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ThisDayOnline (Nigeria): Bonga: Shell Exports 200,000 Barrels of Oil

Posted 3 January 2006
Why BPE disqualified bids for PH refinery
By Mike Oduniyi, 01.02.2006
The count down to recovering the huge sum of money sunk into Bonga deep offshore oil field has begun as Shell announced yesterday the first shipment of 200,000 barrels of crude from the field.
In the downstream, details also emerged over the weekend why the Bureau of Public Enterprises (BPE), disqualified bids from four consortia for the acquisition of controlling stake in the Port Harcourt Refining Company (PHRC).
Shell Nigeria Exploration and Production Company Limited (SNEPCo) said in a statement that the 200,000 barrels of crude were loaded onboard a vessel named “ARION”, December 29, 2005.
In monetary terms, the export might have fetched $11.8 million (N15.34 billion) at $59 per barrel price of crude, according to Nigeria’s official figures, but all the earnings will accrue to Shell, which according to the contract guiding the development of the field, is obliged to first recover money sunk into developing the field.
Commenting on the export, the Managing Director of SNEPCo, Mr. Chima Ibeneche, said that it was significant that shipment was achieved using Bonga’s offshore loading buoy – the world’s first, largest and most technologically advanced polyester moored deepwater buoy, which was built in Nigeria by Nigerdock.
“We are delighted to be exporting crude from Bonga, following the start-up of production on November 25, 2005. It is a technological triumph that Shell is successfully producing oil and gas from Nigeria’s deepwater frontier and we have capped that achievement with today’s first shipment.
“It demonstrates Shell’s commitment to Nigeria, as one of the world’s key energy sources and today marks a major milestone for a project which will deliver long term benefits to Nigeria, to Shell and to our partners,” Ibeneche said.
Oil production at the Bonga facility is expected to ramp up to some 200,000 barrels per day (bpd) in 2006, SNEPCo stated. Peak production is, however, expected to reach 225,000 bpd of oil and 150 million standard cubic feet of gas per day.
Total cost of developing the Bonga field up to the first oil has been put at some $3.6 billion, which Shell will have to recover first, before the Nigerian government could then begin to share from the proceeds of oil exports from the field.
The increase in the $2.9 billion initial cost of the field, and the fact that the Nigerian government would not immediately benefit from the project, pitched the National Assembly against SNEPCo on several occasions with the lawmakers instituting one probe or the other on the project.
Located in Oil Prospecting Licence (OPL) 212, the Bonga concession was awarded to SNEPCo in 1993 under a Production Sharing Contract (PSC). Other partners are Esso (20%), NAE Nigerian Agip Exploration Ltd (12.5%) and Elf Petroleum Nigeria Limited (12.5%).
Meanwhile, the stalemate recorded in the attempt to sell 51 percent shares in the Port Harcourt refineries late last year, has been attributed to the non-inclusion of the foreign technical partners engaged by the local companies in bids as would-be co-owners of the plants.
The BPE had in its ruling December 19, 2005 declared that the bids submitted by Chrome/Chinese Petroleum Corporation/Essar Oil Consortium, Oando/Shell Group, Refinee Petroplus Consortium and Transnational Corporation Consortium, did not attained the minimum qualifying mark of 60 points to qualify for the opening of their Financial Bids.
The agency said that in consultation with its Advisers, it had decided to call for fresh bids from these companies and extend the deadline for a limited period of time.
THISDAY however, gathered the BPE advisers and technical team had faulted the bids submitted by the consortia where the technical partners only owned equity in management of the refineries but these partners would not hold any equity in the ownership of the plants. A senior official close to the transaction said that “When we looked at the bids, what happened is that we have a situation where they have management contract in place to run Port Harcourt, but do not have ownership contract with the foreign technical partners.
“The reality is that refining has become an attractive business since oil prices have gone up. We are looking at selling the plants not for five years, but 10, 15, 20 years. We got to look beyond five years when refining margins may decline and they would decline because middle east capacity is coming up in four years in response to the supply bottleneck”, the official said.
The BPE said it evaluated the bids technically largely on the presence within the consortia, of a competent refinery owner/operator with experience in refineries of similar complexity as Port Harcourt refinery; experience of the technical operator in the ownership, operation and management of a crude oil refining plant; and the capability to finance up to $200 million of capital expenditure by PHRC within the next three years.

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