Energy Security: Nigeria’s Endeavours in Exploring Oil and Gas in Frontier Basins

In recent years, Nigeria has invested heavily in frontier basins exploration of oil and gas. Frontier, which is a very technical word, means where oil has not been found, but there is potential for finding oil. Frontier basins in Nigeria include the Chad Basin, Sokoto Basin, the Bida Basin, Anambra platform, the Calabar Embankment, as well as the ultra-deepwater in the Niger Delta, which has not been explored.

The Petroleum Industry Act (PIA), which was assented to by former President Muhammadu Buhari, makes provision for 30 per cent allocation to the frontier basin exploration. This annually may come down to about $400 million, according to the Group Chief Executive Officer of the Nigerian National Petroleum Company (NNPC) Limited, Mele Kyari.

“The percentage appears very outrageous. 30 per cent of what? That Is where nobody has sat down to the lookout. When you say 30 per cent, it probably comes down to less than $400million per annum and then the other side of it is that 30 per cent is a big number but when it comes to the host community funds, you have 3 per cent of our operating expenses,” Kyari had said in August 2021, while defending the 30 percent allocation to frontier exploration during an interview on the Nigerian Television Authority morning show.

Nigeria is aiming to increase its reserves from 37 billion barrels to 50 billion barrels, in the short to midterm, as well as increase its proven gas reserves from about 209 trillion cubic feet (tcf) to about 250 tcf.

Apart from increasing its reserves, the country is also working on launching more bid rounds, ramping up crude oil production as well as reducing the cost of production per barrel to about $10.

Exploration of oil and gas in the frontier basins is at the centre of Nigeria’s quest to increase its oil and gas reserves. “Today, we have mobilized the drilling rig to this site, here in Obi Local Government Area of Nasarawa State. We are optimistic that the positive outcome of this campaign will contribute to the national aspiration of increasing our hydrocarbon reserves from 37 billion barrels to 50 billion barrels, in the short to medium term and increase our crude oil production to a target of three million barrels (per day).

“I wish to reiterate that NNPC Ltd in conjunction with the NURPC (Nigeria Upstream Petroleum Regulatory Commission) are committed to conducting exploration activities of the nation’s frontier basins that spans the Chad Basin, Upper and Lower Benue troughs, Bida Basin, the Sokoto Basin, Dahomey, Anambra platform, Calabar embarkment and the Ultra deep water Niger Delta, using the best industry standards and technologies,” said Kyari at the official spud-in (drilling) for crude in the Ebenyi-A Well in Obi Local Government Area of Nasarawa State in March.

According to the former Minister of State for Petroleum Resources, Timipre Sylva, about one billion barrels of crude oil have been discovered in the Northeastern part of Nigeria.

“The figure we are getting, the jury is not totally out yet but from the evaluation results we are getting the reserve that has been discovered in the northeast is about a billion barrels.

“Those are the kind of figures we are seeing, and we are beginning to understand the geological structure of the region,” he said at an industry event in 2020.

Static Reserves, Low Production

Nigeria’s crude oil reserves has remained static in the last couple of years. At the same time, the country’s production has been on a downward spiral since 2020 due to numerous challenges. This has resulted in low production, thereby affecting the country’s revenue. Oil export accounts for about 70 percent of Nigeria’s revenue and about 90 percent of its foreign exchange earnings.

According to the Nigeria Employers’ Consultative Association (NECA) early this year, the failure of the country to meet

its OPEC+ quota of about 1.742 million barrels per day (bpd), has resulted in Nigeria losing $2.5bn monthly.

Based on direct communication, according to OPEC in its November 2023 Monthly Oil Market Report, Nigeria’s oil production averaged 1.181 million bpd in August, 1.347 million bpd in September and 1.351million bpd in October.

