ranging from 21o API to 45o API. Nigeria's main export crude blends are Bonny Light (37o API) and Forcados (31o API). Approximately 65% of Nigerian crude oil production is light (35o API or higher) and sweet (low sulfur content).
Nigerian crude oil production averaged 2.118 million barrels per day (bbl/d) in 2002. On January 12, 2003 OPEC decided to raise the "OPEC 10" (excluding Iraq) production quota from 23 million bbl/d to 24.5 million bbl/d, effective February 1, 2003, in order to ensure adequate supplies of crude in response to the oil supply shortfall in Venezuela. Nigeria's new quota was set at 2.018 million bbl/d. At the OPEC meeting, convened on March 11, 2003, OPEC decided to maintain, for the time being, the current "OPEC 10" production ceiling.
Production from joint ventures (JVs) accounts for nearly all (about 95%) of Nigeria's crude oil production. The largest JV, operated by Shell, produces nearly 50% of Nigeria's crude oil. The NNPC, the state-owned oil firm, has a 55% interest in the Shell JV. The other JVs, in which the NNPC has a 60% stake, are operated by ExxonMobil, ChevronTexaco (formerly as Chevron), ENI/Agip (Agip), and TotalFinaElf.
A major problem facing Nigeria's upstream oil sector has been insufficient government funding of its JV commitments. The Nigerian government has two major funding arrangements for oil producing in the country: JV and production sharing contract (PSC) arrangements. Under the JV arrangements, the Nigerian government and its partners contribute to these projects according to their equity holding. Under a PSC, oil companies fund the operations and the profits are shared according to agreed arrangement after the company has recouped its expenditure. The NNPC has proposed a JV cash call budget for 2003 of $4.6 billion in its proposals to the Nigerian legislature. NNPC officials stated its funding request is consistent with the federal government objectives of achieving 40 billion barrels of proven reserves and 4.0 million bbl/d of production capacity by 2010.
The majority of Nigeria's crude exports are destined for markets in the United States and Western Europe, with Asia becoming an increasingly important market as well. In 2002, Nigerian crude exports to the United States averaged 567,000 bbl/d (6.27% of U.S. imported crude oil) a decline from the 842,000 bbl/d in 2001 (9.03% of U.S. imported crude oil). Nigeria was the 5th largest crude exporter to the United States in 2002, behind Saudi Arabia, Mexico, Canada and Venezuela. The NNPC estimates it earned $4.15 billion from crude oil exports from January to September 2002 (EIA estimates that Nigeria earned $17.2 billion in oil export revenues in 2002).
Shell's 40-year-old Bonny Island oil export terminal is in the process of being upgraded and expanded. When completed, the facility will be able to export 1.5 million bbl/d. The $600 million project is expected to be completed in 2006.
Nigeria is a significant supplier of crude oil and refined petroleum products regionally. Nigeria reached an agreement to supply refined products to Guinea. Under terms of the deal the NNPC will supply monthly, 45 metric tons (15 tons each) of gasoline, diesel and kerosene. The NNPC is also considering a deal to supply up to 50,000 bbl/d of crude oil to Cote d'Ivoire's refinery.
Exploration and Field Development:
In March 2000, Nigeria opened competitive bidding on 22 new oil blocks, including 11 in the Niger Delta deep and ultra-deep offshore, in which 46 oil companies participated and 14 blocks received a total of 51 bids. Awards for eight of the offered exploration blocks were announced in December 2000. The licensing round was the Nigeria's first in over a decade.
In July 2002, Shell was awarded Block OPL 245 after the license had been withdrawn from a local firm, Malabu Oil & Gas. The government has said the license was revoked in May 2001 because Malabu, owned by former Nigerian President Sani Abacha and his former oil minister Dan Etete, was improperly given the concession and also that it failed to pay the $20-million signature bonus by the agreed deadline. US-Independent Ocean Energy was awarded offshore OPL 256 in November 2002. The block is adjacent to two highly prospective areas, Shell's OPL 245 and OPL 246, operated by TotalFinaElf and South Atlantic Petroleum.
The Nigerian government held a special bidding round to offer marginal fields to local firms and in June 2002 the government pre-qualified 71 companies out of 150 that submitted bids.The round was held to allow more participation by indigenous oil companies in Nigeria's upstream oil exploration and production activities. Local firms currently account for approximately 150,000 bbl/d (roughly 5%-6%) of Nigeria's oil production. The government has identified 116 marginal fields located within the leaseholds of the multi-national oil companies in the Niger Delta. These fields, which according to the
government had collective reserves totalling about 1.3 billion barrels, have not been developed and are considered uneconomical to produce by the current leaseholders.
