Shell’s prize in Bonga’s billionth barrel

Sopuruchi Onwuka

The best method to convey the value of numbers is to convert them to money. In Nigeria, one billion begins to generate great interest when it looks like N1.0 billion. Greater interest comes with $1.0 billion. and the dollar denomination collocates directly with the upstream petroleum business.

Again, whereas government transactions would relate $1.0 billion to about N500 billion, businessmen would translate it to about N700 billion. In both cases, a billion dollars carries a value scope that stretches towards a trillion Naira.

The whole evaluation alters when the prime factor transforms from cash to commodity. The multiplying factors would now ordinarily include the prevailing price, the currency of transaction and exchange rate.

The scenario develops more complication and intricacy when the commodity is a product of complex production process, requiring multiple layers of activities in a production relay that constantly consumes different products and services. At this stage, the calculation of cumulative economic value of a commodity becomes a complicated mathematical task.

The key factor therefore is the number which determines the rate of value multiplication.

And the criticality of numerical size amplifies the lingering celebration of the billionth barrel production by Shell operated facility which floats on over 1000 meters of water depth some 120 kilometers offshore Niger Delta.

From November 2005, when the floating production, storage and offtake (FPSO) vessel started oil and gas production from Bonga field to February 2023, when it hit the billionth barrel of production, oil prices have oscillated across boom and burst cycles. This makes it difficult to translate output to cash without consulting the books. The non-cash economic values from the Bonga remain incalculable right from the start. But both are huge!

Thus, the billionth barrel production mark is not just a signal of performance; it is a certificate of delivery. It shows the result of resilience over a challenging task. It shows where the real value for the country is actually generated.

The Oracle reports that SNEPCO discovered the field as the operator of the Oil Prospecting Lease (OPL) 212 license, and continued with the field development and production operations under the subsisting Oil Mining Lease (OML) 118 license.

SNEPCo holds 55 percent operating interest in the block under a PSC with NNPC Limited and a Joint Operating Agreement (JOA) with ExxonMobil’s Esso Exploration and Production Limited which holds 20 percent; Eni’s Nigerian Agip Exploration (NAE) Limited which holds 12.5 percent; and TotalEnergies’ Total Exploration and Production Nigeria (TEPN) Limited which holds the remaining 12.5 percent.

The Shell operated JV and PSCs in Nigeria are built on partnerships that control the largest assets in the upstream petroleum industry. These partnerships create inexhaustible resources, efficiencies and capacities in taking some of the toughest challenges in the petroleum industry. They also flaunt a guarantee of high volume outputs and optimum marginal values in terms of gas valorization.

And in the global petroleum market where volume is the king, Shell and partners have through a streak of deep pocket investments and significant output positioned Nigeria as a global energy supply factor.

It is in the context of the offerings to the market that the billion barrel output from Shell operated Bonga deepwater field holds up multiple signals of performance, efficiency, quality and leadership.

The Bonga FPSO, according to Shell Nigeria Exploration and Production Company (SNEPCO), exported its one billionth barrels of oil in the first quarter if the year. The company also declared that the feat was achieved just three months after major rehabilitation work on the vessel concluded.

Managing Director, Shell Nigeria Exploration and Production Company Limited (SNEPCo), Elohor Aiboni, described the milestone as a celebration of excellence, leadership and focused delivery that has brought significant benefits to Nigeria and Nigerians.

Aiboni who is also Nigeria’s first woman to run the deepwater arm of a major multinational company in the country noted that one billion barrels of output is an exciting milestone for a facility that started production in late 2005. She attributed the feat to the professionalism of the combined workforce of the company, its partners and contractors.

“We are building a leading safe, simpler and cost-disciplined deep-water business that brings value to our partners, shareholders and Nigeria which remains a heartland for Shell,” she said.

Country Chair, Shell Companies in Nigeria, Osagie Okunbor, pointed at the resilience, focus and dedication of the entire SNEPCo team, most of whom are Nigerians.

“I feel a strong sense of pride knowing that today, over 95 percent of SNEPCo staff, including those working on the Bonga FPSO, are trained Nigerian deep-water professionals, who daily contribute their quota, in the development of Nigeria’s deep-water hydrocarbon resources. The entire team should be incredibly proud of themselves,” he declared.

Chief Upstream Investment Officer of NNPC’s Nigeria Upstream Investment Management Services (NUIMS), Bala Wunti, congratulated all the partners in the project.

