Uchenna Izundu
OGJ International Editor
LONDON, May 14 -- Chevron plans to ramp up production from its Agbami field in Nigeria to 250,000 b/d and also start gas production from the Escravos Gas Project 3 (EGP3A) later this year.
Ali Moshiri, president of Latin America and African operations at Chevron, told reporters at the Offshore Technology Conference in Houston that Agbami is producing 200,000 b/d through a floating, production, storage, and offloading system, which cost $7 billion.
"When you look at this project, I can tell you that it wasn't only a milestone for us, it was a milestone for the industry: 250,000 b/d—each well is producing up to 30,000 b/d. That's unbelievable," he said.
Nigeria's operators have found it difficult to sustain production in Nigeria because of the incessant attacks on oil facilities by militants and criminals. But these issues can be overcome provided there is close cooperation with the community and the government, according to Moshiri.
Chevron has lost production on the east of the Niger Delta amounting to 50,000 b/d. Production is underway in the centre of the region and at Escravos, but it also has been forced to shut in some output due to pipeline sabotage.
Escravos will process and gather offshore gas, and it will increase processing capacity from 285 MMcfd to 680 MMcfd of gas. Daily LPG and condensate capacity will be increased from 15,000 to 58,000 bbl. Total capital costs are estimated at $2.8 billion, which includes future drilling to keep the plant at capacity. Funding and project execution, however, are the challenges.
Oil reform criticisms
Moshiri deemed the proposed oil sector reforms "complicated" and more dialogue is needed between government and its stakeholders. Nigeria wants to create an integrated national company driven by profit, revamp regulatory agencies to hold distinctive roles, and create new institutions (OGJ Online, May 6).
As Nigeria National Petroleum Corp. (NNPC) has been unable to bring its share of funding for joint ventures, the new entity will be able to raise money from the money markets, and all joint ventures are to be turned into incorporated joint ventures.
"What the federal government of Nigeria is doing in a strategic sense is actually right," said Moshiri who agrees the funding issue has to be tackled. "You cannot address it without going through some sort of reform. The incorporated joint venture companies (IJV), we have no problems with it strategically. It's the very concept, the details, that is where the complications come in, that is where we require dialogue."
However, talk of renegotiating production sharing agreements is worrying after massive investments have been made. Deepwater oil and gas projects, which have cost $7- $8 billion, are due to come online within the medium term in Nigeria, and Moshiri said that to encourage investment, the PSAs should not be touched.
"We would like the federal government of Nigeria to honor and grandfather what has been done. And if you want to do a forward-looking review, that is okay. That means any new projects coming in will fall under the reforms," he said.
With the militants clamoring for a greater share of the oil and gas profits, the government is considering giving their communities equity shares in projects to stop the violence. But Moshiri is not convinced this approach would work. "I think what we've got to do is to provide facilities. We've got to employ more people, we've got to make people more productive, and we've got to make their lives more comfortable by providing the basics, not just in Nigeria."
West Africa updates
The $4 billion Tombua-Landana is expected to come onstream in the second half of 2009. This is a deepwater project in which Chevron has 31%, and it will reach 100,000 b/d.
"The Angola LNG is in Soyo, and we are building the first train—5.2 million tonnes/year," said Moshiri. "Our estimate for cost of the project is about $10 billion, and that includes gas supply as well as the plant itself." The liquefaction plant will start in 2012.
Africa and Latin America, where Chevron has up to 600,000 b/d of production, are the drivers of growth in upstream production. West Africa and the eastern side of Latin America have similar geology meaning Chevron has been able to learn lessons and apply them. "We have close to 3 billion bbl of proven reserves and another 16 billion bbl of un-risked potential," he said.
Although oil prices have collapsed from the peak of $140/bbl to the $50/bbl range now, Chevron is committed to its Nigerian projects—Nsiko, Bonga Southwest, and Aparo—but is eager to see construction and contracting prices fall. "On Nsiko, we are committed. For Bonga Southwest, the development plan submitted by our operator was rejected by NAPIMS, and now we are back on the drawing board to put things together," said Moshiri.
In 2003, the Nsiko well tested 6,500 b/d of oil from one zone under restricted flow conditions. Nsiko lies in 5,800 ft of water and is 90 miles off the western Niger Delta. Development is underway, and front-end engineering and design is expected after commercial terms are finalized.
Moshiri said the final investment decision for Bonga Southwest, operated by Royal Dutch Shell PLC, was expected to be made last year. However, this was delayed so stakeholders could agree on the project's scope as it is meant to be developed jointly with Aparo field as they share a common geologic structure.
EGTL reevaluation
Chevron expects the 34,000 b/d Escravos GTL project to cost $5.5-5.9 billion instead of the $7 billion that had been speculated. It will be a major initiative to stop gas flaring in Nigeria and is under construction.
The plant will process 320 MMcfd of natural gas from the EGP Phase 3A project into high quality diesel that will be sold in Europe. Chevron, however, is pushing for even lower costs from its contractors. "Cost of everything is escalating," Moshiri said.
Contact Uchenna Izundu at [email protected].