Again, Shell dithers on Bonga South West/Aparo development
Royal Dutch Shell has again postponed final investment decision on $12billion Bonga South West/Aparo development as the global energy giant looks to keep costs down.
“Following the decision to delay the Bonga South West/Aparo project, a reframing exercise is under way to make this project economically viable in the current business environment. FID is not expected before 2018,” says the company’s 2016 annual report released March 9.
This move comes as a shock to analysts who expected that FID will be announced in 2017 after Shell last year said it will consider the project.
“This comes as a real shock,” said Dolapo Oni, head of energy research at Ecobank.
Oni said the reframing exercise may include reviewing assumptions made for the project which may have become untenable following slow oil demand growth and dip in prices.
As part of aggressive cost cutting programme, the company strives towards greater efficiency as it announced that it will sell all of its undeveloped oil sands interests in Canada and reduce its stake in a joint venture in the country.
According to Shell’s divestment plan, the company said it would cut down its share in the Athabasca Oil Sands Project from 60pc to 10pc.
The series of transactions will result in a net consideration of $7.25bn (£6bn), and the company’s chief executive said it was a “significant step in re-shaping Shell’s portfolio”.
The company will sell its interest in the Athabasca project to a unit of Canadian Natural Resources, one of the largest independent crude oil and natural gas producers in the world.
BusinessDay gathers that the BSWA project has a capacity generate some $50bn in revenue to government, rake in $3.5 bn in taxes, create some 3,500 direct jobs and 15,000 indirect jobs during construction.
Bonga gas reserves is estimated to be about 150-200 mmscf/d which if developed and made available to the domestic market, will boost electricity generation from gas fired plants.
The BSWA project includes the construction of a new floating production, storage and offloading (FPSO) facility with an expected peak production of 225 thousand barrels of oil per day. The BSWA field straddles Oil Mining Leases (OML) 118, OML132 and OML140.
SNEPCo is the Unit Operator of the BSWA Unitisation project pursuant to a Pre-Unit Agreement between the Nigerian National Petroleum Corporation, Esso Exploration & Production Nigeria (Deepwater) Ltd., Total E&P Nigeria Ltd., Nigerian Agip Exploration Ltd., Texaco Nigeria Outer Shelf Ltd., Star Ultra Deep Petroleum Ltd., Sasol Exploration and Production Nigeria Ltd. and Oil and Gas Nigeria Ltd.
The Bonga project itself, which began producing oil and gas in 2005, is Nigeria’s first deep-water development in water depths over 1,000 metres. In 2014, SNEPCo also started oil production at the Bonga North West deep-water development, with the oil transported by a new undersea pipeline to the existing Bonga FPSO and export facility.
In November 2014, SNEPCo announced plans to drill eight more wells in the Bonga field in the third phase of the Bonga Main development but these plans cannot progress until a FID is taken.
ISAAC ANYAOGU