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Hope springs from Africa’s offshore oil installations

Financial Times: Hope springs from Africa’s offshore oil installations

By Matthew Green
Published: April 18 2008 03:00 | Last updated: April 18 2008 03:00

Seen from the porthole of a Super Puma helicopter skimming over the Atlantic, the future of African oil exploration appears for a second like a giant, fire-breathing dragon.

Towering 12 storeys above the waters off Nigeria, Royal Dutch Shell’s mammoth Bonga facility puffs a constant plume of flame as it sucks oil from below the ocean floor.

Shell sees Bonga’s start-up in November 2005 as heralding a new era of deepwater operations in Nigeria, where a series of recent reports have revealed the depths of its difficulties onshore in the swamps of the Niger Delta.

President Umaru Yar’Adua’s energy advisers warn that the country’s oil output could fall by a third by 2015 unless it succeeds in plans to boost investment in its joint ventures in the delta, of which Shell’s is the biggest, according to a report obtained this week by the Financial Times.

The report followed a warning late last year by a senior executive in Shell’s Nigerian joint venture that funding gaps imperilled the future of the 50-year-old onshore operation, which has also been hit hard by militant violence.

But for Shell and other western groups, a growing fleet of Bonga-style vessels destined for west Africa’s offshore oilfields are a symbol of hope in an increasingly fraught struggle to replace diminishing worldwide reserves.

“It never stops production,” Godwin Itamah, Bonga’s offshore installation manager, said while standing on a gantry amid the floating jungle of pipes, chimneys and turbines. “We’re producing oil every second of the day.”

Questions remain over the pace at which Shell and its peers can exploit west Africa’s offshore potential.

Costs of projects are rising fast, in line with a global industry trend, while there is uncertainty over whether Opec quotas will put a brake on offshore growth in Nigeria and Angola.

Both countries have been making increasingly assertive demands on Western groups to involve more local companies, which can sometimes cause delays.

“The governments have got much tougher [on local content],” said Will Rowley, director of analytical services at Infield Systems, the data analysts. “That puts a real constraint because if there aren’t the companies with the depths of skills you end up coming up against a brick wall.”

Bonga and other FPSOs – floating production, storage and offloading facilities – are moored so far off the coast they are considered relatively safe from the kind of attacks that have shut down much of Shell’s output in the swamps of the delta.

Oil tankers can fill up via a buoy linked by long pipe to Bonga’s hold, a bit like cars pulling up at a petrol station, before shipping the sweet, light crude to US refineries. Nigeria is already among the top five suppliers of oil to the US and by some estimates West Africa could provide a quarter of the US’s oil imports within seven years.

The US navy has launched a permanent training programme for the region’s maritime forces to ensure the crude flows undisturbed.

Warnings this week from a Russian executive that the country’s oil production might have peaked have only underlined declining production in the world’s more mature fields, but West Africa is growing fast. Shell, BP, Chevron, ExxonMobil, and Total pumped 24 per cent of their total production last year from West Africa, compared with 16 per cent in 2001, according to data from John S. Herold, the energy consultancy.

Bonga alone produces 225,000 barrels per day (bpd) – about 10 per cent of Nigeria’s output – as well as gas to feed an onshore liquefied natural gas plant.

Named after a local species of edible fish, Bonga is part of a growing shoal of similar vessels. Infield Systems estimatesFPSOs in the region will more than double from their current 27 by 2013. West Africa’s deep and shallow water oil production could rise from about 5.5m bpd this year to about 9.2m bpd by 2015, the consultancy predicts, provided the oil companies can overcome all the hurdles.

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