…Cautions optimism as experts speak
By Michael Eboh
The Nigerian National Petroleum Corporation, NNPC, announced, last weekend, that it has discovered crude oil, gas and condensates in the Kolmani River II well in northern Nigeria.
The road to the discovery was paved with billions of naira spent on exploration.
Though the Federal Government has not disclosed the actual amount spent in searching for hydrocarbons in northern Nigeria, Professor Jerry Gana, who was then-Chairman of the Northern Nigeria Economic Summit, had, in 2013, stated that up until then, N27 billion had been spent on oil and gas exploration in the Lake Chad Basin.
This was followed by budgetary allocations in millions of dollars in pursuit of oil search in the North.
The opportunity cost of the Federal Government’s decision to spend billions in searching of crude oil in the North included the abandoned Brass and Olokola Liquefied Natural Gas, LNG, projects, the revamp of the country’s refineries, the possibility of commercial crude oil and gas finds in the oil-rich southern part of the country and the numerous infrastructural and developmental projects begging to be undertaken.
Some of these projects, according to analysts, could have been undertaken with a fraction of the amount expended in searching for crude oil in the North.
It was also estimated that over the eight months the NNPC had prospected for hydrocarbon in the Kolmani River Basin, the corporation would have spent over N2.6 billion on drilling, going by the fact that energy experts told Sunday Vanguard that rig owners charge an average of $30,000 per day on operations in onshore, land and swampy areas.
This does not include the billions expended on pre-exploration activities, such as data acquisition, host community engagement and mobilisation of personnel to site, among others.
Furthermore, in the cause of the search, numerous staff members of the NNPC and its consultants were thrown on the path of danger, with some of them losing their lives.
Specifically, aid agencies and executive members of the Academic Staff Union of Universities, ASUU, of the University of Maiduguri (UNIMAID), in July 2017, reported that about 50 persons were killed by members of the Boko Haram terrorist group who ambushed the convoy of an oil exploration team of the NNPC.
Despite the fact that energy and economic experts that spoke with Sunday Vanguard stated that the discovery was a positive development, certain questions have been thrown up by the oil find.
For instance, a former President of the Nigerian Association for Energy Economics, NAEE, Professor Wumi Iledare, cautioned against politicizing the discovery, noting that a number of things should have been considered and declared by the NNPC along with the announcement.
Iledare, who is currently Professor of the Ghana National Petroleum Corporation’s Chair of Petroleum Economics at the Institute of Oil and Gas Studies, IOGS, in Ghana’s University of Cape Coast, noted that such announcements should have come with the estimated size of discovery.
He explained that the way the announcement was made would give the host communities false hope, while the discovery, if in commercial quantity, was welcome news, confirming there are petroleum resources in other basins in Nigeria, and, if the business environment is right, investors can be assured of government strategy to offer blocks for further prospecting.
The professor said, “Honestly, the end does not justify the means. Economic decisions must be devoid of political sentiment. It is my hope that the announcement is not premature.
“Now, you need to think of proper appraisal and evaluation. Normally such announcement should have come with the estimated size of discovery. It gives false hope to the community.
“Even if the discovery is commercial, you are looking at probably between eight to ten years before the first fiscal oil assuming commercially and funding for appraisal, field development and other infrastructures
“Of course, its indirect impact on the aggregate economy is assured if the discovery is commercial. As for the direct impact on reserves, it depends on the outcome of appraisal wells.
“For impact on the economy, the community will be positively affected in the short run as spending to develop the assets materialized.
“It is my hope that the discovered hydrocarbons are dedicated as fuels to power the domestic economy.”
Also, a Professor of Geology, Mr. Ahmad Haruna, queried the find, while he called on the NNPC to provide requisite information to back up its claim of hydrocarbon find.
He noted that the announcement was rather premature, adding that the NNPC needed to give the geologic specificity of Gongola basin which they used to justify their announcement, as claiming that oil emanated from Bima 1, 2, 3, Yolde Formation or pre Bima, served as a puzzle.
Fire brigade approach
According to him, fire brigade approach will never augur well, as they ought to wait until they find and quantify the oil accumulation beyond the marginal field, which is above 500 million barrels, before making this announcement.
He said, “Actually I could not see the difference between this announcement, related to Kolmani River II (by NNPC), and the discovery of 33 billion cubic feet of gas and associated oil by SNEPCO (Shell) in 1999 from Kolmani River I (which was never announced by NNPC).
“If NNPC had earlier come out to say Kolmani River II is an appraisal well for Kolmani River I well findings by SNEPCO in 1999, it would have been more honest and logical.
“I do not believe the new Kolmani River II well was located based on their 3D follow up of the 2D seismic lines used by SNEPCO to locate Kolmani river I in 1999, because as of the time they started drilling Kolmani River II, the Chinese company that was conducting the 3D data acquisition had not completed the work let alone interpret it.
“I see Kolmani River II well as an interpolation as well as an appraisal well for Kolmani River I.
