Intensive Exploration Activities are ongoing in Nigeria’s Sedimentary Basins-Adesanya
Mr. Abiodun Adesanya is the President, Nigerian Association of Petroleum Explorationists (NAPE). A petroleum geologist of the highest category, Adesanya has years of experience in a career spanning more than two decades. He worked with Elf Petroleum, supervising seismic operations and was later deployed to the Asset Management team as Senior Geoscientist in charge of 2D/3D evaluation and portfolio management. In 1997, he joined the then Landmark Graphics (now Halliburton) and was tasked with management and provision of technical consulting, sales marketing and training to local, national and international independent and multinational companies within the Sub-Sahara Africa. In this exclusive interview with the Orient Energy Review (OER), Mr. Adesanya speaks on oil and gas prospect in the Lake Chad and other Sedimentary Basins, the recently passed Petroleum Industry Governance Bill and the forthcoming NAPE conference, amongst others. It is OER’s exclusive!

 

OER: Let’s congratulate you again on your assumption of office as President of the Nigerian Association of Petroleum Explorationists. What are you bringing to the table differently from your predecessors?

 

Mr. Adesanya: Thank you very much. Let me first of all commend my predecessors that you just mentioned. They have done tremendously well. They have set such high standards. We are going to up the game a bit more because like you know, our industry is a very dynamic one and we have to be responsive and reactive to those changes that we see. So, to that extent, we are going to be addressing the issues that confront the industry today and a number of them, quite well known, are being addressed already. One of the issues we’ve had and that has lingered over a long time is the Petroleum Industry Bill (PIB). We can see some movement now and even though we have not gotten to our destination yet, we know that some work is being done in that regard. Another challenge we’ve had has been the issue of the Joint Venture call arrears and liabilities by the Nigerian National Petroleum Corporation,) (NNPC).  Again, a formula has been found; not an easy one but it is a workable formula once everybody puts their minds to it. To our members, the biggest challenge is putting them back to work. The industry has lost a lot of experienced hands, some of whom were trained with a lot of resources. Even though, they have been discharged in their primary places of work, our own objective, not directly but indirectly influenced by what goes on in the industry is to find a way, just to illustrate,  if there is a licensing round for example, some of our retirees would be put to some work. And if companies are being formed as a consequence of their ownership of new assets, they would be able to get back to some jobs at least to be the managers of whatever opportunities that are coming from that. Those are for our members.

We have very large and vibrant pool of young professionals  and student members and we intend to engage them. One of the biggest challenges I have seen is the lack of awareness of what’s going on. We have had a number of social interactions whereby a lot of bonding took place. We had one in Lagos and another in Port Harcourt and we shall continue to do this across the land. The idea is to bring our young professionals together and interact with them,, mentor them and  share with them technical  and industry information  to enable them have a grasp of industry trends and developments.

For the NAPE Secretariat itself, we intend to look for another location. Historically, you will recall that NAPE started from Campbell Street, around St. Nicholas in Lagos Island and then we acquired a building in Victoria Garden City. We later moved to Femi Okounu where we are now. We intend to continue that movement and to move closer into town so that accessibility to the secretariat would be a lot easier for our members.

Last year, we had a conference and the Pre- Conference Workshop dealt with the issue of frontier basins. We proffered some suggestions to the Federal government and some of them are being implemented today. We intend to keept our eyes on the ball and continue to guide them. There are also some interactions going on with the Frontier Exploration Services (FES) in that direction.  To further continue that conversation , we are planning a workshop in September that will discuss not just what they are doing in the Benue trough  alone, but frontier basins as a whole. The workshop will address issues from Dahomey basin offshore Lagos to Anambra basin, to Benue, to Calabar, Chad and Bida basin. We want to update our knowledge because a lot of work has been done in the past and additional information has been available but there has not been a progressive synthesizing of all that information. So, we want to catalog  these information,    create the awareness,  and provide a platform for professional technical interaction around those issues such that we can begin to market the potentials and opportunities in these areas to investors. It is a mid-term strategy towards creating opportunity for employment.. In the nutshell, that’s where we are. The conference theme has been carefully chosen to represent  contemporary trends  in the oil and gas industry and the nation’s economy. One thing about choosing conference themes is that you have to be able to gaze into the crystal ball and see what the situation will look like by the time you are having the conference, so that your topic will be relevant. We have done that and we are discussing “A Roadmap for Nigeria’s Oil and Gas Industry in a Diversifying Economy.”  Nigeria is at that point now where we are discussing ways and means of  diversifying the economy.