The Oracle Today reports that Shell is the first to activate major development in the first set of the 1993 deepwater production sharing agreements; taking the lead risk and providing vital learning opportunities for peer players who were also working on development feasibilities on operated deepwater assets.

“One needed to be brave and meticulous in operating in the deepwater, especially a terrain that is untested, because any misstep comes at huge cost,” according to erstwhile President of the Nigerian Council of the Society of Petroleum Engineers (SPE),  Mr Emeka Ene, whose Oildata Group helps operating companies achieve drilling goals.

While the lingering plaudits stream, discerning players already know that the Bonga field is conversant with industry leadership in deepwater oil and gas operations. And the Bonga FPSO came to Nigeria with innovations never recorded in the construction of such facility at the time.

Bonga recorded the industry’s first large steel catenary riser (SCR) to be installed on an FPSO; the first use of inconel cladding for a dynamic riser application; and the first, largest and most technologically advanced polyester moored deepwater buoy to be built in Nigeria.

Again, AMEC which handled the integration topside modules with the hull declares that Bonga FPSO introduced “the first installation of a large diameter steel tube umbilical with bonded composite material cover as gaslift risers, in dynamic catenary configuration, off a spread moored FPSO, and connected to the base of a steel catenary flowline riser.”

The company which operates its fabrication yard in Wallsend, UK, added that the facility came with industry’s “first implementation of large size dynamic flexible pipe (2.3km long) for oil transfer to a single point mooring (SPM) offloading buoy.”

Governed by the 1993 production sharing contracts (PSCs) Bonga which was discovered in 1995 lies in water 1,000 meters deep some 120 kilometers offshore Niger Delta. The block covers an area of 60 square kilometers.

The $3.6 billion field development project provided for production nameplate of over 225,000 barrels of oil a day (225 kbd) and 150 million standard cubic feet of gas a day (MMscf/d).  Field production life was planned to end by 2022.

The field development plan recommended a massive integrated production floater. Thus, the Bonga FPSO came in as one of the world’s largests at its fabrication time; measuring 300 meters long and towering taller than 12-storey building. The vessel’s deck is the size of three football fields. The massive vessel is designed to float a cumulative deadweight of significant 300,000 tonnes.

Shell says the massive sea structure is “held in place by 500 tonne anchors linked by 20 kilometers of high-strength chains.”

The Oracle Today reports that numerous processing modules on the FPSO deck receive produced gas and liquids from seabed wellheads via risers and umblicals, process them, store liquids in the vessel’s hull and export the gas to onshore processing plants. Frequent offtake of exports from the field is through a single point mooring (SPM) buoy also moored near the FPSO to feed ocean going tankers.

Shell stated that building the Bonga FPSO challenged global engineering capacity, commanding a web of transcontinental collaborations that deployed thousands of workers across the globe.

Samsung Heavy Industries built the hull in South Korea from where it was towed 24,000 kilometers through Egypt’s Suez Canal to Wallsend in the north of England. Integration of topside modules was conducted at AMEC’s facility before the facility embarked on final journey to Nigeria where the last of the equipment was installed.

The project laid template for the near exclusive use of cost efficient integrated floating units for early production in the country’s deepwater operations.  And the giant Bonga FPSO provided the model for onsite production, processing and export.

Industry pundits describe Bonga as the industry’s zoom lens into Nigeria’s full deepwater operating terrain, providing the needed persuasion on existing and new players to shape their investment decisions for field development in the Nigerian deepwater.

The overall Bonga project conceptualization resolved a number of puzzles for the industry. It defined the complexity of the eastern Niger Delta deepwater terrain and offered clear picture on best development options suitable for the massive reserves discovered in a region where no prior facilities and infrastructure existed.

Besides, the skills and technology that came with the Bonga field development have enabled Nigeria to become a major offshore producer, growing deepwater output to significant 800,000 and positioning the country as emerging hub for offshore industry operations. SNEPCo stated that oil and gas production at Bonga increased Nigeria’s oil output capacity by 10 percent when it began producing in 2005.

The Bonga field is also one of the few deepwater production facilities designed for gas gathering and delivery to affiliated liquefaction and export company onshore Niger Delta. It also holds promise for greater oil and gas output from other clustered discoveries at Bonga SW, Bonga North and Chevron operated Aparo field, which are all contiguous to the FPSO.

