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Bonga: 19 new oil wells may gulp N1.96tn

By on June 2, 2013

Indications emerged on Friday that Shell Nigeria Exploration and Production Company Limited will spend $12.35bn (about N1.96tn) on the planned drilling of 19 new oil wells as part of the expansion of Bonga deep water oil field.

A deep water oil well project, it was learnt, would cost $150m (N23.7bn), with further appraisal cost put at $500m (N79bn).

Bonga was Nigeria’s first deep water oil discovery in 2005 and has the capacity to produce more than 250,000 barrels of oil a day and 150 million cubic feet of gas a day. At the end of 2012, Bonga had produced about 450 million barrels of oil.

The Commercial Integration and Business Value Manager, Shell Nigeria, Mr. Taaj Shobayo, also confirmed that about $650m (N102.8bn) was required for each deep water exploration and production.

Shobayo, who spoke at a recent training organised for energy journalists by the oil major, described deep water exploration as an expensive and risky endeavour.

He said, “Deep water exploration and production is expensive, complex and risky with long cycle times. Current offshore projects take 10 years to 20 years from licence award to production. A typical well in a deep water cost about $150m (N23.7bn) and you will be spending another $500m (N23.7bn) for further appraisal.”

With 19 oil exploration wells planned for the Bonga deep water oil fields extension, he explained that an average of $12.35bn (N1.96tn) would be expended alone on the drilling of 19 oil wells.

Bonga is located in oil prospecting licence 212 and SNEPCO operates the field on behalf of the Nigerian National Petroleum Corporation under a production sharing contract, in partnership with Esso (20 per cent), Nigeria Agip (12.5 per cent) and Elf Petroleum Nigeria Limited (12.5 per cent).

Bonga also lies 120km southwest of the Niger Delta in a water depth of over 1,000m.

Managing Director, SNEPCO, Mr. Chike Onyejekwe, said Shell recorded tremendous success in its Bonga deep water oil field, saying as at December 2012, it had exported about 450 million barrels of crude oil.

The cost of the Bonga field development, including the cost of the Floating Production Storage Offshore vessel built in 2004, came to $3.6bn (N569bn)

Despite the fact that the drilling of the 19 oil wells will amount to $12.35bn (N1.96tn), the Bonga extension project, according to Shell, may gulp around $33bn (N5.2tn).

Our correspondent gathered that this might include a $21bn (N3.32bn) FPSO proposed for the new Bonga South West, $4bn (632.7bn) Bonga East, $1.9bn (N300bn) Bonga North (Aparo), and $3bn (N474bn) Bonga North East.

In spite of the fact that the Nigerian National Petroleum Corporation had in January 2013 directed International Oil Companies operating in the country to drastically cut over $30bn (N4.7bn) proposed for new projects, Shell said Petroleum Industry Bill, if passed “the way it is” would drive away investment in the Nigerian oil and gas industry and might stall the 19 Bonga oil wells.

The SNEPCO boss and Shobayo called for a PIB that would be investment-friendly.

They also said if the fiscal terms of the PIB were reviewed, about $3bn (N474bn) deep water revenues could be unlocked for the Federal Government.

Corroborating this,  the Commercial Manager, Shell Nigeria Exploration and Production Company Limited, Mr. Stefan Vas de Wael, said the development of deep water assets in the country’s  oil and gas could contribute $3bn (N474bn) to the country’s economy as well as generate about 200,000 jobs annually.

Vas de Wael said the undeveloped deep-water assets could add over 600,000 barrels per day of oil, which would amount to doubling the current deep water liquids from deep water fields in the country.

He said over $5bn (N790bn) would be required annually to develop and produce five million barrels of oil per day.

Vas de Wael said, “If all the deep water assets in Nigeria are developed, they could generate 200,000 plus jobs, $3bn in GDP and 600, 000 barrels oil per day. This is according to McKinsey Multiplier Model.

“Developing 200,000 jobs is equivalent to growing the oil and gas industry by 30 per cent. $3bn GDP will amount to additional 15 per net of projected GDP growth rate.

“The 600,000 barrels per day will amount to doubling current deep water liquids production. Annual spend of $5bn (N790bn) plus to develop and produce five million barrels of oil per day.”