 

Is there a committee in place to streamline the research into the frontier basins you just spoke about?

The committee has not been formed because, you first of all have to carry out some findings as regards what to expect. . We’ve spent some time doing that and we are seeking advice on the best way to go about it. The good thing is that there is tremendous interest and  people who are very excited about the whole  project.. Some of the people who worked in these basins have retired and the information they have needs to be passed to the younger generation. Some of these old hands are around and they are willing to share their knowledge. And we have a very “hungry” and young group that is ready to grab this information and to run with it.

 

Nigerians would like to know if there is oil in Lake Chad basin. If yes, is it of commercial quantity?

Let me be very professional here in my submission. Lake Chad is a geographical area and the basin itself is a geological area. Both of them are not the same.  Benue for instance is a geographical name given to a river and a State. It is not the same as the geological area that we call the Benue trough. Sometimes, when people talk of Lake Chad, they look at where the water is now, but geologically Lake Chad or what we call the Borno Basin is an expanse of area of which the present lake is a small segment of; it extends from the Southern part of Nigeria to Niger and Chad Republics. So, when you ask if oil has been found in Lake Chad, the answer is yes. But if the question is has oil been found in the Nigerian part of the Lake Chad, the answer is no. Again, is there a possibility of getting oil here? I will say, yes. Perhaps, we’ve been searching  in the wrong places, due maybe to working with wrong data and wrong strategy. In 1999/2000, President Olusegun Obasanjo drew a curtain on the spate of indiscriminate drilling in the Chad basin and that was a very good move. It was like: “you have drilled about 23 wells and you haven’t come up with any commercial find, why not pause and analyze the data you have so far acquired just to see whether you have been working in the wrong place of right place”. That exercise of studying what has been done in a very integrated fashion has been accomplished.. They now have areas where they need additional data before drilling and they have marked those areas. They have also seen that where they have been drilling is not quite where they ought to be drilling. Of the 23 wells that have been drilled, 2 have gas shows and once you have gas shows nearby, you need to be sure that you have oil  nearby. This they got from the integrated study and to this extent, it is better they concentrate in the area where there is gas shows.  That process is well understood and formed  part of what was discussed at last year’s NAPE conference.  What needs to be done is clear in the minds of frontiers explorationists.  In terms of how much reserve, I will say it is too premature to say and again data is what we have to rely on. We have to make the discovery before determining the volume. Yes, we can make a guess but again, you have to do that based on data strength and that is not available to NAPE right now. Part of that data needs to be acquired in the first instance. We are still a little bit away from where we are heading but we have the direction and the right approach and so, we are heading there right now. And I think in no time, we’ll get the right answer to your question.

 

We understand there are other Sedimentary Basins in Nigeria; can you throw more light on them?

We have about half a dozen sedimentary Basins in Nigeria. Niger Delta is a well explored, well-known one. There is Dahomey or Benin Basin, offshore Lagos. It starts from where Niger Delta ends in Ondo. Dahomey Basin geologically stretches from Ondo all the way down to Benin. Republic and Togo and is part of what we call the West Africa margin. Different names come up in different write-ups. If you look at it regionally, we call it the West Africa margin and it goes as far as Senegal. You can see that there is a lot of interest and discoveries being made. Senegal has been able to attract big names there. CNNOC is there, BP and Exxon Mobil also. They are all taking big blocs because of some of the preliminary drilling results. Again, if you look at the approach, they haven’t drilled 23 wells before making those discoveries. In our Chad basin, we drilled 23 wells and we haven’t made any discovery. You now understand the context in which the earlier question was answered. We don’t need to drill too many wells to know where we need to be, to know where we need to explore and all of that. So, the approach and strategy are very important. Apart from Dahomey Basin, we have the Anambra basin. Again, there is the geological and the administrative components. There is the Anambra River and a State called Anambra. Anambra basin extends from Edo to the other side of the Niger, to a bit of Delta State and into Enugu, Anambra and Kogi State. That is one area. If you look at the history of exploration work in Nigeria, it started offshore Lagos, Badagry and to Anambra Basin. All these were before independence and it then descended into the Niger Delta before discovery was made. So, Shell BP has drilled some wells in the Anambra Basin in the past. Some of them made gas discoveries and this was an era where gas was considered a dry well and such that when you make a gas discovery, it’s assumed nothing has been found. So, some of them were covered up; the blocs have been reorganized and assigned to some new operators now. Additional works have been done and you remember that in 2014, the then President, Goodluck Jonathan came to commission a production for Oriental Petroleum in Anambra River field, which was a field that has been drilled by Elf Petroleum between 1967 and 1974. They drilled three wells, Anambra Rivers 1, 2 and 3 and drilled more wells all over that Basin. To the North of those places is the Benue trough. The Benue trough starts from the North of Enugu State, North of Anambra State, East of Kogi State and goes across to Gombe and Bauchi area and part of it to Yola in Adamawa State as well as Taraba State. And because one arm goes one way and another to Yola, we now have the Yola arm of the Benue Basin and the Gongola arm which is the River.  There is a volcanic boundary around Biu which is the Chad Basin and it goes all the way into Chad and Niger Republics from the Southern part of the present Borno and Yobe States, with a part of it extending to Cameroon.  Also, the Yola arm of the Benue Basin extends to Cameroon and Chad. The Chadian side has a discovery and a production by Exxon Mobil that are producing through Cameroon. The pipeline was laid entirely in Cameroon into their port by the coastline in the Atlantic. It is a proven Sedimentary Basin, just like the Chad Basin is proven in the Niger. Everybody calls it Benue as if it is one homogenous basin but we know that there is Yola Basin and the Gongola Basin. Then there is Bida Basin which is the Western part of Niger on the way to Kebbi State. We also have the Sokoto Basin that covers a bit of Kebbi State and a small area of Zamfara State and that extends properly to Niger Republic. This area is the Sokoto Basin but the French people call it the Ilullemmeden Basin.

