What is Lekoil doing with Otakikpo Field?
Recently, Lekoil, announced commencement of continuous production from the Otakikpo Marginal Field (“Otakikpo”) in OML 11. This came at a time when most independents and sole risk oil producers are either suffocating from the steep slide in the oil prices or rendering producing wellheads inactive as a result of the renewed insurgency in militancy.
As Nigeria prepares for a roadshow at the Offshore Technology Conference (OTC) in Houston, Texas, United States next month ahead of the marginal bid round recently announced by the Minister of State for Petroleum Resources, Dr Ibe Kachikwu,the success story of Lekoil’s Otakikpo marginal field becomes even more relevant for the bid round.
There have been some success stories before Otakikpo. Some indigenous marginal field operators have survived the storm after several drawbacks to thrive. The success stories are coming from Ebok field OPL 907,917; Ebendo/Obodeti field OML 56; Ibigwe field in OML 16 and the OML 90 comprising of Ajakpa, Akepo and Ekeh fields at the shallow water of Niger Delta operated by Britania-U Nigeria.
According to analysts, about 10 percent of Nigeria’s daily production of over 2 million barrels of crude oil is produced by Nigerian independent companies, while the rest are produced by multinationals.
Nigeria’s indigenous oil firms in recent years have been showing increasing appetite to participate in the hydrocarbon business that has been dominated by foreign oil companies. The marginal field programme by the federal government helped in no small means to pave the way for the emergence of big players in the sector.
Experts say the key to grow Nigeria’s oil production output particularly in respect of production from the maturing basins is sustainable development programme by marginal field operators. Indeed, there are key marginal fields that are adding significant production to the national pool.
So what did Lekoil do differently?
In about a year and half, Lekoil and its partner, Green Energy International Ltd managed to bring to life the Otakikpo marginal oil field. The feat was a demonstration of the Lekoil’s technical and financial strength.
To underscore the company’s credentials, Lekoil was among the first set of indigenous oil and gas companies to be listed on AIM of the London Stock Exchange with a highly-successful US$50million fundraising. Post listing on AIM, Lekoil announced further fundraisings with gross proceeds of approximately $120 million to finance the drilling completion and testing of the Ogo-1 well and the Ogo-1 sidetrack. Apart from the pool of capital that the company was able to access within a short time for the project, Lekoil’s listing on the Exchange further demonstrated its credibility within the international business circle. The listing exposed the oil firm to quality technical and financial partners as well as investors. It equally enabled the firm to adopt best in class compliance with regulatory guidelines and adoption of world-class processes as it affects health, safety and the environment (HSE).
The fund raised by Lekoil has enabled the company to rev up operations at Otakikpo Marginal Field with the recent commencement of continuous production from the field. According to a company statement, the commencement of continuous production from Otakikpo Marginal Field follows the completion of a six-kilometer offshore pipeline leading from the storage tanks to the tanker offloading manifold at the Otakikpo field. The company also stated that all onshore facilities and the offshore pipeline have been fully commissioned and signed off by the regulators.
Otakikpo field is in the southern part of Oil Mining License 11 about 35 km east of the Bonny export terminal. The field is jointly developed by Green Energy International Ltd as the Operator and Lekoil as technical and financial partner. Lekan Akinyanmi, Chief Executive Officer of Lekoil in a recent statement said, “Lekoil is now a producing company. I would again like to thank the entire team that has worked so hard on this project, our partner Green Energy, our investors and debt financiers, our host communities and our government regulators for their continuing support.
The Otakikpo project began in a swamp location with no infrastructure and our team delivered production in under two years with, importantly, nearly 915,000 hours without any lost time injuries. I am extremely proud of our people’s achievements.” Akinyanmi further stated that initial production (from the four production strings across both wells Otakikpo-002 and -003) is in line with company expectations.
According to him, “Initial production rates are 5,000 bopd, per current regulatory approvals for production commencement. As it is customary for a new field, the Company will now focus on gathering production data and optimizing well performance. With regular exports underway, the Company is focused on ramping up to production of 10,000 bopd by end of Q2 2017”.
In addition, pleasant stories are coming from other marginal oil fields that are significantly ramping up production in line with government aspiration to double oil production.
Boosting output through marginal fields
The reason for initiating the marginal fields programme was to increase Nigerian content in the upstream exploration and production, provide the platform for competent Nigerian professionals from the industry to participate in the upstream E&P, rather than be employees of IOCs; create and increase employment for Nigerians within upstream and to increase the contributions of Nigerian E&P producers to the overall production and reserve base of Nigeria.
There has been relative success but the situation could have been better. Experts identified multiple regulatory authorities of the Federal Government and incessant risks emanating from host communities as key factors inhibiting successful operation of marginal fields by companies.
Industry experts at the Africa Small & Marginal Fields Development Conference, with the theme: “Find It, Commercialise It,” held in London last year canvassed the need for government to align its various policies to avoid regulatory conflicts by its agencies which frustrate the operations of marginal field companies.
They also emphasized the need for government to recognise that in order for the objectives of promoting marginal field development to be achieved fully, government must be proactive to global issues, demonstrate support for marginal field operators and should not use same yard stick to bench mark or regulate marginal field operators and international oil companies.
Another area the government needs to step up the game in order to boost involvement of indigenous marginal field operators is speedy regulatory approvals. Needless bureaucratic bottlenecks and delays in securing necessary government approvals continue to constitute an albatross to operators especially indigenous companies. For instance, the delay in granting Ministerial Consent for OPL 310 and rescheduling of DPR’s due diligence show how government’s action may pose a threat to indigenous involvement in upstream oil and gas operations in Nigeria.
To unlock the potentials of marginal oil fields and create multiples of Lekoil from the forth coming marginal bid round, government should align its various policies to avoid regulatory conflicts by its agencies which frustrate the operations of marginal field companies.
Dapo Ayoola, Chief Executive Officer of the Sub-Saharan African Oil and Gas Conference and Exhibition told BusinessDay that the Nigerian government needs to quickly tidy up the protracted issue of overhauling the regulatory framework for the oil and gas industry to unlock its potentials. According to Dapo, “Regulation is not negotiable. It is time we had a Petroleum Industry Act (PIA) and no longer a Petroleum Industry Bill (PIB). Once the Bill becomes an Act of the parliament, it would send a signal of stability”,
What Lekoil has accomplished with Otakikpo underscores the need for the government to do more with regard to encouraging increased indigenous participation in developing Nigeria’s hydrocarbon resources. It must be stressed that if Nigeria must attain her production aspiration in the years to come, and achieve sustained growth of the oil and gas industry and the economy, then looking inwards for answers remains the way forward.
FRANK UZUEGBUNAM