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BusinessDayOnline: Defending the cost of Shell’s Bonga, pride of the nation

03 January, 2008 12:00:00 EJIOFOR ALIKE

The trellines, which are bonded hoses made of rubber, steel rings, and reinforced rubber layers that allow the hose to withstand internal pressure, were installed without any impact on oil production during the entire installation process.

SBM was contracted by Shell Nigeria Exploration and Production Company (SNEPCO) for the supply and installation of a trelline flexible export line for the Bonga field offshore.

The line, with a total length of over 2,000 metres and a 20-inch diameter, is suspended between the spread moored Floating Production Storage Offshore (FPSO) and the export buoy at a depth of about 100 metres under the water surface.

The trellines, which are designed by SBM are adapted for higher tension levels and a longer service life of 20 years.

Energy experts say a landmark innovation in the installation, was the putting in place, the mid-water flow line without shutting the oil well.

BusinessDay gathered that SBM’s Dynamic Installer maneuvered the trellines into position, avoiding mooring lines and steel catenary risers.

The newly placed line was filled with water to facilitate installation. When the trelline was in place, it was connected to the system and flooded with oil, which displaced the water into the FPSO and readied the line for production, sources disclosed.

Located in Oil Mining Licence (OML) 118 (previously Oil Prospecting License (OPL) 212) the Bonga concession was awarded in 1993 during the first round of bidding for the country’s deepwater frontier acreage.

The field lies at a distance of 120 kilometres from the country’s shoreline, approximately four degrees and 33 seconds North; and four degrees and 36-seconds East.

It is operated by SNEPCo, which controls 55-percent on behalf of the Nigerian National Petroleum Corporation (NNPC) under a Production Sharing Contract (PSC).

SNEPCo has a Joint Operating Agreement (JOA) with Esso, which has 20 percent participating interest, Nigerian Agip Exploration Ltd; 12.5 percent and Elf Petroleum Nigeria Limited;12.5 percent, in respect of OPL 212.

Target production it was gathered, is 225,000 barrels of oil and 150 million standard cubic feet of gas per day.

The development cost to first oil for Bonga is some $3.6 billion (N457.2-billion).

The field was discovered and developed by Shell using its technology and deepwater experience, and marks a number of industry records.

The 60 square kilometre field is situated in water depths of more than 1000 metres. Production facilities comprise one of the world’s largest Floating Production Storage and Offloading (FPSO) vessels and deepwater subsea infrastructure.

The field’s initial 16 subsea oil producing and water injection wells are connected to the two million barrel storage capacity FPSO by production flowlines, risers and control umbilicals.

The technological feats achieved with Bonga include the fabrication and installation of the world’s largest deepwater Single Point Mooring Buoy at Nigerdock in Lagos.

Despite the impressive performance of Bonga as a world class deepwater field, its $3.6 billion development cost to first oil was on the news recently.

Interestingly, some industry analysts, including the Environmental Right Action (ERA) Report for 2007 have queried the upward review of the cost by its operators.

They maintain that similar deepwater field in other parts of the world would not gulp such whooping amount.

As plausible as this argument may be, it is pertinent to look at the peculiarity of the Bonga technology, as well as the operating environment before comparing the cost of doing business in the country with what is obtainable elsewhere.

Only about 20 months ago, the issue was not the cost of Bonga but whether such deepwater field could come on-stream in this part of the world, a territory without deepwater infrastructure.

Before Bonga, experts noted there was no such project that had been undertaken in sub-saharan Africa.

The argument that there were smaller projects in the Gulf of Mexico and one in Angola, which could have been used as benchmark for Bonga, could not hold water.

As the project was going on, a number of issues came up which were not originally envisaged.

When the project estimate went up, there were many issues tied to it, including the rising cost of steel and the lingering crisis in the oil-rich Niger Delta.

According to experts, the cost of doing business in Nigeria is the highest in the world. This they reasoned is because no other social or business environment is as volatile as the country.

In ordinary trade terms, experts have argued that more than 70 percent of goods that are supposed to come into the country go through Cotonou due to the peculiarity of the Nigerian environment.

This translates to high cost of doing business, a sad development that is alien in The Hague or other parts of the world.

Many things are special about Bonga – risk is very high; it is the country’s first deepwater field; it requires specialised complex deepwater technology.

It also provides opportunities for local content development in design and fabrication, as well as a model for other deepwater projects in the country.

Despite the technical and financial challenges, Bonga was completed on schedule.

Reacting to this, industry experts say they were yet to identify any other similar project that had such production uptime in any part of the world.

The technical success of Bonga is legendary, a success that is used as a benchmark not only in the Shell Group, but also in other western oil majors.

In fact, Bonga is said to be the basis for learning by projects like the ExxonMobil’s Erha deepwater.

Reports also have it that at a recent conference in Holland, delegates from more than 30 countries were amazed at the technical success of the project, a single project that adds more than 10 percent to the daily national output.

“Bonga begins a new chapter in Nigeria’s oil and gas production, and an important contribution to new material oil production for Shell. The project targets an increase of around ten percent in Nigeria’s oil production and around 25 percent increase in Shell operated production in the country,” said Malcolm Brinded, executive director, Shell Exploration and Production.

“We pioneered the advance into Nigeria’s deepwater frontier, leveraging Shell’s global expertise to discover and develop producible hydrocarbons. Bonga will deliver excellent value to the Government and people of Nigeria, co-venturers and the shareholders, for many years to come,” observed Chima Ibeneche, former managing director, SNEPCo.

At $3.6 billion, the cost of Bonga is indeed comparable to any project of its size and magnitude in other parts of the world.

By and large, Bonga has been identified as a single project to be proud of, an asset to the company and an asset to the nation.

http://www.businessdayonline.com/Energy/1817.html

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