Chief Timipre Sylva and the Group Chief Executive Officer of NNPC, Mallam Mele Kyari, among other government and NNPC officials.

However, the oilfields in Bauchi and Gombe States will be developed by Sterling Global Oil, New Nigeria Development Commission (NNDC) and the NNPC Limited, an official of NNPC had told THISDAY anonymously.

“The ceremony will be held on Tuesday, November 22, and will be attended by Mr. President himself together with most of his cabinet members including the Minister of State for Petroleum, Timipre Sylva,” the NNPC official had said.

Excited by the scheduled supervision of the oil drilling exercise by the president, some players in the Nigerian oil and gas industry and policy analysts have lauded the president, saying that would have positive impact on the current search for more oil deposits by the NNPC.

Commenting on the development, some of the analysts and industry players, who spoke to THISDAY, yesterday, on condition of anonymity, said the move by the president would signal to both local and international investors that Nigeria means business in its efforts to get value from its God-given resources.

They said the president’s billed supervision of the drilling campaign tomorrow as he did in 2019, was indicative of his walking the talk having signed the landmark Petroleum Industry Act (PIA) into law in 2021, which provided for the Frontier Exploration Fund to enable NNPC aggressively go in search of more oil to boost the nation’s oil and gas reserves.

One of the analysts, whose company consults for national and international oil companies said as long as the supervision would lead to real oil discoveries and not political discoveries, and subsequent growth of reserves and production, it would usher in bright prospects for the industry and the nation.

He said, “I read it in the paper like other people that the president will be supervising the drilling. You know it’s not the first time he has done that. He did it in 2019. So, it’s a welcome development. At least, it’s a sign that Buhari is serious about growing our reserves.

“That move is indicative that he is actually walking the talk. Remember he has signed the PIA, which captured the Frontier Exploration Fund, that has empowered NNPC to go all out in search of more oil and gas to grow our reserves.

“So, with this move by the president, investors in Nigeria and abroad will now know that we are serious about adding value to what we have. But I hope the discoveries will be real and not political because that has been one of the issues around that oil exploration in the north.”

Another source told THISDAY that Buhari’s supervision of the drilling would motivate NNPC and its partners to be more serious in the search for oil in the region, saying, “they know that the president is actively watching what they are doing and wants to see results”.

However, the Nigerian Association of Petroleum Explorationists (NAPE) had in 2020 commended the NNPC and Kyari for executing oil exploration in the Benue Trough and Chad Basin despite the Coronavirus pandemic.

The then President of NAPE, Mr. Alex Tarka, who relayed the association’s view in his remark during a virtual workshop for oil and gas journalists at the time, had said the exploration being carried out by the NNPC was attracting the attention of the International Oil Companies (IOCs), who the corporation was considering partnership with.

He had specifically noted that the NNPC was pressing ahead with the oil drilling in the Benue Trough in order to add more to the lives of Nigerians, stressing that the government needed not to wait for investors before embarking on oil exploration in the land.

He had added that the government’s doggedness and the enabling environment would cause the IOCs to join in the search for oil.

Tarka commended Kyari, for leading the corporation on more oil search despite the challenges in the global oil environment, adding that the gesture showed that the current NNPC was desirous of matching the nation along its 40 billion barrels crude oil reserves target.

The Buhari-led government had disclosed in February 2020 that about one billion barrels of crude oil had been discovered in the Northeastern part of Nigeria.

Sylva, who made the disclosure at the 2020 Nigeria International Petroleum Summit (NIPS) in Abuja,

had said, “The figure we are getting, the jury is not totally out yet, but from the evaluation results we are getting, the reserve that has been discovered in the northeast is about a billion barrels.

“Those are the kind of figures we are seeing and we are beginning to understand the geological structure of the region.”

The minister had noted that a lot of oil was yet to be found in the country, adding that there was a need for more exploration in the country as more oil would be discovered.

Both the NNPC and the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) have been passionate about growing Nigeria’s oil and gas reserve and have been taking a number of measures and actions towards achieving that.

Last year, the Nigerian Petroleum Development Company (NPDC) had issued a request for expressions of interest (EoI) on the development of the two licences in Nigeria’s North-east.

The integrated development of OPLs 809 and 810 in the Gongola Basin, in the Upper Benue trough extends about 1,000 km from the Bight of Benin to Lake Chad.

The NPDC had in October 2019 announced that it had discovered “huge commercial quantities” of oil and gas in the Kolmani River, adding that the blocks were more than 700 km from the coast, posing challenges to export options.

It also proposed an onsite midstream refinery and power plant, saying that this would allow it to use these resources for local needs as well as “create an industrial hub” to provide economic benefits and employment.At some point in the development of the facilities, in the midstream, the plan would involve a 150 MW power plant and a 50,000 barrel- per day condensate refinery.

The NPDC, as it was then called, had drilled the Kolmani River 2 well in 2019 and the Kolmani River 3 in early 2021.Bauchi State Governor, Senator Bala Mohammed, had also recently said the oil and gas exploration at Kolmani River in Alkaleri Local Government Area of the state by the NNPC would ‘reverse the narrative of poverty and underdevelopment’ in the state.