 

Has there been any exploration activity in the Benue and Sokoto Basins?

Frontiers Exploration Service is in the Benue Basins right now. Shell, Total and Chevron had drilled wells in the Benue before. Relatively speaking, all the basins have been touched and a kind of exploration work had actually taken place but the quantum of works differs. Today, the Dahomey Basin – Aje Field is in production and another discovery, the Ogoh field is  where they  are developing. You say that is a proven basin. The Anambra Basin already has the Anambra River that President Jonathan commissioned. It has been in production but it is shutting now because they were targeting to produce oil only to discover they had a lot of gas. The strategy and investment for that is what they are trying to put together. There are other pockets of gas discovered in the past that some operators are trying to work on. The effort of Chevron, Shell and Total in the Gongola Basin led to each of them drilling a well apiece in 1996/1997 in their respective blocks they were allocated. Kolmani River made a discovery of gas in that place. There is data acquisition that is ongoing now by Frontiers Exploration Service centre around that area so that they can drill Kolmani River 2 and begin to have an idea of the dimension and size of the gas. In essence, gas has been discovered but we don’t have an idea of what the volume is. Because of shortage of information, we need to do that assessment.

 

Sir, tell us about the huge cash call issue and how it was resolved? What was the model deployed by NNPC?

From 2005 to 2015, there was accumulated joint venture call arrears. You know when you prepare your budget and the President signs it into law, you must spend the money. It is like you are breaking the law by not doing what you are supposed to do. But we do recognize that there are some constraints of people’s expectations and revenue streams and all that should fund the projects. So these are carried over and they cannot be cancelled. I don’t have the figures but it was close to $20 billion that was owed and recognized as at 2015 when we had our NAPE Conference. What government has done and this is all coming from the discussions that NAPE has had in the past. NAPE chose  these topics and had discussions about them and came up with solutions, which were presented through  communiqués that we sent to government. This government is listening and somebody is studying and watching what we say; which is very good. So what government   did was to call all the oil companies together and presented a scenario to them, They were told  that in an ideal situation, Nigeria produces 2.2 million barrel of oil per day, And they,  all have a quota production towards that 2.2 million. They were reminded that  this 2.2 million is coming from the IOCs, the PSCs, the Independents, the marginal fields. So, whatever their own quota is as joint venture operators, that quota is cast. So government now urged them to propel themselves by exceeding that quota. At the time they settled this issue, the Niger Delta challenge was still there and meeting the quota was still a problem. But today, we can say that there is significant progress in that direction. They not only produce their quota,  they produce more and that incremental margin is supposed to be shared by joint venture partners but government now says, use our share of this to defray what it is owed the partners.  So, this is what they did. Going forward, government is trying to remove itself from this cash call responsibility and argued that each project should source for its funding internationally and that is a strategy that is embedded in the Petroleum Industry Governance Bill, (PIGB.) Package your project, convince the investors and let money flow in. That way, you won’t be looking for NNPC to bring cash call. With this, each company is now on its own just as we have SEPLAT and others. As it is now, companies now have to package their projects and convince financiers that they can pay back. This solution fits this PIGB very well. The Senate has passed the Act but the House of Representatives will also need to do same and then both Houses will have a harmonized version which will be taken to the executive for assent.

