ABUJA – The Nigerian oil and gas industry looks set for a major shift as Shell Petroleum Development Company (SPDC) plans to take the Final Investment Decision (FID) on the large-scale Bonga Southwest deepwater project by December this year.

The disclosure was made by the company, amid the uncertainty surrounding the industry on account of the non-passage of the Petroleum Industry Bill (PIB), which has stalled investments in the petroleum industry over the past six years.

The Federal Government also said it was negotiating about 450 million euros for the various gas pipelines to be constructed across the country, just as it claimed it lost over $11billion worth of oil revenue in 2013 due to incessant attacks on major pipelines and crude oil theft in the Niger Delta.

Speaking at the ongoing Nigerian Oil and Gas conference (NOG 2014) in Abuja on Tuesday, Markus Droll, vice president, Shell global upstream, said Bonga Southwest is one of the large investment portfolios the company is currently working on. “In the deepwater, we are pushing forward to have the world-class Bonga Southwest project FID ready by the end of 2014.”

He said the company would continue with a strong suit of infill drilling projects on the original Floating Production Storage Offshore (FPSO) to keep the facility full, generating returns for partners and government alike.

According to Droll, the company, along with its operator partner, ExxonMobil, is investing substantially in the further development of the ‘important Erha field’.

“On the onshore, we are embarking on a number of large gas projects, so that we can keep Nigeria Liquefied Natural Gas (NLNG) company supplied with enough gas, and make sure Nigeria can maintain its strategic importance in the global LNG market.

“Together with Nigerian National Petroleum Corporation (NNPC) and other stakeholders in NLNG, we are investigating how we can further expand the NLNG supply and processing capacity.

“And I should mention that NLNG is a world-class operation, recognised as such, well beyond the borders of Nigeria. We are also working extremely on how to make the Assa North/Ohaji South project work,” he said.

Also speaking, Diezani Alison-Madueke, minister of petroleum resources, said that through the assistance of the ministry of finance, a loan of about 450 million euros for some gas projects in the country is being negotiated to expand the gas processing and transportation facilities.

She said aside from security challenges hurting the industry, limited institutional capacity, poor funding of investments, high technical costs, obsolete laws, outdated fiscal regimes and infrastructural constraints, with particular respect to gas commercialisation, have also taken a toll on it.

In terms of institutional incapacity, the petroleum laws in the country were mainly designed for oil production, with limited coverage for gas. On the other hand, gas is less fundable compared to oil, as it requires complex commercial and technical regulations to ensure its commercialisation, she added.

In terms of funding, she explained that the competing fiscal needs by other sectors of the economy have meant that the joint ventures have suffered for a long time, and that the government is aware of this, despite the fact that it yields much higher benefits than the production sharing contract. “And as oil prices have risen, so have costs escalated, most of our oil producing facilities are actually in our onshore and shallow waters, and they are aging and would need to be refurbished or replaced; additional funding will be required to enable these facilities meet current fire safety standards.”

Two days ago, Shell said that it had halted crude oil exports at the Forcados terminal because of a leak in a supply pipeline. With a capacity of 400,000 barrels per day. Forcados is one of Nigeria’s key export terminals. Last month, the company shut the Nembe Creek trunkline which carries about 150,000 barrels per day to the Bonny export terminal, because of a leak.

Oil companies including Shell, Chevron, Total and ExxonMobil, which pump about 90% of Nigeria’s crude, have repeatedly called on the government to do more to stop the unprecedented level of theft from the pipelines.

Nigeria has been facing fuel scarcity for the past two months. The minister, however, blamed the current fuel scarcity on sabotage, diversion, hoarding, panic buying and rumours of imminent pump price increase. She also outlined other challenges confronting the sector which include sabotage and the non-passage of the ‘famous’ petroleum industry bill (PIB).

Madueke also called for reforms in the oil and gas sector stating that “now that reforms in power sector are underway, the next focus should be reforms in the downstream sub-sector”. She said that the continued regulation of the downstream sector with some positives, has more negative impact on the economy, especially as the subsidy does not actually benefit the poor who are the real targets but rather the rich.

Nigeria derives over 75% of its revenue and more than 90 percent of its foreign exchange earnings from the oil industry.

In his remark, Andrew Yakubu, group managing director, NNPC stated that in 2013, the country lost 300,000 barrels of crude oil per day (bpd). By implication, computing this figure at an average price of $100 per barrel, it means a loss of $10,950,000,000 in value was made last year.

“In 2013, Nigeria suffered severe attacks on its critical export pipeline system, leading to the loss and or deferment of about 300,000 bpd. This deferred production or loss is equivalent to the total production of Equatorial Guinea and larger than the entire production of Ghana, Congo Brazzaville, Cameroun and Gabon,” he said.

Yakubu stated that the Federal Government has taken steps to curb the menace. “The government has set aside N15billion for the purchase of security equipment to checkmate the scourge of oil theft in the Niger Delta, approved by the National Economic Council (NEC).

This, he said includes utilisation of new technology and radar surveillance to boost maritime security and increase sea patrol by the Nigerian Navy and inauguration of an Inter-Agency Maritime Operations Coordination Committee (IMOCC) to provide synergy among agencies operating in the industry.

This is to ensure safety and security in the Nigerian maritime industry and provision of air surveillance of Nigeria’s pipelines with modern aircraft, manned by Nigerian pilots, trained under the Petroleum Technology Development Fund (PTDF) programme.

Nigeria’s crude oil production is dependent on key arteries which include Trans Forcados, Trans Niger, Nembe Creek line and Temidaba-Brass pipelines. These lines connect to three export terminals, Forcados, Bonny and Brass terminals.

Shell Nigeria Exploration and Production Company (SNEPCo) began producing oil and gas from Bonga field, Nigeria’s first deep water oil discovery, which is located in Oil Mining Lease (OML) 118, in 2005.

The Bonga South West deposit was discovered in May 2001, 135 kilometers off the coast of Nigeria in the Niger Delta, at a water depth of 1,300 meters. It is located on OML 118, which also includes the Bonga field that has been producing since 2005 at a rate of 225,000 bpd.

The Bonga South West development plan will entail the construction of an FPSO vessel with a production capacity of 225,000 bpd. First oil from the project is scheduled for 2020.

– BUSINESS DAY