Nigeria has the potential to increase its crude oil production significantly in the next few years as recent discoveries come on stream. ExxonMobil has launched its construction work on Nigeria's deep-water Erha field, which is estimated to contain 500 million barrels of reserves. ExxonMobil announced the discovery in 1999 on Block OPL 209. At maturity Erha should yield 150,000 bbl/d, and first oil was expected in 2005. ExxonMobil holds a 56.25% share and operates Block OPL-209 under a production-sharing contract (PSC) with NNPC. Shell is the other partner on OPL-209. Erha's $1.1-billion field development is expected to include a Floating Production Storage and Offloading vessel (FPSO), 15 producing wells, five water injection wells, and four gas injection wells.
ExxonMobil is also developing the 400-million-barrel Yoho field in the shallow waters of Block OML-104. ExxonMobil holds 40% and NNPC 60% of the $1.2 billion project. Initial production, producing at 90,000 bbl/d, began in February 2003. Yoho utilizes an FPSO to allow oil production almost two years ahead of the full-field production capacity. When full-field output of 150,000 bbl/d is achieved in late 2004, the FPSO will be replaced by a floating storage and offloading (FSO) vessel. Associated gas will be re-injected to maintain field pressures and eliminate flaring.
In February 2003, the ChevronTexaco/NNPC JV announced its plan to spend $4 billion on developing three oil and gas projects in Nigeria including the deepwater Agbami field. In November 2001, ChevronTexaco and its partners signed a 30-year PSC with Nigeria for the exploitation of OPL 250. Tests confirm that Agbami contains nearly 1 billion barrels of recoverable hydrocarbons. Agbami, which covers 45,000 acres, is located about 70 miles from Nigeria's coast. Oil production, utilizing a FPSO, should begin by mid-2006 and peak at 225,000 bbl/d. The majority of the Agbami field lies in Block OPL 216, where ChevronTexaco holds a 32% interest. ChevronTexaco's partners on OPL 216 are NNPC (40%) Petrobras (8%) and the indigenous firm, Famfa Oil (20%). Approximately one-third of Agbami lies in the adjacent Block OPL 217. Statoil (54%) is the operator on the block and ChevronTexaco (46%) is its partner.
Work is continuing on Shell's massive Bonga deep-water development, which has the potential to produce 225,000 bbl/d. Bonga is estimated to contain 700 million barrels of oil and it came on stream in 2004. Shell is the operator (55%), partnered with ExxonMobil (20%), Agip (12.5%), and TotalFinaElf (12.5%). The field will be serviced by a 2.0-million-barrel FPSO. In May 2001, Shell announced a second major discovery on Block OPL 212 (OML 118), which contains the Bonga Field. Bonga South West, is estimated to contain reserves of nearly 600 million barrels of oil. Drilling on the Bonga South West development was estimated to be completed in 2003 with the first oil produced, also by FPSO, expected in 2005.
Limited production from Shell's EA field (Block OML 79) began in December 2002. With estimated reserves of 350 million barrels of oil, the EA field is expected to produce at peak more than 125,000 bbl/d of oil and up to 100 million cubic feet per day (Mmcf/d) of natural gas.
Agip is developing the Abo discovery on Block OPL 316. Agip (40% and operator), BP (35%) and ExxonMobil (25%) hope to produce 30,000 bbl/d from the Abo field.
In May 2000, TotalFinaElf announced the Akpo-1 discovery on Block OPL 246. Initial tests on the field yielded output of 9,000 bbl/d of very light oil. Akpo was originally estimated to contain reserves of 200 million barrels of crude and condensate, but additional appraisal drilling has upped the estimate to nearly 1 billion barrels of oil and 4 trillion cubic feet (Tcf) of natural gas. TotalFinaElf is the operator with a 24% share, and its partners are South Atlantic Petroleum (60%) and Petrobras (16%). The Akpo field is very near the boundary of the Joint Development Zone (JDZ) recently established between Nigeria and Sao Tome and Principe, and it may extend into the JDZ.
TotalFinaElf (operator) is also developing the Amenam/Kpono field, which straddles Blocks OML 99 and OML 70. Development drilling began in early 2003, and the field began production in July 2004. Production is expected at 125,000 bbl/d. The Amenam/Kpono project is said to be the single largest scheme in the world in the traditional shallow water environment. Total reserves on Blocks OML 99 and OML 70 are over one billion barrels. In 2002, TotalFinaElf took delivery of the FSO for the project. The new vessel has a storage capacity of 2.2 million barrels of oil, is designed to handle up to 230,000 bbl/d of liquid production and has the capacity to export crude oil at up to 50,000 barrels per hour to loading tankers. TotalFinaElf's (31.2% interest) partners on Amenam/Kpono are ExxonMobil (8.8%), and NNPC (60%).
