The nation’s dream of achieving
uninterrupted power supply may not materialise, following the alleged
dispute between the Federal Government (FG) and international oil
companies (IOCs), over the ownership of gas in the deep offshore fields
being operated under the Production Sharing Contract (PSC), BusinessDay
findings have shown.
A clause which is said to have vested
exclusive ownership of the gas on the Federal Government, has prevented
the international oil companies (IOCs) from developing the gas fields
that would have been used to boost the supply of electricity.
A source close to the Department of
Petroleum Resources (DPR), the nation’s regulatory agency for the oil
and gas industry, who pleaded anonymity said, “some of the IOCs may have
decided not to show interest in the development of the deep offshore
gas, because of the clause in the PSC which governs the operations of
deepwater operations, and which vested the ownership of the gas in the
fields in the hands of government, while the oil is the commercial
product on which economies should be based.”
Our source said because of the nature of
the contract, oil companies were currently concentrating on finding
crude oil and shunning anything that has to do with gas development deep
offshore. The clause which was contained in 1993 PSC contract, did not envisage huge gas discoveries in those fields.
Some of the fields affected in the controversy include Erha, Ngolo, Nnwa /Doro, Bosi and Ansah, some of which have been lying dormant for more than ten years.
Erha field operated by ExxonMobil, said to be having gas reserves in the region of over 200 billion standard cubic feet, according to analysts, could easily have been developed to mitigate the suffering of Nigerians because of inadequate power supply, if government had acted proactively by giving the companies the go ahead to develop the gas.
The gas volume in Erha is four times more
than the reserve in Papau Guinea where ExxonMobil, the parent company
of the Nigerian subsidiary has built an Liquefied Natural Gas (LNG)
plant.
People familiar with the industry say Erha is about 120 kilometres from Lagos and that with about $2 billion, the project would have
been developed and put to use for the benefit of Nigerians, if not for
the disagreement between ExxonMobil and government over fiscal terms.
Experts say that laying pipelines from
the location of the gas straight to Lagos is an uncomplicated operation
in terms of technicality and time, while the outcome would be that the
country’s gas starved power plants would then receive the life blood
they require and Nigerian businesses and households would get the much
desired power supply.
He stated further that from Lagos the gas
could be transported through some reliable processes to power plants
around the metropolis and beyond.
The Erha gas, if developed, could serve as a backup to the Ecravos –Lagos pipeline and even tee-off the West African Gas pipeline which supplies gas to Ghana.
However, another official inside of the
system, said inspite of the challenges posed by the PSC contract, the
company still has a window through which it could develop the gas, if it had demonstrated the will to do so.
The source said attempts to make
ExxonMobil begin work on the field had proved fruitless, as the company
preferred to use the gas for reinjection purposes to boost crude oil
production and flare the excess.
“ExxonMobil had informed DPR that it
would prefer to use a third party to develop the gas, when it was asked
to present a gas utilisation plan for Erha field.
“It was given the go ahead to do so, and
told that it must bring the company that intends to develop the gas to
DPR, along with officials of the
Nigerian National Petroleum Corporation (NNPC) for discuss on the gas
development. It is about a year ago since we discussed this issue and
nothing more has been heard of the matter.”
He said a company like Pan Ocean operated
under the PSC contract, yet it was developing its own gas. “ExxonMobil
is not interest in the development of the gas, that is why it is
procastinating.”
When an officer of ExxonMobil was contacted for comment by BusinessDay, he said the company could not speak on the issue then.
Ngolo oil field was discovered by Shell several years ago and is said to have a gas reserve in the region of over three trillion standard cubic feet, and is suffering
the same fate. It has remained dormant for over ten years because there
is no commercial framework on which it could develop.
Commenting on the issue, Eddy Wikina, a former general manager external affairs, Shell Nigeria Exploration and Production (SNEPCO), who is now managing director Treasure Energy Resources, said there had been no commercial framework for the companies to work with, and because of that, they would not venture to develop the gas. Wikina said the fiscal terms for gas were still being debated by government after so many years since the discovery of gas, adding that it had been abandoned by the company.
“Gas development is expensive, government
cannot meet its aspect of funding the projects. It is a big investment
which requires long term planning, long term sale and purchase agreement
and huge capital to develop, but government does not have money to do
this,” he said.
The operators agreed that government could encourage the companies to develop the fields by giving them between 15-25 percent of the value of the gas as incentive.
They also suggested that government and
the legal teams of the companies should come together and resolve the
deadlock this contract has created.
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