Nigeria: Will Kolmani Oil Field Change Nigeria’s Story?

IN THE ARENA

The decades-long quest for oil and gas in the North apparently ended last week with President Muhammadu Buhari kick-starting oil drilling in the Upper Benue Trough’s Kolmani River field straddling Bauchi and Gombe states and estimated to add one billion barrels, and 500 billion cubic feet of gas to national reserves. It is not however certain if this discovery will have the capacity to change the Nigerian story, Louis Achi writes

According to former Saudi Arabian Minister of Petroleum and Mineral Resources between 1962 and 1986, Sheikh Zaki Yamani, “The Stone Age did not end for lack of stones and the Oil Age will end long before the world runs out of oil.” Yamani pushed this fundamental position despite his country’s almost embarrassing surfeit of hydrocarbon largesse.

While geology granted almost 50 per cent of earth’s proven crude oil reserves to Saudi Arabia and four of her neighbours, it handed Nigeria about 2.2 per cent of the same strategic product that drives human civilisation. But recent oil and gas industry developments may have upscaled the initial statistics for Nigeria.

Last week, President Muhammadu Buhari flagged off the first crude oil drilling project in Northern Nigeria, in the Upper Benue Trough’s Kolmani River field (Kolmani Oil Prospecting Lease 809 and 810) straddling Bauchi and Gombe states. According to an obviously elated Buhari, it was to the credit of his government that at a time that financing of fossil fuel projects was drying up due to the energy transition drive, his administration was able to attract $3 billion to the sector.

He further clarified that prior scientific assessment had established that over one billion barrels of oil and over 500 billion cubic feet of gas are existing in the newfound reserve as drilling starts and that the project has attracted $3 billion investment already.

Understandably, Buhari described the day as important in Nigeria’s economic history as it progresses to production of oil and gas in the Upper Benue Trough.

According to the provisions of the Production Sharing Contract (PSC), while the Nigerian National Petroleum Company Limited (NNPC) is the concessionaire of the blocks, the NNPC Exploration and Production Limited (NEPL) and New Nigeria Development Company Limited (NNDC) are the contractor parties.

Additionally, AOML Consortium signed a strategic partnership with the contractors to provide funding and technical capabilities for the integrated oil and gas development project and to be compensated from the contractor’s profit oil after commencement of operations.

Further, it also has an in-situ integrated development plan, which guarantees evacuation and monetisation route for the hydrocarbon in the location, thereby eliminating the high cost and burden of building crude and product pipelines.

The first phase of the integrated development project would entail an oil refinery of up to 120,000 barrels per day capacity, a gas processing plant of up to 500 million standard cubic feet per day, a power plant of up to 300-megawatt capacity and a fertiliser plant of 2,500 tonnes per day.

It could be recalled that the NNPC had in October 2019 announced the discovery of hydrocarbon deposits in the Kolmani River II Well on the Upper Benue Trough, Gongola Basin, in the North-eastern part of the country. The discovery said to have commercial quantity was the first in the region after several crude oil explorations in the Upper Benue Trough.

According to Buhari who urged the NNPC Ltd, NNDC, and their Strategic partners to ensure all lessons learnt from years of experience as an oil-producing nation are utilised, he noted that drilling kick-off “is indeed significant considering that efforts to find commercial oil and gas outside the established Niger Delta Basin were attempted for many years without the desired outcomes.

“This discovery had emanated from our charge to the NNPC to re-strategise and expand its oil and gas exploration footprints to the frontier basins of Anambra, Dahomey, Sokoto, Benue trough, Chad and Bida Basins. Similar activities across the other basins are currently actively ongoing.”

After over six decades of the exploration and exploitation of crude petroleum in Nigeria, the future of the industry remains in the front burner of development discourse. Indisputably, the nation’s fossil fuel-powered economy could benefit from more far-sighted policies which has repositioned comparable producing countries.

The Petroleum Industry Bill – now the Petroleum Industry Act (PIA) – signed into law by President Buhari on August 16, 2021, was a fundamentally crucial executive action and an important take-off point for transformative progression of the industry.

In a milieu where fetishism still subsists, unscientific reasons were even adduced to explain the extreme 20-year delay that dogged passing the PIB into law. Even the Senate President, Dr. Ahmad Lawan, at one time concluded that some “demons” were behind its non-passage.

As it were, the fortuitous arrival of Kolmani oil field fits nicely into the new industry management templates created and is a considerable revenue booster for a beleaguered nation.

The Group Managing Director, NNDC, Shehu Mai-Borno, cut to the heart of the new industry reality and perhaps unwittingly to the core of an often cynical old debate when he stressed that the inauguration of the project put paid to doubts whether oil and gas resources could ever be found in the North.

Now that oil and gas has finally been struck in Northern Nigeria, after years of seemingly quixotic exploration, what are the industry and political implications? With little question, the oil find and move by the president would signal to both local and international investors that Nigeria means business in its efforts to get value from its God-given resources.

More specifically, the discovery of oil and gas in commercial quantity in the Benue Trough/Gongola Basin would attract foreign investment, generate employment for people to earn income and increase government revenues.

The Northern oil find comes at a time crude oil production has dropped to around one million barrels per day in the country caused by rampant oil theft and vandalism, effectively hobbling the country’s ability to earn foreign exchange. For many years, Nigeria, Africa’s largest oil producer has not been able to increase her reserve, often defaulting in meeting OPEC quotas, resulting in steady depletion with concomitant economic risks.

But many disillusioned Southerners believe that crude petroleum has been the only fabric uniting the country and now with the claims of oil find of viable commercial quantity in the core North that the Northern region should relinquish its alleged predatory grip of the South.

But this apparently illogical position is being countered by other stakeholders who hold that the discovery of oil in the North would do pretty little to transform the North given the claim that the management of the country’s petroleum resources, largely a Southern product, has been mostly in the hands of Northerners.

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