NNPC’s prickly ‘political’ crude oil drilling, By Yemi Adebowale

Ten days back, the Nigerian National Petroleum Company Limited (NNPCL) lavishly celebrated the commencement of exploratory drilling of Ebenyi-A well in Obi, Nasarawa State, with the assurance that the effort would contribute to its aspiration to grow Nigeria’s crude oil reserves from 37 billion barrels to 50 billion barrels. President Muhammadu Buhari, speaking at the “spudding” of the well, the first in the Middle Benue Trough, stated that the move was in line with the ongoing campaigns for the exploration of crude oil and gas in the nation’s frontier basins.

The manner the Ebenyi-A well was celebrated, one would think the said crude oil discovery would, within some months, develop to commercial production. This is not certain. Just like the other explorations in Nigeria’s so-called frontier basins, Ebenyi-A well may not get to commercial production level. There are no proven crude oil reserves in this area, yet, NNPC has been spending millions of scarce US Dollars on the Ebenyi-A well. I have very strong fears that there may be no crude oil production news from Nasarawa State many more years after the “spudding” in Obi. I even read some publications with screaming headline, “Nasarawa State joins oil producing states.” This is not true.

The Ebenyi-A well is just the latest in the list of “political” oil drilling by the NNPCL, gulping huge public funds. It is part of the desperate effort to find commercial oil and gas outside the Niger Delta basin. It all started in the Chad basin when the then Direct Exploratory Services (DES), later renamed Frontier Exploratory Services (FES) of the NNPC embarked on massive exploration drillings that lasted some 14 years, starting from 1986 and ending around 2000. During that period, 23 exploratory wells were drilled within Borno State, largely in the Chad Basin Sedimentary Rocks. None of the wells moved anywhere near commercial crude oil production. Notwithstanding, I can safely confirm that the NNPCL has commenced mobilisation for a return to the Chad basin for exploration.

This same NNPCL that has not remitted a dime to the federation account for almost a year is able to move millions of Dollars for a hugely uncertain frontier exploration in the Chad basin. What a country! A few years back, Prof. Adeola Adenikinju, a Petroleum Economist and Energy Law expert said, “considering the huge financial obligation of the NNPC, adding the burden of oil exploration in the Chad Basin is foolery.”

Adenikinju adds: “This is where the issue of political interference comes in. This is not an issue of politics but business. Directing the NNPC to resume oil search in that region is not good for the corporation. The corporation should run as an independent business en¬tity devoid of political interference. They should be able to determine whether to resume oil search or not, and not the government telling them what to do.”

NNPCL has also pumped huge money into the Kolmani Field straddling Bauchi and Gombe states in the Upper Benue trough. It would be an integrated project, so we were told. The company has been pushing out positive stories that the field holds about one billion barrels crude oil reserve and 500 billion cubic feet of gas deposit; that the Kolmani Integrated Development Project would house a 120,000-barrels per day refinery; a 500-million standard cubic feet per day gas processing plant, a 300-megawatt capacity power plant, and a fertiliser plant of 2,500 tons per day. We have also been told that the asset operator will be Sterling Global, a Nigerian affiliate of the Indian Sandesara Group.

Last November, President Buhari was in Kolmani to flag off drilling of the crude oil well. Yes, that was what we were told. Now, this is where the confusion is. You would probably think Kolmani well is set to start pushing out crude oil. No! It is not near production stage. The possibility of getting to that stage is slim because the geography of the zone may not guarantee a commercial find. As at press time, nothing is happening in Kolmani.

Years back, a multinational company was motivated to explore for oil in the Sokoto basin with all sorts of incentives. After persistent negative results, it pulled out because the chances of hitting crude oil in commercial quantity were very remote. That was where economic considerations came in. The firm could no longer commit funds to the project for obvious economic reasons. It is also for these economic considerations that international oil firms and privately-owned Nigerian oil companies are not interested in getting involved in frontier basins’ explorations. They are unwilling to drill outside the Niger Delta that has proven crude oil reserves.

The NNPCL has even become rigorous in the search for oil in areas without proven reserves by expanding the scope of its frontier explorations. This is clearly because the Petroleum Industry Act sets aside 30 percent of NNPCL’s profit for frontier exploration. This is big money. So, it is now talking about oil explorations in Dahomey Basin, Anambra Platform, the Calabar Embankment, Bida Basin as well as the Ultra-Deepwater Niger Delta. Likewise, it is planning to return to the Sokoto basin.

The frontier basins are too shallow and not mature. This is the truth that must be told. The wasteful involvement of NNPCL (a company struggling to meet its financial obligations to the federation), in the search for oil in these frontier basins is for political reasons. Experts have consistently emphasised that none of the so-called crude oil discoveries in the frontier basins can progress to commercial production level that will add to the nation’s hydro-carbon assets as being promoted.

If the NNPCL is truly interested in growing the hydrocarbon reserves of Nigeria, with the ultimate aim of enhancing national energy security and associated economic benefits to the people, it should increase its exploration aggressiveness in areas with proven reserves, and show more determination there. This country still has a huge number of such areas. Nigeria’s drive to meet its target of growing hydrocarbon reserves from 37 billion barrels to 50 billion barrels, in the short to medium term, and increasing crude oil production to 3 million barrels per day can be easily attained in these areas with proven reserves, if the NNPCL works assiduously.

The way forward is to expunge the Frontier Exploration Fund (FEF) from the Petroleum Industry Act. That means amending the PIA. This is a task that must be done. The 30 percent of NNPCL’s profit provided for FEF can then be used for explorations in areas with proven reserves. That is what the PIA should do for exploration. Committing huge cash and resources for oil search in the frontier basins is not a good investment decision for a country like ours whose economy is in crisis.

I agree that there is the need for oil fields to be discovered outside the Niger Delta region, so that the region will stop holding the rest of the country to ransom. However, running to non-petroliferous areas and wasting huge money is not the way to go.

Source: First published in Thisday Newspaper