Royal Dutch Shell Group .com

Vanguard (Nigeria): Nigeria key to oil stability, —France * FG audits Shell-operated Bonga field: “The Federal Government has also commenced a technical and financial audit of the multi-billion dollars Bonga deepwater field development project operated by a Shell Nigeria subsidiary, Shell Nigeria Exploration and Production Company…” ( 23 May 05


By Hector Igbikiowubo, with agency reports

Posted to the Web: Monday, May 23, 2005


LAGOS—FRANCE has expressed the view that increased crude oil production by Nigeria is a key factor in meeting the challenge of rising oil prices as well as rising global consumption, particularly in the surging Chinese economy which relies on oil imports.


The Federal Government has also commenced a technical and financial audit of the multi-billion dollars Bonga deepwater field development project operated by a Shell Nigeria subsidiary, Shell Nigeria Exploration and Production Company (SNEPCO), to ascertain the cost incurred by the operator leading up to first oil.


Mr. Francois Loos, the French Trade Minister, on a working visit to the Niger Delta said: “Demand will increase by two million barrels per day every year. You have to produce them somewhere,” he told Nigerian industrialists and academics at a working breakfast in Port Harcourt before his visit to the Amenam rig, the hub of Total’s current offshore expansion.


The minister was briefed on expansion plans during a tour of the facility; a cluster of drilling rigs and production platforms linked by undersea pipes to FSO vessel (Floating Storage and Offloading), which can hold two million barrels of crude, 55 kilometres offshore.


Nigeria produced an average of more than 2.5 million barrels per day last year and has embarked on an ambitious period of expansion designed to increase its daily exports to 4.1 million barrels and beyond by 2010s.


Speaking with journalists during a visit to the Bonga FPSO vessel, weekend, Mr. Phil Chukwu, Group General Manager in charge of National Petroleum Investment Management Services (NAPIMS), the subsidiary of the Nigerian National Petroleum Corporation (NNPC) which supervises government investment in the upstream oil sector said government had begun an audit of the project.


“We are carrying out technical and financial audit of this Bonga project. We started in February 2004 and  work is still going on and that work is a rigorous assignment. We have engineers; we have financial experts who are doing that work.


“It is not a one-day thing and it can’t be a one-day thing. It will continue until we have first oil and we say yes this is the cost that we have incurred and then SNEPCO will now begin to recover it. To date, we have not paid anyone one cent on this project and that point must be borne in mind.


“When we have gone through all the papers and that has been done – that is, from the point of view of the NNPC, and agreed with SNEPCO and all the partners on this PSC (Production Sharing Contract) to say yes this is the total cost that will be recovered by SNEPCO, it is only at that point that we can say yes. All the cost that is being bandied about, probably they are estimates and speculations.


“The only time we will begin to ask SNEPCO to recover cost will be at that point. For example, we are even still debating on how the cost will be recovered – long after they have first oil. It is not a one day thing, it is something that we have to agree on and it must be based on evidence.  


“We have not had first oil yet. For example, we travelled from Lagos to this place, we have added cost. It was not planned. There are such costs occurring, but when do you now say this is the actual cost of this project up to first oil? It is at first oil you now know what the cost is and it is only at that point in time you can now say yes this is my cost,” he said.

On whether he had been invited by the Senate Committee on Upstream regarding development of the Bonga field, he said no and advised those interested in the field development to go through the PSC agreement.


“When you check out the PSC, it says they would bear the risk of exploration. What if SNEPCO drilled the first well – at that time a single exploration well was $50 million, and they did not find oil? You wouldn’t even be talking about Nigeria losing $50 million, it is their responsibility.


He said after SNEPCO achieved first oil from the field, they would recover their cost, while government would recover royalty oil, tax oil and split the profit in line with the Joint Operating Agreement (JOA).


Also speaking during the visit, Mr. Chima Ibeneche, Managing Director of SNEPCO, said the company had written to government, urging it to abide by the PSC agreement. “We went further to state that we really have no direct relationship with the Federal Government except as a contractor to NNPC as far as Bonga is concerned. Therefore, what would have been natural would be for government to go through their agents.


“Unfortunately, instead of government insisting that its own agents and institutions work effectively, they are trying to turn what is primarily a commercial and technical problem into a political problem. All it does is to drain energy from us and stop us from delivering what we are good at delivering – creating facilities that will find and develop and produce the oil for the benefit of Nigeria and the people of Nigeria.


“The real interpretation of what is going on is that there is no sanctity of any contract and that existing laws can be ignored by anybody who has power and you cannot contemplate making billions of dollars of investment in a country when you can ot have confidence in the laws of the land and the sanctity of contract law,” he said.


On the likely date for first oil from the Bonga field, he said it was scheduled for the third quarter of this year and that the company was more concerned with ensuring that it operated the facility in a safe manner. 


Click here for HOME PAGE

Click here to return to Royal Dutch Shell Group .com