Tightening costs rank high in oil majors corporate plans
Royal Dutch Shell in its recently released annual reports for 2016 said it was further pushing a possible date for final investment decision on $12 billion Bonga South West/Aparo project in Nigeria past 2018 and divesting its share in Canadian oil sands project.
Shell proposes a reframing exercise to make the project economically viable in the current business environment. This is just a way to say it is reviewing the assumptions on which a possible final investment decision will be made on the project.
The BSWA project includes the construction of a new floating production, storage and offloading (FPSO) facility with an expected peak production of 225,000 barrels of oil per day. The BSWA field straddles Oil Mining Leases (OML) 118, OML132 and OML140 in Nigeria.
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.
While in the Canadian sands project, Shell oil is cutting 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.
American energy giant, Chevron in January reported earnings of $0.22 per share for the fourth quarter, compared with a loss of $0.31 per share for the fourth quarter of 2015.
As a result of this, the company is embarking on aggressive cost cutting measures and reducing investment dollars in countries like Nigeria where its operations are prone to greater risks of militant attacks.
Capital and exploratory expenditures in 2016 were $22.4 billion, compared with $34.0 billion in 2015. And further cuts are expected as the company announced in December its capital expenditure would be $19.8 billion in 2017, down 42 percent on 2015 and at least 15 percent lower than outlays for 2016.
While Chevron has vast interests in Nigeria ranging from 20 percent to 100 percent, in three operated and six non operated deepwater blocks in Nigeria, many of these projects await further development.
In 2015, the company said it expected the last Agbami 2 well to come on line in the second quarter of 2016. Then it will progress to the next phase, Agbami 3, a five-well drilling program. Drilling began in early 2015 and is scheduled to continue through 2017.
There are still further exploration works yet to be completed on Oil Mining Lease 140, which lies in roughly 8,000 feet (2,438 m) of water, 90 miles (145 km) off the coast of the western Niger Delta region, and includes the Nsiko discovery. There is also further evaluation work expected in the Usan area.
These projects have not progressed according to plans due to low oil prices that have rubbished projections, militancy that has made investments unattractive and lack of concrete action on joint venture cash call areas.
West African oil countries have their work cut out in fixing fiscal and regulatory issues to attract investments in a highly competitive oil market where low oil prices and slow oil demand growth will mean investment dollars may go to countries in other regions with better investment climate.
ISAAC ANYAOGU