NAE, BW Offshore intensify renegotiation on Abo FPSO lease

Sopuruchi Onwuka

Eni’s deepwater arm in Nigeria, Nigeria Agip Energy (NAE), is locked in intense negotiation with BW Offshore for retention of is key production facility at the operated Abo deepwater field, offshore Niger Delta.

In the interim, the two parties have embarked on rapid short term lease extensions that run as short as few days in visible efforts to buy time, indicating that discussions are getting tough for the Italian operator as cost of services equipment and services continue to soar on the back on strong oil prices.    

Since early January, NAE has moved its lease tenure for the producing Abo floating production vessel about twice in the New Year, raising concerns over operations in the field which is actually the nation’s first deepwater field to come online.

BW Offshore which owns the vessel declared in quick succession that it was in deals with Agip to extend its contract for the Abo FPSO. And sources in NAE stated that the short extensions in the elapsed lease tenure buys time for the operator as hard negotiations for strike a sustainable deal.

He could not confirm if acquiring the floater is an option in the negotiations.

The company stated that the first contract extension stretched the tenure of the lease to January 14; adding that Agip has again secured further extension of the vessel lease by weeks until March 31, 2023.

The short term deals indicate that another extension deal is imminent or that there could be changes in the ownership, given that the field still has long production life in view of huge potentials for positive exploration appraisal outcomes.

The Oracle Today reports that the Abo FPSO has been producing the Abo field in OML 125, formerly OPL 316 in water depth of 2,640 feet offshore Nigeria since 2003.

The Abo oil field operated by NAE in partnership with Oando Energy Resources (OER) under a Production Sharing Contract (PSC) with the Nigerian government is expected to continue production until it reaches its economic limit in 2056.

The field reached peak production in 2010 at about 30, 510 barrels of oil equivalent per day; and has produced significant 58.32 percent of its estimated 86.6 Mmboe recoverable reserves comprising crude oil and condensate.

Investing partners plan to increase production from Abo to some 45,000 kboe via enhanced oil recovery (EOR) programme but it is not clear whether the expected increase in volume production would require modified floater of retention of the existing producer.

Company sources told The Oracle Today that the Abo EOR programme deploys produced water and gas reinjection for oil lift. The strategy, according to sources, simultaneously addresses gas flare elimination and produced water management.

The existing Abo FPSO which under lease arrangement with BW Offshore has a storage capacity of 900,000 bbl of oil and oil treatment capacity of up to 45,000 b/d, a water injection capacity of 30,000 b/d, and a gas injection capacity of 35 MMcf/d.

The Oracle Today reports that Abo field forms part of the nation’s first deepwater development programme under the string of 1993 PSCs with the defunct Nigerian National Petroleum Corporation (NNPC), now Nigerian National Petroleum Company (NNPC) Limited. Other deepwater development programmes that came from the 1993 PSCs include Shell’s Bonga Main, Chevron’s Agbami, Total’s Akpo and Esso’s Erha.

Shell had gone to town in 2005 as the first company to stream a deepwater development in the country with Bonga field, but Eni had remained characteristically quiet about smaller volume Abo which actually went silently online in 2003.

The Abo field extension development was carried out between 2006 and 2009 with the drilling and tie-in of Abo 10 and 11 production wells, and the installation of a gas injector in Abo 9 well.  

After achieving peak production of 37,300 bopd in February 2010, NAE acquired 4D seismic data on the asset in early 2011 with which it identified further upside in the resources of Abo field. Subsequent Abo Phase 3 development in 2013 contributed to a further peak in oil production, and in effect extending the life of the field. 

And just as the New Year thawed in January, BW Offshore announced that it signed a short-term extension for Abo FPSO lease with NAE by two weeks till January 14 to allow time to finalize terms for a further contract extension.

And as mid January came upon the companies, a further extension of the FPSO lease was announced till March 2023, indicating that discussions on the fate and future of the field’s production operations are still on the table.