Now that the 650,000 bpd Dangote Refinery has come onstream and the NNPC Limited’s refineries with combined capacity of 445,000 are currently being rehabilitated; with 250,000 BUA Refinery and combined capacity of 375,000 bpd from 27 existing and proposed modular refineries also expected to come onstream soon, the country may have to import crude from other countries to feed these refineries if production does not increase.

“It will be a sad outcome if we stop the importation of refined petroleum products only to replace it with the importation of crude oil for use in our local refineries,” said the Executive Secretary of the Nigerian Content Development and Monitoring Board (NCDMB), Engr. Simbi Wabote at an industry event recently.

Nigerian government believes that exploration in frontier basins will not only help the country to increase its reserves, but also its production.

Overall Energy Security

The discovery and drilling of oil in Nasarawa State will lead to greater prosperity for Nigerians as well as enhance overall energy security for the country, Buhari said at the official spud-in of the Ebenyi-A Well located in the Middle Benue Trough.

According to him, the surrounding communities would particularly benefit from the value created by the exploration and eventual production activities.

Buhari recalled that the official commencement of drilling activities in the Middle Benue Trough is in line with ongoing campaigns for the exploration of crude oil and gas in the nation’s frontier basins.

He listed the Chad Basin, Dahomey Basin, Anambra Platform, the Calabar Embankment, Sokoto Basin, Bida Basin, Benue Trough as well as the Ultra-Deepwater Niger Delta as areas where NNPC is extending its crude oil exploration.

‘‘This is consistent with the commercial discoveries of hydrocarbons in the Kolmani Area of the Upper Benue Trough.

‘‘I am pleased to note that activities are currently ongoing to develop the Kolmani petroleum discoveries to commercial production to add to the nation’s considerable hydro-carbon assets.

‘‘I am encouraged by the enormous work done by NNPC Limited to exploit the prospects in the Middle Benue Trough, leading to the event of today.

‘‘I congratulate NNPC Limited, the Nigerian Upstream Petroleum Regulatory Commission and other partners for their immense contributions towards making this day and this event possible,’’ he said.

Kolmani Project

Kolmani oil and gas project has attracted over $3 billion investment, according to Buhari. The project is an integration

of upstream production, oil refining, power generation and fertilizer.

“Considering the land locked location and the huge capital requirement, the economics of the project is a challenging proposition. Consequently, from the outset, I instructed NNPC Limited to utilize and leverage their vast asset portfolio across all corridors of its operations to de-risk the project to attract the much-needed investment.

“It is therefore to the credit of this administration that at a time when there is near zero appetite for investment in fossil energy, coupled with the location challenges, we are able to attract investment of over $3 billion to this project,” he said in November 2022 at a ceremony of the project.

Buhari noted that the significant investment is pivotal, especially as Nigeria strives to achieve carbon neutrality by 2060. He said: “This is indeed significant considering that, efforts to find commercial oil and gas outside the established Niger

Delta Basin was attempted for many years without the desired outcomes.

“However, the successful discovery of the Kolmani Oil and Gas field by NNPC and her partners has finally broken the jinx by the confirmation of huge commercial deposits of hydrocarbons in Kolmani River field.

“This discovery had emanated from our charge to the NNPC to re-strategize and expand its oil and gas exploration footprints to the frontier basins of Anambra, Dahomey, Sokoto, Benue trough, Chad and Bida Basins. Similar activities across the other basins are currently actively on-going.

“We are pleased with the current discovery of over 1 billion barrels of oil reserves and 500 billion Cubic Feet of Gas

within the Kolmani area and the huge potentials for more deposits as we intensify exploration efforts.”

Chad Basin

In the twilight of his administration in May, Buhari also flagged off the resumption of physical activities towards the exploration of crude oil and gas in the Chad Basin area, expressing his belief that the successes recorded in the Kolmani River 2 and Nasarawa State will be replicated in the area.

