Shell eyes $8.5 billion Nigeria program

Royal Dutch/Shell has begun talks with the government of Nigeria over a proposed $8.5 billion, 5-year oil and gas development program in that country.

A Shell official told OGJ the company put forward development plans for a number of oil discoveries that are currently being appraised, with plans to utilize associated gas from these and other fields. Combined oil production from the new projects is expected to be 600,000 b/d.

Shell listed its development projects as: six onshore oil finds, the Bonga deepwater oil discovery, and three shallow-water finds on Blocks H and K; tied to those projects are onshore gas-gathering facilities, a gas pipeline from the offshore fields, and a third liquefied natural gas production train at the Bonny Island LNG export plant, due to begin operations this year.

Seventy percent of the cost of the projects would be met by Shell and its partners in Nigerian projects, mainly Elf Aquitaine and Agip SpA, with the remainder to be provided by the government through the cash-starved, state-owned Nigerian National Petroleum Corp. (NNPC).

Shell said the government has pledged to prioritize gas-related projects, particularly those involving use of associated gas, which is currently flared. The government has allocated $450 million to gas projects this year, with $1.5 billion earmarked for oil-producing ventures.

Layoffs

While Shell is ramping up project spending in Nigeria, persistently low oil prices and recurring civil unrest in the oil-producing Niger Delta are spurring it to restructure operations in Nigeria, according to local press reports.

Shell's Nigerian unit, Shell Petroleum Development Co. (SPDC), may lay off as much as 20-25% of its Nigerian work force of 4,500 permanent staff and about 10,000 contract workers.

SPDC has had to cut crude production in the delta region by 100,000-150,000 b/d of oil from 850,000 b/d this year (already down by 100,000 b/d from 1997's level, owing to cuts promised under an agreement with other members of the Organization of Petroleum Exporting Countries), as a result of disruptions caused by warring factions in the region.

The new program is seen as a shift in emphasis by Shell toward more stable areas of the country away from the strife-torn delta region, which has become a lightning rod for international human rights pressure groups as well as a source of frequent production disruptions from sectional fighting and sabotage.

Cash flows

Meanwhile, Nigeria's petroleum industry cash-flow problems are expected to be eased after the government reportedly accepted external auditing of NNPC's accounts under a deal with the International Monetary Fund (IMF).

The move is seen as an attempt by Nigeria's current military regime, which has proposed to hand over the country to civilian rule in May, to address international concerns about corruption and transparency in Nigeria's authorities.

NNPC is reportedly expected to hand over externally audited accounts for 1998 to the IMF's Auditor General in June 1999, with a view to the figures being published shortly afterwards.