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Better times for offshore Nigeria

Total, Shell and ExxonMobil are among the majors with commercial finds to develop

After a long hiatus, the international oil companies (IOCs) are swinging back into action with new projects planned for offshore Nigeria. Work on Total's Egina development is expected to be complete by the end of the year, while the French major, ExxonMobil and Shell all have further sizeable projects that could be developed.

Next in line for the green light looks likely to be Total's shallow-water Ikike project, which entered the pre-tender stage last September. The development was originally designed in 2013, but has suffered delays since then. Nicolas Terraz, Total's head of Nigerian upstream, said in March, he expected a final investment decision to be taken before the end of 2018.

Located in 20 metres of water, some 20km offshore, on bock OML 99, Ikike is intended produce 32,000 barrels a day of oil and some 3.5m cubic meters a day of gas. While oil production will be relatively modest compared to Egina—a 200,000 b/d development—apparent progress is another sign that IOC appetite for Nigeria is returning, as their coffers replenish following the downturn resulting from the 2014 oil-price crash. Indications that the Nigerian government is serious about pushing through legislation to improve investment conditions in the sector has also improved sentiment.

Further down the line, Nigeria's aspirations to boost oil production from less than 2m b/d now to closer to 3m b/d over coming years could receive a real boost if ExxonMobil decides to push on with development of the Owowo field. First oil was discovered in 2012, but it was with the drilling of the Owowo-3 appraisal well in late 2016 that its full potential became clear. That well, in 576 metres of water, found 140 metres of oil-bearing sandstone reservoir and is estimated to hold 500m-1bn barrels of recoverable oil. That made it Nigeria's largest oil discovery since 2004, according to Wood Mackenzie.

ExxonMobil holds a 27% stake in the field and is partnered by Chevron (27%), Total (18%), China's Nexen (18%) and the state-controlled Nigeria Petroleum Development Company (10%).

However, there is little indication that the group is poised to plough resources into the project at this stage, with the traditionally tight-lipped Exxon saying next to nothing about the field's development prospects since the discovery.

Zabazaba delay

An even bigger prize would be production from the Zabazaba and Etan fields on the Eni-operated OPL 245, acreage which could hold total oil reserves of around 9bn or more, according to Nigerian government figures, as well as a large, but unspecified, amount of gas.

Eni had planned to push on with the development, which lies in water depths up to 2,000 metres on the fringe of the Niger Delta, last year with a view to achieving first production in around 2020. Since late 2017, Eni has been assessing bids for construction of a 150,000 b/d floating production storage and offloading (FPSO) vessel for the project, which would initially exploit an estimated 500-600m barrels of reserves. However, a winner for the tender has yet to be announced and FID remains elusive.

A major drag on the project is that the acquisition of OPL 245 by Eni and its partner Shell for around $1.1bn in 2011 is the subject of a long-running corruption case in Italy that has ensnared Eni chief executive Claudio Descalzi, as well as other managers of Eni and of Shell. The government has said it is keen to push on with the project, but the corruption investigation and concerns over the future status of the block is putting a brake on $10bn-plus development.

If the hurdles to investment can be overcome, Nigeria could become one of the global oil sector's largest investment magnets over the next decade. Global Energy Data, a consultancy, estimates that the country could bring in $48bn of capital expenditure in 2018-25-around a quarter of the total on all African upstream developments. Other potential major developments could include Shell's deep-water Bonga North, with an estimated cost of around $9bn and Bonga Southwest/Aparo, costing some $4bn.

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