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LAGOS OIL CLUB, NOVEMBER 21, 2011

Challenges of Nigerian Independents: Beyond 2011. Austin Avuru Managing Director/CEO SE P LAT Petroleum Development Company Limited. LAGOS OIL CLUB, NOVEMBER 21, 2011. KEY DISCUSSION FOCUS. THE NO-GROWTH HISTORY OF NIGERIAN INDEPENDENTS. THE EMERGING NEW SHAPE OF INDUSTRY FOOTPRINT

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LAGOS OIL CLUB, NOVEMBER 21, 2011

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  1. Challenges of Nigerian Independents: Beyond 2011 Austin Avuru Managing Director/CEO SEPLAT Petroleum Development Company Limited LAGOS OIL CLUB, NOVEMBER 21, 2011

  2. KEY DISCUSSION FOCUS • THE NO-GROWTH HISTORY OF NIGERIAN INDEPENDENTS. • THE EMERGING NEW SHAPE OF INDUSTRY FOOTPRINT • IMPLICATIONS FOR NIGERIAN INDEPENDENTS

  3. THE 20-YEAR HISTORY OF NIGERIAN INDEPENDENT • Dubri Oil (since 1987) is Nigeria’s oldest Independent Producer. • But the Landmark Takeoff of the Indigenous program occurred during 1990/1991. • Between 1990 and 2007, some 52 Indigenous Companies have been licensed to Operate Leases in the Niger Delta and Anambra Basin. • In 2004, 24 Nigerian companies were licensed to operate 24 Marginal Fields. • Independents’ Operated Production peaked at about 100kbd in 2005. Conoil and Moni Pulo accounted for 70% of this peak production.

  4. THE 20-YEAR HISTORY OF NIGERIAN INDEPENDENT • Seven Marginal Field Operators currently produce about 22,000 bopd. Two of them account for 60% of this figure. • On the average, Independent production over the 20 years from 1990 to 2010 has stayed below 80kbd, often oscillating between 40kbd and 100kbd. • Average life cycle from First Oil to Peak Production to Rapid Decline is less than 10years for Independents. • Apart from Conoil, most Independents Operations are single block/single field developments with little or no prospects for sustainable growth in reserves and production.

  5. CURRENT INDUSTRY FOOTPRINT • DeepWater, the tuff of Deep Pocket Multinationals • - Shell • - ExxonMobil • - Chevron • - Total • In the Traditional Onshore/Shallow Water, five early comers sit on some 88% of the Reserves and Production • - Shell • ExxonMobil • Chevron • Total • Agip

  6. CURRENT INDUSTRY ….. (cont’d) Shell Chevron Mobil Total OML 04 Agip OML 41 OML 38

  7. THE EMERGING SHAPE OF INDUSTRY FOOTPRINT • On January 29, 2010, SEPLAT pioneered a Commercial, operated Asset acquisition transaction with the Shell Joint Venture. • Five more transactions have followed this, and are at different stages of rancorous closure.

  8. THE EMERGING SHAPE OF ….. (cont’d) NPDC/SEPLAT JOINT VENTURE

  9. THE EMERGING SHAPE OF ….. (cont’d) NPDC/SEPLAT NEW ACQUISITIONS OML 40 OML 42 OML 34 OML 26 OML 30 9

  10. IS THIS A GAME CHANGER?? • But over 52 Nigerian Companies have been awarded blocks in the past 20 years without any growth in Indigenous Production?? • Could the prospects now look more promising?? • In the immediate horizon are six possible Independents poised to seize the moment. • SEPLAT • OANDO • FIRST HYDROCARBON • CONOIL • NIGER DELTA • NECONDO

  11. These fore-runners can quickly build up Operational and Financial Capacity and set the pace for a few others to join. • A lot, however, depends on the disposition of NNPC/NPDC • THE KEY GAME CHANGER HERE IS THE ABILITY OF THIS NEW GENERATION OF INDEPENDENTS TO BUILD OPERATIONAL CAPACITY AND RAISE SUBSTANTIAL FUNDS TO FINANCE THEIR GROWTH.

  12. IMPLICATIONS • Production from Nigerian Independents could top 250kbd by 2015. • Annual spend by Independents could top $1.5billion by 2014. • These activities will precipitate a full-blown Exploration/Appraisal Development Campaign focusing on: • - Deeper Plays • - By-passed Plays • - Small Fields Development

  13. IMPLICATIONS (cont’d) • The result will be • Accelerated growth of Nigerian Independents • Renewed Onshore Exploration, Appraisal and Development Campaigns • Accelerated Gas Development • Production/Reserve Growth • Some 60% of Domestic Gas supply in the West will come from these new locals. • The Western Franchise of the Gas Master Plan will be hinged on them.

  14. KEY CHALLENGES • Funding • Operatorship/ Capacity / Competencies • Security • Community Management • JV Management - Partnership

  15. CONCLUSION • There is a window of opportunity now to build a new crop of medium-sized Independents in Nigeria. • The combination of some PIB (Lease Administration) provisions and Voluntary Asset rationalisation by the Majors will fuel this opportunity. • The Unfolding scenario could see the dominance of Independents in the Onshore Niger Delta.

  16. THANK YOU

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