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Oil production in Lagos: The concerns, the celebrations

By Michael Eboh

 Nigeria’s quest for increased crude oil production and reserves is on the verge of being achieved with the commencement of oil exploration in offshore Lagos, at the Aje field located in Oil Mining Lease 113. Though the actual quantity of current production was not stated, it is expected that production from the well would contribute to Nigeria’s attainment of four million barrels per day crude oil target and also help achieve the daily target of 2.5 million barrels.

Lagos-OilIt is also expected to boost the country and Lagos State’s revenue profile, generate employment and make positive contribution to the economy of the country in general. However, the commencement of production also raises certain questions and concerns, especially as it concerns the management of proceeds from the field. This is mainly due to the large-scale corruption that has bedeviled the Nigeria’s oil and gas sector over the years.

There is also concern around environmental management, mostly because of the fact that most of the communities in the Niger Delta are currently battling with environmental pollution and degradation of immense proportion, due to oil exploration activities within the area.

Aje is an offshore field located in Oil Mining Lease (OML) 113 in the western part of Nigeria, in the Dahomey Basin. The field is situated in water depths ranging from 100 to 1,000 metres about 24 km from the coast. The Aje Field contains hydrocarbon resources in sandstone reservoirs in three main levels – a Turonian gas condensate reservoir, a Cenomanian oil reservoir and an Albian gas condensate reservoir.

Panoro Energy, one of the owners of the oil field, disclosed that AGR TRACS International calculated the gross Cenomanian oil Proved plus Probable Reserves estimate associated the Aje-4 and Aje-5 wells, and the gross Contingent Resources estimate associated with the future drilling of Aje-6 and Aje-7 wells.

At that time, the company said AGR TRACS International calculated these as 23.4 million barrels (MMbbl) and 15.7MMbbl respectively (on a gross basis), indicating a mid-case expected ultimate recovery of 39.1MMbbl from the Cenomanian Oil Reservoir once all four wells have been drilled.

AGR TRACS International also calculated the Turonian gas and condensate/oil best estimate gross contingent resource as 163 million barrels of oil equivalent (MMboe).

Former Commissioner for Energy and Mineral Resources for Lagos State, Mr. Taofiq Tijani, had during the announcement of the discovery of oil in the state, disclosed that Lagos had done its due diligence about the activity of oil and gas within the state and was aware of the different status and level of activities.

He said the state is aware of companies that have drilled and found oil, but are yet to commence operation after about seven years.

He said, “We were aware when they found the oil and they contacted us so that we can work in partnership to develop that block. So we are in touch with them. We know about another block owned by Sunlink. We have also been interacting with all the professional groups, Geologists, Geo-physicists’, petroleum engineers and stakeholders to know about the kind of resources we found within our offshore, onshore Lagos.

“We have been told all along, that offshore Lagos is also a potential oil producing region like the Niger Delta, if they do enough exploration and exploitation activities. We know that the reservoir that we are talking about of the new discovery will amount to that of the Jubilee Field in Ghana where they are now producing.

“So it is not news to us that they found oil, it is a thing of joy that they put in money to be able to explore and make arrangement for production.”

“What then is the economic impact of this discovery to the state? As for the economic impact for Nigeria and Lagos in particular, it has a very positive economic implications for Nigeria. Considering the fact that Nigeria has made a projection that we are going to achieve certain billion barrels of reserves in certain years. We have not been able to make good the projection because most of the international oil companies are not doing what they are supposed to do – developing their resources.”

He had blamed the inability of the other companies to start production on the absence of a proper fiscal regime, especially with the delay in the passage of the Petroleum Industry Bill (PIB).

Panoro Energy ASA, an independent Exploration and Production (E&P) company, with assets in Nigeria and Gabon, in conjunction with its partner, the Operator of OML 113, Yinka Folawiyo Petroleum Company Limited, had earlier in the week announce the first oil production from the Aje field, offshore Lagos.

According to Panoro, subsea installation activities had been underway at Aje since January and were completed in early March ready for the hook-up of the Front Puffin Floating Production, Storage and Offloading, FPSO, which arrived in Nigeria on the 16th of March.

The company said oil produced from the Aje field will be stored on the Front Puffin which has production capacity of 40,000 barrels of oil per day and storage capacity of 750,000 barrels, adding that flow rates will be provided in Panoro’s next operations update, following a period of commissioning and well stabilisation.

Commenting on the development, Panoro’s Chief Executive Officer, John Hamilton, said, “We are extremely pleased to announce the start of first oil production at Aje. This is a transformational milestone for Panoro and represents a great achievement by the Aje project teams. “It is also a key building block in our strategy to become a full cycle E&P company, focused on West Africa. The commencement of production at Aje is also significant for Nigeria as it is the first commercial production for the country in the emerging Dahomey Basin.”



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