Nigeria’s quest to grow its crude production, given perennial technical and operational setbacks, has received a blow with the announcement yesterday by Shell of its decision to delay expansion work at its Nigerian offshore Bonga field by another two years.
Top officials of the state owned oil company, the Nigerian National Petroleum Company (NNPC) suspect that delays could be related to a change in Shell’s upstream strategy as part of its net zero ambitions.
Developing the Bonga Southwest would cost $10 billion, according to estimates by the NNPC, the concessionaire of the field. The bulk of Bonga Southwest’s resources are located in OML 118, but it also extends into OMLs 132 and 140, operated by US major Chevron, where it is called Aparo. Other partners in the project are France’s TotalEnergies and Italy’s Eni
Just last May, Shell, along with its partners, signed a deal with state oil company Nigerian National Petroleum Company Ltd (NNPC) in the deepwater oil block Oil Mining Lease 118, clearing the path to a major expansion of the country’s Bonga oil and gas field. The development had previously been shelved due to a long-standing tax dispute with Shell, the operator of the field.
After the dispute was resolved, Shell once again invited bids for the construction of a new floating production storage and offloading (FPSO) unit for its Bonga Southwest deepwater oil field in Nigeria.
However, the response to the tender had been underwhelming, a senior official at NNPC told S&P Global Platts. “There has been a delay in progressing with the tendering process for the Bonga Southwest field. The tenders have been put on hold till around 2024,” the official said.
A spokesman for the Shell Petroleum Development Company (SPDC, Nigeria confirmed that the contract award for the construction of the 150,000 b/d Bonga Southwest FPSO had been put on hold. “The Bonga Southwest has been deferred,” he said, declining to offer further details.
Shell is Nigeria’s biggest oil producer, but relations have soured in recent years due to commercial and security issues in the Nigeria Delta, most of which resulted to litigation challenges
In May 2021, Shell CEO Ben van Beurden told investors the company was focusing more on its Nigerian deepwater and gas assets after it deemed its onshore oil portfolio in Nigeria “no longer compatible” with its strategic ambitions, which include a focus on climate change and net zero carbon strategy. The energy major is currently in talks with the government to sell at its onshore oil assets.
Bonga, Nigeria’s first deepwater oil field, currently has the capacity to produce 225,000 b/d of crude oil and 150 MMcf/d of gas which feeds the Nigeria Liquefied Natural Gas (NLNG) plant at Bonny.
Developing Bonga Southwest has the capacity to add around 1 billion barrels to Nigeria’s oil reserves. Shell had previously said it would develop the Bonga Southwest project across three phases with a total potential yield of 3.2 billion barrels.
Output from the field was one of the projects Nigeria was banking on to raise production to around 3 million b/d by 2023, NNPC officials said.
Nigeria, which produces high quality light sweet crude oil, has seen its production slump to multi-decade lows, due to operational, security and technical issues.
Nigeria has the capacity to pump around 2.2 million b/d of crude and condensate, but in 2021 output languished near 1.55 million b/d, according to Platts estimates.
By Chibisi Ohakah, Abuja
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