TotalFinaElf plans to drill additional appraisal wells on Block OPL 222, the location of the kot-1 discovery. Ukot was discovered in 1999 in 1,800 feet of water and flowed 15,000 bbl/d on test. A second discovery, Usan was made in May 2002, and it tested at 5,000 bbl/d in 2,450 feet of water. The Ukot/Usan discoveries could be on stream within four years if further delineation and exploration work prove successful. TotalFinaElf, the operator on OPL 222 with a 20% interest, is partnered with ChevronTexaco (30%), ExxonMobil (30%) and Nexen (20%).
Refining And Downstream:
Nigeria's four refineries (Port Harcourt 1 and 2, Warri, and Kaduna have a combined nameplate capacity of 438,750 bbl/d, but problems including sabotage, fire, poor management and lack of turnaround maintenance have sharply decreased actual output. In March 2003, NNPC officials stated that maintenance work at its Port Harcourt refinery has been completed and that the plant is now operating at an improved production capacity of approximately 90,000 bbl/d. However, repairs are ongoing at the Kaduna and Warri refineries. The NNPC signed a Memorandum of Understanding (MOU) with Venezuela's state oil firm PDVSA in December 2000 to help maintain Nigeria's refineries. In March 2003, ChevronTexaco signed an agreement with NNPC to take over the management of
the Warri and Kaduna refineries and its crude oil tanks in Delta State.
The NNPC will retain ownership of the refineries; only the management of the facilities has been signed over to ChevronTexaco. While Nigeria's state-held refineries are slated for privatization, plans for several small, independently-owned refineries are being developed. Nigeria has awarded 18 private refinery licences after opening up the country's downstream sector to private investment. President Obasanjo laid the foundation stone of the $1.5 billion Tonwei Refinery (in October 2002) in a ceremony marking the start of construction of Nigeria's first private refinery. The Tonwei Refinery will have an initial capacity of 100,000 bbl/d and it can be expanded to 200,000 bbl/d. The government of Lagos State has announced that it is studying the possibility of establishing a refinery. Lagos is estimated to consume more than 50% of Nigeria's petroleum products. The refinery, if built, will serve not only Lagos but also Nigeria's other southwestern states.
The Akwa Ibom state government announced that it had concluded plans to build a 12,000-bbl/d refinery. U.S.-based Ventech announced that design and construction of the refinery, to be built in prefabricated modules in the United States and then shipped to Nigeria for assembly, had begun. The facility will be located in Eket, adjacent to the Qua Iboe crude terminal. The Edo State government has obtained approval from the federal government to build an oil refinery. Capacity is expected to be 50,000 bbl/d, and a consortium of Nigeria's independent, local petroleum marketers stated that the government had approved their plan for the construction of a refinery in Nigeria's Federal Capital Territory. The lack of refining capacity in the country has been a key factor in Nigeria's fuel crisis.
Nigeria has an estimated 124 trillion cubic feet (Tcf) of proven natural gas reserves (9th largest in the world). Due to a lack of utilization infrastructure, Nigeria flares 75% of the natural gas it produces and re-injects 12% to enhance oil recovery. President Obasanjo announced in January 2003 that the official date to end natural gas flaring has been reset for 2004. This date represents a four-year revision of the previous target of 2008. World Bank estimates that Nigeria accounts for 12.5% of the world's total gas flare with a record estimate of 2.5billion cf daily gas flare in the process of oil exploration in the Niger Delta; amounting to about $2.5billion annual loss. Nigeria ranked today as the World biggest culprit on gas flaring. Nigeria's most ambitious natural gas project, the $3.8 billion LNG (Liquefied Natural Gas) facility on Bonny Island, was completed in September 1999. The facility is expected to process 252.4 billion cubic feet (Bcf) of LNG annually. The consortium developing the project, Nigeria Liquefied Natural Gas Corporation (NLNG), is comprised of the NNPC (49%), Shell (25.6%), TotalFinaElf (15%), and Agip (10.4%).
Initially, the facility is to be supplied from dedicated natural gas fields, but within a few years it is anticipated that half of the input gas will consist of associated (currently flared) natural gas. The third LNG production train, with an annual capacity of 130.6 Bcf, began operations in November 2002. The third LNG train
will increase NLNG's overall LNG processing capacity to 383 Bcf per year.
NLNG has added two additional liquefaction trains and they are in operation by the end of 2005. NLNG has secured a $1.06 billion loan towards the construction of trains 4 and 5, which it says is the largest private sector loan ever in sub-Saharan Africa. The total cost of the fourth and fifth trains is $2.1 billion, excluding ship acquisition costs. NLNG officials stated in January 2003 that it hoped to have a sixth train operational in 2006. The two new trains will have a combined capacity of 363.5 Bcf per year. In March 2003, NLNG obtained $460 million in loans to expand its fleet of vessels. An additional eight vessels are needed to meet the shipping requirements for the fourth and fifth trains. Several customers have signed long-term purchase agreements with NLNG. Four sales agreements, covering over half of trains four and five's planned output, have been signed. NLNG has delivered 21 spot LNG cargoes to the Lake Charles, Louisiana LNG receiving terminal since 2000, and an additional 17 cargoes were expected to be delivered in 2003. Plans for additional LNG facilities are being developed.
