Lagos, Nigeria —
Shell Nigeria’s production unit Tuesday said it hoped to conclude negotiations soon on a commercial framework for the expansion of the Bonga deepwater oil field, after which a final investment decision will be taken to start the project, billed to add around 1 billion barrels to Nigeria’s oil reserves.
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Shell previously said it expects to take the FID on the Bonga Southwest/Aparo field development project in 2018, but this seemed increasingly unlikely after legal disputes between Shell and the Nigerian National Petroleum Corp..
“A timeframe for the FID will be announced after the conclusion of commercial discussions with [the Nigerian] government,” Managing Director of Shell Nigeria Exploration and Production Co. Bayo Ojulari said in a company statement.
“The discussions are ongoing and may be concluded soon,” Ojulari said.
NNPC chief executive Maikanti Baru had said July 4 that both the NNPC and Shell were trying to resolve, through arbitration, disputes over terms contained in the production sharing contract agreement that governs the Bonga Southwest field.
Developing Bonga Southwest was billed to cost $10 billion, according to NNPC estimates.
The bulk of Bonga Southwest’s resources are located in an area referred to as OML 118, but it also extends into OMLs 132 and 140, areas operated by US company Chevron, where the field is called Aparo.
Other partners in the project are France’s Total, Italy’s Eni and South Africa’s Sasol Petroleum.
Faced with declining oil revenue, Nigeria announced in 2015 it planned to review PSCs with foreign companies, proposing an increase in royalty rates for terrains beyond 1,000 meters, from zero to 3%, and a royalty rate of 8% for output of up to 50,000 b/d.
The government’s bid was backed by the country’s oil industry auditor, Nigeria Extractive Industries Transparency Initiative (NEITI), which said last week that the failure to review the PSC agreement with foreign companies cost the Nigerian government $35 billion in revenue between 2015 and 2017.
Under PSCs, NNPC holds the concessions, and the outside drillers fund development of the mostly deepwater offshore blocks and recover their costs from the production after royalty payments.
Output from PSC fields including Bonga, Erha, Agbami, Akpo, Usan and Egina, account for around 50% of Nigerian oil production, according to NNPC estimates. –Eklavya Gupte, email@example.com
–Edited by Derek Sands, firstname.lastname@example.org