Output mandate: Niger Delta is mature but still has lots of oil __Avuru
- Low oil export responsible for Naira devaluation __Wale Tinubu
Sopuruchi Onwuka
Despite the fears that Nigeria’s crude oil output from the traditional Niger Delta terrains has peaked alongside ageing infrastructure and declining investments, the new government mandate of the industry to grow production by a million barrels per day is very feasible under the prevailing divestment programme.
Leading industry geologist and explorationist, Mr Austin Avuru, maintains that the reserves profile of the Nigerian conventional oil play is still robust enough to support sustainable production addition required to build back to over 2.5 million barrels per day (mbd).
Chairman of AA Holdings, Mr Austin Avuru
The Oracle Today reports that the petroleum industry is under a new presidential mandate to grow production by additional 1.0 mbd to former output level of 2.5 mbd. The mandate is critical to overall fiscal agenda of shoring up the nation’s foreign exchange receipt, address the liquidity squeeze in the economy and rescue the Naira from a steep plunge in the foreign exchange market.
Export of petroleum commodity is responsible for low foreign exchange income and consequent devaluation of local currencies across the sub-Saharan Africa, according the Group Chief Executive of Oando Plc, Mr Wale Tinubu.
From the oil price crash in the covid period of 2020 and 2021 to the steep production declines associated with low IOC investments in the energy transition landscape, Wale Tinubu argued, African economies including Nigeria have suffered devastating devaluation of local currencies and jumps in inflation.
Group Chief Executive of Oando Plc, Mr Wale Tinubu
Within the period, The Oracle Today reports, oil dependent Nigeria has suffered sustained drop in foreign exchange earnings, leading to sustained external borrowing spree and growing debt burden that has impacted the overall fiscal agenda of the government.
In seeking a way out the prevailing fiscal mess and hyperinflation in the country, President Bola Tinubu, acting on advice of industry and financial experts, had to float incentives to bolster fresh investments in production recovery as a way of boosting foreign exchange income and salvage the Naira from further decline.
But industry analysts point at natural reserves declines at oilfields as the main cause Nigeria’s falling oil output and as the reason many international oil companies are walking away from the mature production terrain. Discussions at platforms of policy debate center on the capacity of indigenous companies that acquire brownfield assets from divesting multinationals to squeeze out more production from the assets.
In responding to the growing anxiety over the possibility of increasing production from assets that currently suffer natural declines, Mr Avuru who is the Chairman of AA Holdings declared with certainty that indigenous companies that have requisite competencies, operating efficiency and financial capacity stand solid chances of boosting output in record time.
Mr Avuru spoke to industry journalists at the just concluded African Energy Week (AEW) in Cape Town, South Africa, where he features in several panel discussions on the future of African petroleum industry in the face of energy transition and global sentiments for climate action.
Mr Avuru is the founding Managing Director of Seplat Energy Plc, the founding Managing Director of Platform Petroleum, former Chairman of Nigerian Association of Petroleum Explorationists (NAPE), fellow of the Nigerian Council of Society of Petroleum Engineers (SPE), member of Institute of Directors (IOD) and eminent member of Indigenous Petroleum Producers Group (IPPG).
He dismissed the fears of natural declines in the Niger Delta terrain, describing it as traditional pattern in global petroleum play. He noted that maturity only entails depletion of proven (1P) reserves and the beginning of investments in probable and potential (2P and 3P) reserves.
“Any marginal field operator will tell you for instance: ‘we were assigned a marginal field with 2P reserves seven million barrels. We have produced 12 million barrels and still producing.’ That is the story you always hear from them.
“So, what we call mature field from a geological point of view are those assets where the easy plays, the easy discoveries have been made, the easy to be developed fields have been developed, but there is still substantial reserves. It requires more technology, higher cost, more diligence to develop. But it is there,” Mr Avuru explains.
According to him, “when you see an asset that you think holds 100 million barrels, by the time you bring in technology for secondary recovery, you would probably recover 180 million barrels of reserves.”
Mr Avuru made it clear that the conventional terrains of the Nigerian petroleum industry has entered the notional second phase of exploration and production, adding that time has come to explore bypassed reserves and also squeeze out more from producing assets.
“So we are now in phase II of the Nigerian oil and gas play when we are going to squeeze out the remaining barrels of oil. Not that they were not there. They are there but they were not captured in the original 2P, which why in any reserves estimate you have 2P and you have 3P. We are now going to be converting our 2Ps and 3Ps into 1P and put them to production,” he stated.
According to him, the second phase of exploration activities in the Niger Delta could enable the industry produce as much additional resources as has been produced in the past 60 years.
“Almost in every basin, when you say it is mature, you probably have as much left as you have produced. But it requires more intense technology and more diligence at higher cost,” he stated.
In describing the Nigerian independents acquiring assets from the IOCs as thirsty for new barrels, Mr Avuru noted that the drive to boost output and impatience for market returns would entail new investments in unlocking dormant fields
In the second phase of operations in the Niger Delta, he said, “we are going to be unlocking dormant fields to boost production. That is why I defined maturity. It means that all the easy to find and develop assets have already been produced.
“So, we are going back to the second phase: the bypassed plays, the dormant fields are the ones that are going to be unlocked. That is why I said that the reserves we have left are as probably as much as we have produced; but we need more technology and more diligence to then unlock the dormant assets.”
In relating Nigeria’s dire fiscal situation to government’s response with reforms in the petroleum industry, he described the presidential executive orders on ease of doing business and incentives for new petroleum investments as deliberate measures to stimulate the right set of activities that would build reserves and grow output.
Avuru
“So, what I said about changes in the policy arena is not meant to patronize the government people who were there. No! I am seeing for the first time what we saw in 1991 under Professor Aminu when he came out to say, ‘we want to achieve this reserves base and these are the things we are going to do.’ And that was how he unlocked the deepwater.
“So today, we are seeing recognition by the government, particularly by the office of the Special Adviser, that there are things to be done to unlock the bypassed places in the mature basin that you are referring to. And those policy thrusts are what they are putting in place,” he explained.
On the prevailing divestments in the conventional terrains, Mr Avuru stated that it is also natural that independent companies which are thirsty for new barrels to mop up the terrains after the big multinationals have creamed off the assets.
“You cannot wish away the independents! It is the independents that play in mature basins. Nigeria is not an exception: whether you go to North Sea or any where it is the same. Mature basins belong to independents.
“So, once we have now reached that point of recognition that independents have to be supported to build capacity, then you are doing the right thing because it s these independents that will unlock additional production from mature assets.”
On the declining output from the deepwater and absence of new discoveries in the terrain which will now host the community of big international players, Mr Avuru stated that new incentives from government target to lure in more investments into resumption of exploration in the zone.
“As you may have heard in the presentation by the Presidential Adviser, the Nigerian deepwater basin has not seen any serious exploration work in the past 13 years.
“After the first rash of exploration that discovered about 8 billion barrels, they have all gone into production mode. That is the production you said is declining! Again, with the kind of policy thrust we have today, they are now incentivised to go back to exploration mode both for oil and for natural gas.
“So, you are going to see new exploration outcomes, either near field discoveries or even exploration discoveries. And that will happen even onshore that is so mature that is 60 years old. You heard Chevron the other day announcing near field appraisal discovery in an asset that has been producing for more than 45 years.
“So, those potentials are still there. And those are the potentials that the new players are going to chase because they hold the opportunity for optimization,” Mr Avuru explained.