Speaking virtually at the Wadi-B Drilling Campaign which physically took place in Borno State, Buhari said: “crude oil and gas exploration activities have been ongoing in the Chad Basin since 1976 and also know of the discovery of sub commercial gas at the Wadi-1 Well in 1985. I am also aware that active drilling activities were suspended in 1995 to enable re-evaluation of exploration activities in the entire frontier basins.

“I am happy that the NNPC has since then conducted extensive Basinal Analysis and Evaluation of all frontier basins leading to the successful drilling and discovery of crude oil and gas in commercial quantities in Kolmani River 2 and providing insight to the ongoing crude oil and gas drilling campaign in Nasarawa State as well the current re-entry activities into the Chad Basin.”

He believes the country stands to benefit from a positive outcome of the operations as there will be an increase in national

crude oil and gas reserves and production, enhanced national energy security and greater prosperity for Nigerian people.

Also speaking at the event, Kyari said the re-mobilization of a drilling rig to the Chad Basin for the first time since the 1980s indeed underscored Buhari’s visionary leadership.

“NNPC Limited is committed to carrying out detailed exploration of the Frontier Sedimentary Basins using the best

industry standards and technologies, with the aim of attaining commercial discoveries of crude oil and gas.

“This is a spud-in event that will reinforce the Government’s commitment for exploration in the nation’s frontier basins, primarily aimed at increasing the Nation’s hydrocarbon reserves. This is a mission that we will take to deliver. We are very committed. It does not depend on Mele Kyari. It will work. This is a process, and this process has value, and this value will be created for everyone,” Kyari declared.

Need for Private Investment Participation.

Nigeria lost over 70 percent of capital expenditure in the oil and gas industry because of the delay in the passage of the

PIA. The law addresses some of the challenges hindering investment inflow into the industry.

“For so long we have been quivering about the PIB, for more than 20 years. And for so long, we have not been able to attract a lot of investment into the oil sector.

“Let me give you an example, by the year 2002, our oil reserves stood at around 22 billion barrels. We were able to grow that reserve from 22 billion barrels to 37 billion barrels by 2007.

“From 2007 to now, we have only been able to grow our reserves from 37 billion barrels to 37.5 billion barrels, in more than 10 years. Why? Not much investment is coming into Nigeria,” former Minister of State for Petroleum Resources, Sylva said at an industry event in February 2020.

The Managing Director/Chief Executive Officer of an indigenous oil and gas firm, ND Western, Eberechukwu Oji, in 2021, advocated for more private investment participation in the frontier basins exploration.

Oji who stated this in an interview with THE PUNCH said considering the fact that Nigeria has abundant oil and gas reserves, it was important that the country maximize the known and existing potential whilst making further investments in exploration.

He, however, averred that mandating a percentage for frontier basin exploration as contained in the PIA, is “a mistake and should be corrected.”

According to Oji, the country’s focus should be on  diversifying its economy by building a strong and well-funded sovereign wealth fund to drive the diversification agenda.

“In my view, capital allocation is best handled by competent managers of any corporate organisation of the size of the new NNPC. Mandating a percentage for frontier basin exploration is a mistake and should be corrected,” Oji said.

“If anything, we should be seeking to diversify the Nigerian economy by building a strong and well-funded sovereign wealth fund to drive the diversification agenda. We need to invest more in gas as a transition fuel, invest in renewables to future-proof our economy and channel our available funds to the most important resource that Nigeria has which is her people.

“Aggressive human capacity development in the frontier basin is guaranteed to pay more long-term dividend than a certain per cent profit allocation for exploration in the same basin.”

For now, frontier exploration in the Chad Basin, Sokoto Basin, the Bida Basin, Anambra platform, the Calabar Embankment, as well as the ultra-deepwater in the Niger Delta, appears to be unattractive to oil and gas exploration companies. This may not be unconnected to the issues around bankability of project and how capital-intensive exploration in these areas are. The NNPC Limited has been leading frontier basins exploration and how long the national oil firm will go on this journey remains unknown.