However whereas approval is certain for separate development of Bonga SW/Aparo using another floater, Bonga North forms additional responsibility to the Bonga Main FPSO. The economics of facility optimization has made routine rehabilitation of the FPSO necessary for development of smaller fields from where new output is expected to replace natural declines from Bonga Main. The new developments would necessarily tie back to Bonga FPSO and demand extension of its field life.

Thus, the Bonga field and its facilities have seen multiple maintenance programmes, reaching the fourth turnaround maintenance (TAM) in 2017, which enabled it achieve production of 819 million barrels of oil by the end of 2018. Shell added in its recent statement that the FPSO also concluded another rehabilitation programme in the last quarter of 2022.

“The Bonga FPSO vessel has enjoyed significant expansion over the years with the further drilling of wells in Bonga Phases 2 and 3 and through a subsea tie-back that unlocked the nearby Bonga Northwest field in August 2014. Bonga Northwest can produce approximately 65,000 barrels of oil equivalent a day and was named Engineering Project of the Year 2015 at the prestigious Platts Global Energy Awards in New York,” Shell explained.

The Oracle Today reports that the Bonga project and its production floater hold the consolidated capacity of its global industry partnership; bringing the global experience of world’s biggest and best oil firms to interaction; assembling the best industry technology available only to the biggest global players; and pooling the required funds in an opportunity sharing arrangement.

According to the Chairman of AA Holdings, Mr Austin Avuru, “I know that in all these period of 60 years these companies are dependable allies of government. When the government prepared its budgets, it simply pulled the figures from these companies: Shell, ExxonMobil, TotalEnergies, Agip and Chevron, Addax; about six, seven of them.”

Mr Avuru who is also Nigeria’s foremost industry geologists, investor and professional leader also credited the international oil companies with preparing the grounds for entry of indigenous oil companies into the high stake upstream oil business and all the values they have created in the economy.

“Aiboni attributed the success of Bonga to the supportive partnership with the Nigerian National Petroleum Company Limited and SNEPCo’s co-venturers: TotalEnergies EP Nigeria Limited, Nigerian Agip Oil Company, and Esso Exploration and Production Nigeria Limited,” Shell declared while celebrating the billionth barrel production.

And deconstructing the celebration of billion barrels from one oilfield in 18 years of operations amplifies immense revenue and sundry economy opportunities associated with the volume of production and length of operating activities. From cash returns from the export market, to number of workers engaged in the operations, and volume of patronage to local economy; the value creation and incremental growth are perceptible.

Like Mr Avuru pointed out, Nigeria is lucky to have the best international oil companies in the world as government’s traditional partners in the upstream petroleum industry. He said that even government has come to depend on the reliability and efficiency of the key multinational companies in making key fiscal decisions.

“So government would base its budget on the companies and those production volumes were delivered. Even in terms of policies, plans and investments in gas monetization, they also delivered. When we wanted to do LNG, they delivered on that aspiration,” he said.

Mr Ene who is also the first African to sit in the board of the International Gas Union (IGU) after serving simultaneously as Chairman of Petroleum Technology Association of Nigeria (PETAN) and the President of the Nigerian Council of the Society of Petroleum Engineers (SPE) pointed at the Bonga field development as the ground breaking point for the Nigerian Content policy.

He noted that construction of the SPM buoy in Lagos exposed the huge dormant capacity and inexhaustible potentials in the local environment. The Bonga SPM bouy, Mr Ene said, reactivated the local fabrication industry which culminated in first local fabrication and integration of topside modules on an FPSO hull by 2016. 

The Oracle Today reports that growing Nigerian Content, which is measured by the size of in-country capital spend, to over 70 percent is one of the prime national aspirations set for the petroleum industry; and the NCDMB classifies fabrication and EPC as key project cost drivers in the industry.

Shell confirms that it has consistently delivered value in national revenue, local capacity development of Nigerian engineers and funding support to the service industry, in addition to its many social investment programmes in health, education and sports.

“The Bonga field has stimulated the growth of support industries in addition to helping to create the first generation of passionate and dedicated Nigerian oil and gas engineers with deep-water experience.  The FPSO won the 2016 Asset of the Year of the Shell Group,” SNEPCO declared.

In sum, the Bonga FPSO vessel which floats 120 kilometers offshore is not just a production facility: it is a stalwart’s footprint, signifying audacity and confidence in testing a new terrain under risky and cash intensive but highly rewarding commercial terms. The vessel led the charge into the deepwater, and has in the past 18 years kept bursting lodes of reserves, pumping billion barrels of production, yielding huge economic returns to Nigeria, and delivering excellent commercial rewards for investors.