22-09-04
The Federal Government has initiated moves to ensure that Nigeria's crude oil reserves reach 40 bn barrels by the year 2010. The moves are part of the plan to shore up the current reserves and to encourage investors to develop an agreement that would benefit the citizenry.
Disclosing this at a training programme in oil and gas organised by the
Department of Petroleum Resources (DPR) in Lagos, Mr A.O. Lufadeju, DPR's Chief
Geologist revealed that the Federal Government plans to open up deep-water
blocks, which is beyond the 200 m tre Isobath.
According to him, "government wants the hurdles of meeting cash call behind her. In terms of production-sharing contract, Nigeria National Petroleum Corporation (NNPC) which operates the blocks on behalf of the Federal Government is the owner of the block while the operator is the contractor. The contractor takes the exploration risk. In the event of discovery and production, they recover its cost through cost oil and the profit is shared between NNPC and the contractor in pre-agreed ratio".
Lufadeju stated that updates in the Production-Sharing Contracts (PSC), shows
that different prototype PSCs have been signed.
Some of these include the 1973 PSC that was basically on onshore-shallow water, the 1993 and 2001 PSCs which was beyond 200 m Isobath, the 2003 PSC (Nigerian Petroleum Development Company (NPDC) participation on carry bases), which was represented by NNPC and a total of about 53,000 sq km deep water acreages allocated and operated on PSC basis.
"The production sharing contracts trend-acreage so far has been on the
increase, the year 2003 witnessed an increase of 57,000 sq km", he added.
Speaking on the benefits of PSCs, the Chief Geologist claimed there is
compensation or reimbursement (cost/profit oil) in petroleum operation in the
case of commercial finds.
"Government is not involved in the up-front risks and expenses until the
period of production, if there is commercial oil discovery. PSC serves as a
relief to the cash-callconstraints and enhances exploration activities leading
to additional oil reserves", he said.
He noted that terms and clauses of the PSC are negotiated and agreed by both parties (concessionaire and contractor), while the process gives room for flexibility, negotiations for work programme commitment, payment of premia, performance bond, abandonment etc. subject to the provisions of the prevailing laws and regulations.
On the issue of contractual arrangement/Joint Venture, he spoke on Federal
Government participation via NNPC with multinational companies, where NNPC has
60 % and multinational companies 40 % equity share in most of the blocks.
"Government, through NNPC, contributes it's share of the cost of operations
through cash-call", he disclosed.
Source: LiquidAfrica