Total’s Usan Raises the Bar Despite Increasing Theft in Nigeria

Usan production facility

With the start-up of crude oil production at offshore Total’s Usan deepwater field, Nigeria’s crude oil production received a boost in the first quarter of 2012, even though there was increasing rate of crude oil theft, especially in Shell-operated facilities in the Niger Delta.

A landmark development in Nigeria’s oil and gas industry was recorded in February 2012 when French oil giant, Total, operator of Oil Mining Lease (OML138), announced the start-up of crude oil and gas production at its offshore Usan field in Nigeria.

Usan, which boosted Nigeria’s daily output by about 180,000 barrels per day, is the second deep offshore development operated by Total in Nigeria, coming on stream less than three years after Akpo.

According to Total, the Usan field, which was discovered in 2002, lies around 100 kilometres off the South East Nigerian coast in water depths ranging from 750 to 850 metres.

The Usan development comprises a spread moored Floating Production, Storage and Offloading (FPSO) vessel designed to process 180 000 barrels per day and with a crude storage capacity of 2 million barrels.

Its size of 320 metres long and 61 metres wide makes it one of the largest vessels of this type in the world.

Development involves 42 oil and gas wells that are connected to the FPSO by a 70 kilometres long subsea network.

President of Exploration and Production (E &P) at Total, Yves-Louis Darricarrere said the project was a demonstration of the ability of Total to lead ambitious projects that would contribute to increase production for the country.

“I am particularly proud to announce start-up of this major project together with the concession holder NNPC.

This project demonstrates the ability of Total, a key operator of large-scale deep offshore developments in the Gulf of Guinea, to lead ambitious projects that will contribute to increase production for the group and for the country.

Total as operator has introduced a number of technology innovations, among which is a solution that drastically reduces gas flare and thus minimises the project’s environmental impact,” he said.

According to him, the development of Usan has involved a record of 60 per cent local content man-hours and thus has contributed to strengthening the know-how of the Nigerian industry in the area of hydrocarbon exploitation in the deep offshore.

The Usan project has involved an unprecedented level of Nigerian local content, with over 500,000 engineering man-hours and 14 million construction and installation man-hours performed in Nigeria.

FPSO construction included an offshore integration of 3,500 tons of locally fabricated structures. In addition, large-scale training and capacity building programs were put in place, raising the skills of the local workforce to the benefit of future projects.

Total’s wholly owned subsidiary Total E&P Nigeria Ltd. operates OML 138 with a 20 per cent interest, while NNPC is the concession holder.

Total’s partners are Chevron Petroleum Nigeria Ltd. (30Pper cent), Esso E&P Nigeria (Offshore East) Ltd. (30per cent) and Nexen Petroleum Nigeria Ltd. (20per cent).

Total will this year celebrate fifty years of its presence in Nigeria, with approximately 290,000 barrels of oil equivalent per day production in 2011.

Usan is capable of boosting Nigeria’s daily crude oil production to 2.68million barrels per day.

Renewal of ExxonMobil Leases

During the first quarter of 2012, the Federal Government renewed oil leases of Mobil Producing Nigeria Unlimited (MPNU), a subsidiary of United States oil giant, ExxonMobil, which were initially renewed in November 2009 but later invalidated in March 2011.

Government also made a commitment to renew the oil leases being operated by Shell Petroleum Development Company (SPDC) and Chevron Nigeria Limited, in joint venture with the Federal Government.

The initial validation of the ExxonMobil leases – Oil Mining Leases (OMLs) 67, 68 and 70 – with a combined output of 580,000 barrels of crude oil per day, was cancelled because of what the Ministry of Petroleum called the addendum used for the renewal, which showed that they had been executed in the first instance on March 11, 1971 and not December 1, 1968.

Speaking in her office in Abuja after she endorsed the renewal of the Oil Mining Licenses (OMLs) 67, 68 and 70 held by Mobil Producing Nigeria (MPN) in joint venture with the Nigerian National Petroleum Corporation (NNPC) for another 20 years, Mrs. Alison-Mad eke, stated that efforts were in top gear to expedite action on outstanding oil licences that were due for renewal.

She acknowledged that there were outstanding oil production licences due for renewal as informed by the Department of Petroleum Resources (DPR) and assured that those licenses would be renewed.

“Outstanding renewals right now would be the Shell ones and Chevron as well, but I am assured by the Director of the Department of Petroleum (DPR), because we have had this discussion in the last 24 hours, that before the end of next month the Chevron ones will expire, but I’m sure the Shell ones will be signed,” She said.

Though no official figure was given financial consideration for the renewal of the ExxonMobil leases for another 20 was estimated to be around $665 million.

“I am particularly delighted to welcome you all as we formally renew shallow onshore oil mining leases 67, 68 and 70 for the NNPC, Mobil Producing Nigeria joint venture. I am delighted that after a somewhat lengthy process both parties that is, the government and people of Nigeria and the NNPC/MPN joint venture have arrived at what they consider a mutually fair agreement in which to work together for another 20 years,” she said.

Crude Oil Theft and Non-passage of PIB

Despite the boost in Nigeria’s crude oil production and other positive developments, the issue of increasing rate of crude oil theft and non-passage of the Petroleum Industry Bill (PIB) continue to hamper progress in the sector.

According to Shell statistics, $1.5billion is lost yearly to illegal bunkering and crude oil theft.

The lack of fresh investments owing to the non-passage of the PIB could result in nearly 25 per cent drop in Nigeria’s oil production in the next two years.

It is also feared that the country may face a production crunch by the next decade as cuts in oil and gas sector investments are set to crimp the country’s output. Nigeria had set a production target of four million barrels per day (mbpd) and reserve base of 40 billion by 2010.

However, these targets could not be met mainly because of the years of unrest in the Niger Delta region, which reduced Nigeria’s then production of 2.5mbpd by more than half.

The Federal Government’s post amnesty programme for militants in the region has however, helped push up the country’s oil production to a new high of 2.4mbpd.

Most oil and gas deals signed with potential investors about five years ago, some of which had been slated to come on stream between last year and this year, are yet to take off owing to the PIB delay.

The Federal Government had shelved plans to conduct bid rounds in 2009 and 2010 due to long delay in the passage of the PIB.

Most of these investments have found their way into neighbouring countries including Angola, Ghana and Burkina Faso, which have more stable policies, he said.

A committee had been given the mandate to review the various versions of the bill submitted to the parliament and produce a new one.

Fuel Subsidy Controversy

During the first quarter of 2012, a House of Representatives’ ad-hoc committee under Hon. Lawan Farouk, investigated the management of nearly N2trillion spent on payment of petrol subsidy in 2011.

The investigation into the management of subsidy was similar to the failed probe of the power sector to the extent that the subsidy payment also involves huge amount of money and very powerful individuals at the corridors of power and the private sector.

This has generated concern that the House of Representatives and its committee may not muster the political will to deal with the issues and personalities involved in the management of petrol subsidy.

This concern was reinforced by the public belief that some members of both the legislature and the executive have soiled their hands in the various ‘deals’ going on daily in the country’s downstream sector.

As Nigerians await the report of the committee, some members of the legislature, especially the key officials are believed to have enjoyed one form of patronage or the other in the oil industry in the past.

There is therefore, a growing concern that the legislature may bungle its investigation or dump the report as it did with the power sector.

Citing the case of similar probes by the National Assembly on government’s privatisation exercise and allocation of land at the Federal Capital, analysts have also raised doubt on the ability of the government to implement a damning report, because of the high profile individuals that may be affected.