Sustaining Investments & Reserves In The Face of Growing Challenges

1. Sustaining Investments & Reserves In The Face of Growing Challenges GeorgeOsahon department of petroleum resources 24 September2013

2. Contents • Scene Setting:- Status of Petroleum Reserves and Production • Investment Opportunities to grow Reserves in Nigeria • Key Challenges & Strategic Intervention • Conclusion

3. Scene Setting:- Status of Petroleum Reserves and Production

4. Technology has always been an enabler Nigeria’s Oil & Gas Reserves 1956 to 2011 Deepwater technology 35,000 200,000 Advanced imaging techniques) 28,000 160,000 New drilling techniques) 21,000 120,000 14,000 80,000 7,000 40,000 Oil, Condensate Gas (Bscf) (MMstb) 0 0 • Until recent, Nigeria’s oil and gas reserves have always been on the incline and the periods of major reserves increases can be linked to conscious uptake of new technology Oil Condensate Gas

5. Evolution of Nigeria’s Oil and Gas Production Deep Water Shallow Offshore Biafrawar Onshore High value Onshore production continues to nose-dive; Progressively replace by high-cost Offshore oil

6. Oil & Gas Reserve Status

7. Oil & Gas Production Status

8. Nigeria’s Oil and Gas Reserves @ 01-01-13 Whereas production has steadily remained flat, there is not enough focus and effort at replacing or growing reserves

9. Nigeria’s Oil and Gas Reserves @ 01-01-12 Reserves @ 1/1/2012 Gas 182.8 Tscf -AG 92.6 -NAG 90.2 Oil + Condensate 36.2 blnbbl There is urgent need to affirmatively grow indigenous capacity to boost finding new reserves

10. Investment Opportunities to grow Reserves & Production - Organic growth and renewal - New hydrocarbons from Frontier basins

11. Organic growth of Reserves There is tremendous opportunity in organically unlocking the potential from discovered In-Place Resources

12. Renewing Mature Basins • Organic growth in Reserves through Field Revisions • About 70 percent of reservoirs in the matured Niger Delta are either in the secondary or tertiary stages of production. • Encouraging the utilization of secondary or tertiary methods of recovery for fields could significantly increase recoverability. • Petroleum Act 1969 and its Amendments provide that studies should commence to arrest pressure decline beyond 10%. Enablers to winning about 9 billion barrels of oil through incremental Ultimate recovery of 10% and increase production. • Wells should be drilled to define fields separated from each other by a minor sealing fault, and/or saddle or those with ODT, GDT, OUT and GUT situations in order to evaluate their full potential.

13. Renewing Mature Basins • In-fill Opportunities (By-passed Oil) • Sizeable volumes of by-passed oil that have not been exploited due to structural or/and stratigraphic constraints. • Exploiting these through in-fill drilling will enhance good oil field practice, boost reserves and increase production. • However, in some cases, current well spacing regulation presents a challenge to drilling in-fill wells that will unlock these potentials. • Relaxing the spacing where economic reserves can be won with strict adherence to sound reservoir management and oil field best practices will motivate operators to embark on infill campaigns.

14. Realisable Reserves Additions Unlocking this potential by 10% will bring total oil and condensate reserves to way above the 40bln bbl Target

15. Other major Opportunities • Short (1-5years), Medium (5-8years) and Long Term (>8years)

16. Seeing beyond ever seen? Advanced Imaging & Deep Drilling • Deep Play Potential • Current exploration and drilling efforts limited to conventional oil window which is mostly within the Miocene and Oligocene sequences. • Estimated Yet to be discovered potentials: About 20 billion boe are at present locked-in, in about 900 prospects and leads across the Niger delta.

17. New Hydrocarbons from Frontier Basins Frontier Inland Basins and the Ultra Deep Offshore • Inland Basins • Ultra Deep Offshore • The Ultra Deep Waters Frontier is yet to be fully explored in spite of its potentials. • With present day technology and the success achieved in the Deep Offshore, ample opportunities exist in encouraging aggressive exploration through periodic licensing round. Ultra deepwater

18. Key Challenges and Strategic Intervention

19. Key Challenges • Current seismic record lengths averages 4 seconds • Drilled depths limited to between 4000m and 6400m • High Temperature and Pressure regimes • Technology constraints – available but need to be acquired • Niger Delta insecurity • In cohesive regulatory & commercial frameworks • Restricted Infrastructural availability

20. Strategic Intervention • Establish a robust regulatory framework for the Oil and gas sector in • Nigeria • Develop and sustain a commercial framework for the industry capable • of encouraging Investment flow (gas sector) • Encourage a sustainable development of the indigenous capacity in Oil • & Gas operations • Sustain the commitment towards the full implementation of the Niger • Delta Amnesty program

21. Strategic Intervention • Reserves Growth Committee was recently set-up in the DPR to: • Establish a framework that will stimulate reserves growth. • Provide models, where appropriate, that will propel operators to increase exploration efforts. • Accelerate Federal government’s 40 billion barrels oil reserves aspiration and increase gas reserves volumes in the shortest time possible. • Ensure continuous and sustainable revenue flow from exploration and production activities to support governments infrastructural and strategic economic development programmes • Propose Policy to the HMPR that will enable all the above.

22. Conclusion

23. Conclusion • The current negative trend in Nigeria’s oil and gas reserves is a major concern, indeed no longer acceptable • Investment Opportunities abound in the entire hydrocarbon value chain in Nigeria • Reserves growth can be achieved through organic renewal, seeing and drilling beyond current depths, and upgrading efforts in Frontier exploration • The DPR is currently helping to put a Policy in place to encourage Operators to replace and grow reserves.

24. Thank you