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This Day (Lagos): Nigeria: Chevron, Shell Relinquish Deep Offshore Oil Block

By Mike Oduniyi
Lagos
Crude oil exploration in Nigeria's deep offshore region has suffered a set back after multinational oil companies including Chevron and Shell, joint owners in Block OPL 250, relinquished the asset to the Federal Government over poor results from a five year drilling campaign.
Nigeria's oil production has again been further cutback by 75,000 barrels per day (bpd) after unknown persons blew up Friday night, a crude oil pipeline belonging to Nigerian Agip Oil Company (NAOC) in Tebidaba-Brass, Bayelsa State. This has now taken the country's total production loses to 631,000 bpd of oil, representing 25 percent of Nigeria's daily oil production.
The stakeholders in OPL 250, which also included US firm ConocoPhillips and Brazil's Petrobras, said they had an unsuccessful exploration campaign in the block for which they paid the Federal Government signature bonus of $75 million.
OPL 250 was among the eight oil blocks awarded in December 2000, when the government held the first open bidding round for the allocation of oil licenses.
Chevron, appointed the operator of the block after a bitter quarrel with Shell (which originally believed it owned the block), drilled one well, Iroko -1, in the block to a water depth about 2,300 meters.
However, the acreage, which first hold much geological prospects and attracted interest from major oil companies that participated in the 2000 licensing round, results obtained from the well drilled fell short of expectations.
“After drilling Iroko-1 well and we evaluated the hydrocarbon potential, what we saw was short of commercial discovery,” a source close to the joint venture partners, disclosed to THISDAY.
“The result was too short to justify deepwater development. So the stakeholders in block OPL 250 agreed to relinquish,” the source said, adding that the decision had been communicated to the Nigerian National Petroleum Corporation ((NNPC) under the Production Sharing Contract (PSC) agreement.
The decision climaxed the bitter struggle for the possession of OPL 250, then believed to be rich in oil reserves compared to seven other offshore oil blocks, OPLs 214, 229, 242, 244, 318, 320 and 324, the Federal Government put on offer in March 2000 in the first of its open and competitive licensing rounds in the country to encourage a shift to the offshore by foreign companies.
Shell had offered $200 million for the block, while US-based Ocean Energy put in $210 million, Petrobras $100 million and Chevron $75 million. The Ministry of Petroleum Resources, however, announced Chevron as the operator, joining Shell, Ocean Energy and Petrobras as partners.
In November 2001, Chevron and its partners signed a 30-year PSC agreement with NNPC for the exploitation of OPL 250.
The exploration setback in OPL 250 has left Chevron, Nigeria's second biggest oil producer still with no deep offshore production although the US oil major now looks up to drilling in Agbami, Usan and Aparo fields for a successful foray into the deep offshore region. Shell on the other hand, has the huge Bonga field already producing for it some 200,000 bpd of oil.
“The fields in the deepwater are never the same. One may have a good geological feature but poor in accumulation of oil, it is only when you drill that you can really say,” a Chevron official explained.
Meanwhile, oil production from the country has further reduced by 75,000 bpd after unknown persons attacked an Agip oil pipeline in the swamp of Bayelsa State on Friday night, signifying that insurgence in the Niger Delta was now moving eastward. Agip officials told THISDAY yesterday that there was an attack on the company's trunk line. “Some persons yet to be identified blasted the pipeline. Right now we are moving to curtail the oil spilled from the attack on the line,” said an official. He said that no group has yet come out to claim responsibilities for the attack.
A militia group known as the Movement for the Emancipation of the Niger Delta (MEND) had launched series of attacks on Nigeria's oil producing facilities since January, to press demand for increase in the share of oil revenue for oil-producing states, release of two Ijaw leaders from detention and payment of $1.5 billion compensation by Shell to Ijaw communities.
THISDAY had reported recently that oil companies with operational bases mainly in Rivers and Akwa Ibom states could be next on the firing line as the militants planned an eastward proliferation of their attacks on facilities in the area.
Companies prominent in this area are Italian oil firm, Nigerian Agip Oil Company (NAOC), US oil major ExxonMobil and French firm Total.
It was revealed then attacks on the oil firms based in the east of the Niger Delta, might further worsen the production and revenue losses. Mobil, Total and Agip account for a total of 1.1 million bpd of oil production.

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