In February 2001, it was announced that Nigeria and the U.S. oil firms of ChevronTexaco, Conoco, and ExxonMobil had signed an MOU to conduct feasibility studies for a second LNG facility, West Niger Delta LNG. The plant was expected to be on stream by 2005. An MOU for a third LNG plant in Nigeria was signed in September 2001. Phillips and Agip signed the agreement with the Nigerian government for the establishment of the Brass River LNG plant. The facility, which is expected to be operational in 2007, will be the world's first offshore LNG plant and have a capacity of 850 Mmcf/d. Shell and Norway's Statoil signed an MOU in the fourth quarter of 2003 with the NNPC to construct a new LNG plant. The plant will be a floating offshore LNG processing facility. The feedstock gas will come from Shell and Statoil's Nnwa/Doro (OPL 218) gas fields. Gas reserves on OPL 218 are estimated to be nearly 10 Tcf.
If approved and constructed, the Nnwa LNG facility could begin operations in 2007. The Escravos Gas Project (EGP), in which the NNPC holds a 60% share and ChevronTexaco a 40% share, is another project that has expanded Nigeria's natural gas industry. The first phase of the EGP (EGP-1) processes 165 Mmcf/d of associated natural gas, which is supplied to the domestic market by pipeline. Phase two of the EGP (EGP-2), which processes an additional 135 Mmcf/d of natural gas, began operations in late 2000. The gas is currently used domestically, but gas from EGP-2 also will be exported to Benin, Togo and Ghana through the West African Gas Pipeline (WAGP). The third phase of the EGP (EGP-3) will increase gas processing to 400 Mmcf/d of natural gas from Chevron's northern offshore fields. Gas from EGP-3 will serve as feedstock for the $1.3 billion, Escravos gas-to-liquid (EGTL) plant, scheduled to come online in 2005. The EGTL will utilize technologies developed by ChevronTexaco and South Africa's Sasol, and will produce nearly 35,000 bbl/d of synthetic fuels (diesel, kerosene, jetfuel & naphtha) which are sulfur and particulate-free. EGTL's capacity can be expanded to 120,000 bbl/d. O
ther American and Canadian firms also are considering establishing GTL plants in Nigeria. Several distribution schemes are planned to help promote Nigerian consumption of natural gas. The proposed $580 million Ajaokuta-Abuja-Kaduna pipeline will supply natural gas to central and northern Nigeria, while the proposed Aba-Enugu-Gboko pipeline will deliver natural gas to portions of eastern Nigeria. The Lagos State government and Gaslink Nigeria Limited (Gaslink), a local gas distribution company, are developing a pilot program to deliver natural gas to nine residential neighborhoods in the state. Gaslink, which supplies natural gas to nearly 30 industrial customers in Lagos' Ikeja industrial district, plans to expand operations to include 150 industrial customers, 250,000 residential/commercial customers and 25 independent power plants.
In January 2003, Shell and its partner, Nigerian Gas Company (NGC), connected 30 firms in the Agbara/Ota industrial areas of Ogun State to gas supplies. Nigeria and Algeria continue to discuss the possibility of constructing a "Trans-Saharan Gas Pipeline". The 2,500-mile (4,000-kilometer) pipeline would carry gas from oil fields in Nigeria's Delta region via Niger to Algeria's Beni Saf export terminal on the Mediterranean. It is estimated that construction of the $7 billion project would take six years.
Nigeria's mineral resource base is so variegated that even the operations in the famed petroleum industry is like scratching the surface of investment opportunities in the oil and gas industry. Her endowments runs the gamut from gold, diamond, uranium, tin, coal, barites, columbite, bentonite, tantalite, mica, limestone, kaolin, tin ore, bitumen among others, all in commercial quantities. In 1994, ministry of solid minerals was created to harness the potentials in the sector .
Tin Ore: Nigeria traditionally supplies five per cent of the world's output of tin ore, making her the world sixth largest supplier.
Columbite: Nigeria is the world's largest supplier of columbite, producing over 90 per cent of the global output. The known reserve of this metal is 86,900 tonnes. Columbite is an important component in the making of aircraft engines.
Gold: is being produced by artisan diggers in Osun State; other deposits are in Sokoto State.
Limestone: Deposits exist in over 30 sites. (For Datails See Ministry of Solid Minerals.
Bitumen: Nigeria has the world's second largest reserve of bitumen with such site stretching from Ondo State in the South West to Edo State in the Midwest or South South.
Coal: Nigeria Coal reserve is put at between 360-800 million tones. Most of these reserves are located in Enugu, Okaba and Kabba in Kogi state.