Having understood the risk posed by the depletion of Nigeria’s oil reserves and the need to rise to the occasion, NNPC under Kyari has moved into aggressive exploration activity to ensure that more oil finds are made.

Between 2019 and 2020, the corporation has recorded successes in its bid to find new oil deposits and add to the nation’s reserves. In October, 2019, the NNPC announced that it had discovered oil in the North-eastern part of the country after several years of oil search in that area.

Announcing the positive development in a statement at the time, NNPC had said it discovered hydrocarbon deposits in the Kolmani River II Well on the Upper Benue Trough/Gongola Basin, explaining that “preliminary reports indicated that the hydrocarbon discovery consisted of gas, condensate and light sweet oil of American Petroleum Institute (API) gravity, “ranging from 38 to 41 found in stacked siliciclastic cretaceous reservoirs of Yolde, Bima Sandstone and Pre-Bima formations.”

It had explained that NNPC acquired 435.54 kilometres-square (km2) of 3D seismic data over Kolmani prospect in the upper Benue trough in the Gongola basin to evaluate Shell Nigeria Exploration and Production Company (SNEPCo) Kolmani River 1 Well discovery of 33 billion standard feet (BCF) of gas and explore deeper levels. The corporation also said it had also acquired additional 1183km2 of 3D seismic data over highly prospective areas of the Gongola basin with a view to evaluating the full hydrocarbon potential of the basin.

“NNPC has deployed world class cutting-edge technologies including surface geochemistry, ground gravity/magnetic, stress field detection, full tensor gradiometry aerial surveys to de-risk exploration in the frontier basins.

“The NNPC plans to drill additional wells for full evaluation of the hydrocarbon volume in the Gongola basin,” the company had stated.

Buhari, had during the spud-in ceremony of Kolmani River II at the timre, restated the commitment of the federal government to the exploration for oil and gas in the frontier basins in the entire length and breadth of the country.

NNPC said the basins included the Benue trough, Chad basin, Sokoto and Bida basins, adding that the president stated that attention would also be given to the Dahomey and Anambra basins, which have already witnessed oil and gas discoveries.

It said the discovery of oil and gas in commercial quantity in the Gongola basin would attract foreign investment, generate employment for people to earn income and increase government revenues.

NNPC Limited has over the years expended monies on frontier exploration, but the spending has now been statutorily ingrained in the new Petroleum Industry Act (PIA) 2021.

The new piece of legislation has now raised funding for frontier exploration to 30 per cent, which implies that the NNPC Limited would have more funds to develop oil fields around the country.

According to the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), Nigeria currently has crude oil reserves of about 37 billion barrels.Kolmani fields could hold as much as one billion barrels crude oil reserve, which could significantly raise Nigeria’s oil reserve.

The oil discovery in the north is coming at a time crude oil production has dropped to around one million barrels per day in the country, as a result of oil theft and vandalism, thereby hobbling the ability of the country to earn foreign exchange.

For many years, Nigeria, the largest oil producer in Africa, has not been able to add to the reserve, resulting in steady depletion with attendant economic risks for the country.

In one of its interventions, NAPE had in 2019 raised the alarm that the continuous depletion of the nation’s oil reserve portended great danger for the country. It specifically warned that the reduction in hydrocarbon exploration and steady depletion of the oil reserves would drive Nigeria into risks of long-term disruption to oil and gas supplies, power generation, collapse of industries and significant loss of revenue.

It had also declared that with Nigeria being a mono-economy that is largely dependent on the proceeds of crude oil for its sustenance, such inactivity in the exploration business would have dire consequences for the country.

The President of NAPE at the time, Mr. Ajibola Oyebamiji, stated that the nation’s oil and gas business was being hampered by several factors, including long procurement and contracting cycles, insecurity, oil theft and illegal refining, saying, the later even poses bigger threat to the sector than the fall in oil price.

“Nigeria is at risk of long-term disruption to oil and gas supplies, power generation, a collapse of industries and significant loss of revenue due to continue reduction in hydrocarbon exploration activities. Reduction in hydrocarbon exploration and exploitation has dire consequences for a country like Nigeria with a mono-economy hinged on crude oil.

“Procurement and contracting cycles in the Nigerian oil and gas industry is about 36 months, making it the longest and most inefficient in the world. The long contracting cycle results in high level of uncertainties in costing and planning, thereby creating a sluggish business climate.

“Insecurity, oil theft and illegal refining are bigger threats to the oil and gas industry in Nigeria than the declining price of oil. The current low oil price is rather a reflection of an over-supply of oil in the world market. In Nigeria, the low oil price regime has led to dwindling national wealth, more burdens on foreign reserves, pressure on infrastructure and social services, inability to meet commitments to institutional lenders, and the list of untoward outcomes is long,” he said.

But with the pace of exploration activity being championed by the NNPC, it will not be long when the aspired 40 billion barrels crude reserve and the three million daily production mark will be reached.

NNPC and New Oil Discoveries  – THISDAYLIVE