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Nigeria seeks to double oil exports

Mail & Guardian Online (South Africa): Nigeria seeks to double oil exports

By Dave Clark

22 May 2005

 

With the world’s demand for oil and gas surging, multinational energy giants have embarked on a platform-building spree off the southern coast of Nigeria with an eye to doubling exports from the unruly West African giant.

 

From the deck of Total’s Amenam platform, high above the surging blue waters of the Atlantic, visitors can see the bright orange gas flares of a half-dozen more wells through the haze in the middle distance.

 

In the foreground lie the half-built structures of future oil and gas rigs.

 

Nigeria — which last year produced an average of more than 2,5-million barrels per day despite chronic insecurity in its oil-rich regions — has embarked on an ambitious period of expansion designed to increase its daily exports to 4,1-million barrels and beyond within the next few years.

 

At the same time, massive investment is being poured into building liquefied natural gas plants to convert the gas, which is wastefully and damagingly burned off above the wells, into a saleable and clean-burning fuel for the world’s rapidly expanding market of gas-fuelled power stations.

 

The bulk of the extra production is expected to come from offshore fields, some on the continental shelf in waters off the coast of the Niger Delta and some in deeper and so far vastly underexploited fields under the once-inaccessible floor of the Atlantic Ocean.

 

French Trade Minister Francois Loos, who visited the Niger Delta last week, said Nigeria’s expansion will be a key factor in meeting the challenge of rising prices and rising consumption, particularly in the surging Chinese economy, which relies on oil imports.

 

“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 the oil city of 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 a massive floating storage and offloading vessel, which can hold two million barrels of crude, 55km offshore.

 

Massive investment

 

Total is currently a relatively small player in Nigeria’s oil sector, exporting about 220 000 barrels per day, but by 2010 it “will double and probably more than double that” thanks to a $1,2-billion investment over the next three years, said Total’s regional manager, Thierry Bourgeois.

 

A parallel to the French group’s activities, the Anglo-Dutch giant Shell, Italy’s Agip and the United States majors ChevronTexaco and ExxonMobil are also racing into new offshore territory. Shell alone has promised to invest $8,2-billion in new production between 1999 and the end of the year.

 

Shell’s Bonga field, which is due to come online by the end of the year, is thought to hold 1,2-billion barrels of crude, while Chevron has begun work on the Agbami field, which holds one billion barrels.

 

Nigeria’s presidential oil adviser Edmond Daukoru predicts new finds totalling two to three billion barrels of oil every year until 2010. This year, he will auction off 60 more oil-exploration blocks both offshore and in previously unexploited areas of the Nigerian mainland.

 

The attractions of Nigerian oil are easy to see. It is largely sweet, light, low-sulphur crude — which is easy to convert into petrol — and lies near the shipping lanes to the fuel-hungry US and Brazil’s emerging market.

 

But the industry has been plagued by Nigeria’s unstable political scene.

 

Onshore wells in the swamps of the Niger Delta are often targeted by pirates and ethnic militants.

 

Total shut down its operations in the block known as Oil Mining Licence 57 in the western delta swamps near Warri on March 15 2003 after its tank farm there was destroyed in an attack that left five people dead. About 10 000 barrels per day in production have been lost.

 

ChevronTexaco’s nearby wells have also been shut since March 2003 following the same ethnic violence. Several tens of millions of barrels in estimated reserves have lain untapped under Ogoniland since Shell quit the area following the controversial execution of minority rights activist Ken Saro-Wiwa in 1995.

 

Compared to such risks, the added engineering difficulties of working offshore become insignificant. Some offshore licences have also come with more favourable terms from the government, allowing firms to recoup their development costs over several years before sharing profits with the Nigerian state.

 

But the sense of security provided by the sea separating the rigs from the chaos and poverty of the delta may turn out to be false if Nigeria cannot learn to translate its oil wealth into greater well-being for its people, Nigerian and international officials warn.

 

Since the first oil started flowing from Shell’s Oil Well Number One in Oloibiri in 1956, Nigeria has earned more than $300-billion. In the same time, the proportion of its rapidly growing population living below the poverty line has more than doubled, to 75%, according to the World Bank.

 

Ethnic, political and sectarian strife combined with well-armed pirate gangs threaten disaster to what has become a place of strategic economic importance, warned Nigeria’s Chief of Navy Staff Samuel Afoloyan at a security conference this year, urging the West to buy him ships to defend the platforms.

 

Nevertheless, for the moment the drilling and building continues. — Sapa-AFP

 

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