“I imply that the discovery was made by SNEPCO in 1999 (20 years ago) and not NNPC in 2019. The Kolmani River II is, therefore, a follow-up and appraisal well. Credit should be given to whom it is due. The discovery was made during the former Obasanjo government and that should be made clear.”
In his own remarks, the Chairman of the Petroleum Technology Association of Nigeria, PETAN, Mazi Bank-Anthony Okoroafor, commended the NNPC, while he stated that the release of the quantity of the find would be crucial in future analyses of the project.
He said, “It is a good move. I hope we will have this in commercial quantity. That is why we have been pushing for the exploration of our inland basins. It is all part of our energy security.
“I still praise the NNPC for its doggedness in getting to this level. But we have to wait to see the volumetrics.”
On his own part, a former President of the Petroleum and Natural Gas Senior Staff Association of Nigeria, PENGASSAN, Comrade Peter Esele, also called for caution until the NNPC confirms if the find was in commercial quantity.
He said the find is a positive development as it would enhance the country’s reserves, generate more money for the country, create more employment and also expand the economy of the area.
He argued that the find would balance out certain political factors in the country in the long run, especially if the current find is in commercial quantity.
However, he warned, “Our biggest challenges had not been lack of opportunities, but how we have been able to maximize the opportunities that come along and also manage efficiently and optimally the challenges that we face.
“The discovery of hydrocarbon in this basin would not stop the various agitations we have been witnessing in host communities.
“The downsides include that we have not been taking advantage of crude oil over time. Another downside is that the area where this was discovered is an agrarian community.
“I can assure you that if they do not manage it very well, that could be the end of agriculture in the area and along the entire stretch of states along the Benue Trough.
“Benue and the states around this trough is one of the food baskets of this country. My worry is that if it is not properly managed, the youths in that area and everybody would want to be in oil and gas and everybody would want to be Community Liaison Officers, CLO.”
In his own submission, Dr. Eze Onyekpere, Executive Director, Centre for Social Justice, CSJ, called for caution, stating, “While discoveries of hydrocarbons in geopolitical zones apart from the Niger Delta of Nigeria, may, in the short term, relieve our quest for improved revenue, the days of the oil economy are numbered, considering climate change threat and the emergence of new technologies that will no longer rely on hydrocarbons.
“However, whether the discovery is in commercial quantity is yet to be determined. But we need to learn the right environmental lessons from the oil exploitation in the Niger Delta to avoid human misery and disasters.
“The way forward for Nigeria in the new age of the fourth industrial revolution is to ensure that we begin technological value addition and economic growth, not mere reliance of minerals and natural resources.”
Crude oil search commenced in northern Nigeria 45 years ago, in 1974 specifically, continuing in 1996, after a brief break.
With the resumption in 1996, a major milestone was recorded in 1999, with the discovery of gas in non-commercial quantity in the Kolmani River region.
In 2000, exploration was suspended and later resumed in 2014. In 2016, President Muhammadu Buhari gave the NNPC a marching order to commence crude oil search in the northern region, mostly in the Benue Trough. The NNPC mobilized resources to the region, especially in the Lake Chad Basin and other areas around the region.
With the escalation of insurgency in the North-East in 2017, hydrocarbon search was suspended in the region. It later resumed in February 2019, when Buhari flagged off crude oil search in the Kolmani River II Well on the Upper Benue Trough, Gongola Basin, between Bauchi and Gombe States.
Buhari’s directive, according to the NNPC, was because of the discovery of crude oil in commercial quantity in Niger, Chad and the Central African Republic, all in the Chad Basin.
The several efforts put into the find in northern Nigeria culminated in the claim by the NNPC that it discovered crude oil on October 10, 2019 at the Kolmani River II Well.
This is a pointer to the fact, that if the government and its agencies display the same zeal and commitment to Nigeria’s economic development, nothing would stand on the way of the country in achieving greatness.
The search for crude oil in the Kolmani River II Well was undertaken by the NNPC.
This was after Shell had tried and could only discover gas in non-commercial quantity in Kolmani River I Well in 1999.
Despite the loss of lives and the money spent so far, analysts agree that the discovery of hydrocarbon in the North is a good development, especially as it would boost Nigeria’s crude oil and gas reserves as well as output, grow the country’s foreign exchange earnings, and boost foreign reserves.
In announcing the recent find, the NNPC claimed that it acquired 435.54 square kilometres of 3D Seismic Data over Kolmani Prospect in the Upper Benue Trough, Gongola Basin, to evaluate Shell Kolmani River 1 Well discovery of 33 BCF and explore deeper levels.
The corporation said the well was drilled with “Ikenga Rig 101” to a total depth of 13,701 feet encountering oil and gas in several levels, adding that a Drill Stem Test, DST, is currently on-going to confirm the commercial viability and flow of the Kolmani River reservoirs.
It noted that preliminary reports indicated that the discovery consists of gas, condensate and light sweet oil of API gravity ranging from 38 to 41 found in stacked siliciclastic cretaceous reservoirs of Yolde, Bima Sandstone and Pre-Bima formations.