 

So does the PIGB as recently passed by the Senate meet your expectation?

Yes, it does. You see, when you are unable to move at all, anything that comes your way is good enough. I like the strategy and you remember that the earlier version of the PIB is one giant document. Now, if you speak with the parliamentarians and Nigerians in general, people don’t have issues with about 80-85 per cent of that document. It is the contentious 10-15 per cent that derailed the entire document and that nullified the hard work that people put into that document. What this government has done was to break it into three parts and take the less contentious issues and get them done with and then sit down to do an eye-ball to eye-ball negotiation on the rest. That way some activities can be taking place. The PIGB is a welcome development and I hope that the House of Representatives gives it a dispassionate approval and I hope that it will come to government and it will become a law very soon. It’s long overdue and the delay in passing it has done a lot of damage, created anxiety, delayed projects and no new investors came in. There were no exploration activities in the way and manner it should have been. Everyone retreated  to their zones and watched what was going on.

 

What do you make of this shale, the potentials and its impact on our market?

It has already affected our market and has been responsible for why Nigeria is in recession even though the situation was compounded by some Nigerian localized issues. Basically, it has made people that we used to sell oil to become potential sellers to us, if we are able to buy. That is basically the United States of America, which was our biggest importer. They are saying, they can supply gas to Europe as from 2018. This means they have surplus. When they say they can sell, trust me, they have enough for 50 years. What is happening is that the supply and demand have been stabilized by the shale oil. A situation where demand was dictating the oil price is gone as supply is now the new determinant of the oil price. Organization of Petroleum Exporting Countries, (OPEC) has been struggling to hold it by way of supply cuts just to make what is available to be lower, to make the supplier a bit agitated. This is what has been keeping the price afloat but if  all countries are allowed to produce the way they like, the oil price will crash down further still.

 

Now, do you think the shale technology is something Nigeria can acquire?

Yes but I won’t say we should go in that direction now because we haven’t finished with the conventional practice. We shouldn’t rush into it also because of the cost. Yes, the cost is gradually falling which is one of the factors that delayed it but we still have a sizeable reserve of 37 billion barrels and we want to grow to 40 billion barrels in the next few years. We are not desperate for energy and we need to develop by using what we have to get to where we want to. We need to develop our infrastructure, our industries and uplift the economic situation of our people. We need this in oil and gas and this is where the theme for the NAPE Conference is linked. We need to ensure that we optimize and become more efficient managers of these resources and channel the revenue thereof into other sectors to grow them. For instance, if you do an audit of the Petrochemicals, what comes from oil and gas will probably be up to about 60 per cent that our lives are invariably tied to. We waste some of these resources and haven’t really used them fully. The Petrochemicals industry is underdeveloped in Nigeria. There is an Eleme Petrochemical industry which is not doing much but we need a giant, modern Petrochemical industry. Basically, we have the multiplier effect that this would bring to the economy if we are able to efficiently work on it.

 

Do you think we are ready for enhanced oil recovery technology in Nigeria?

We have been using it because Niger Delta is a mature producing area. Some of the discoveries date back to decades and we have witnessed both peak and declined production. So, we are already doing enhanced recovery in some areas. What will come are guidelines for doing it. The existing guidelines are targeted towards primary production. We need to work on our guidelines to direct the companies on what to do.

 

Aramco is producing a barrel at about $9 or much lesser. What are we doing to bring down this cost at the moment?

It is about amortizing the facilities because, don’t forget, Aramco made their discoveries years ago. They have a giant field that is about the size of Ogun State (in Nigeria) and they have thousands of wells on that field. They built infrastructures for production and everything over the years. So, the field itself has been amortized overtime and therefore, the cost has been incrementally falling. You can’t compare them to one small field somewhere in the Delta recently discovered. Having said that, our cost is high in Nigeria and there are two sides to this. We have the technical cost element and the non-technical cost element. We can work with the technical cost element by meeting all the contractors and tell them how much we can pay because oil price is low. But we have the non-technical cost of JTF, Navy, host communities, security, vigilante and cost for monitoring your pipelines and cost for preventing people from doing bunkering on your facility. This cost has been escalating and it has no respect for the fall in oil prices.

 

Recently in Houston, you spoke brilliantly on managing our gas, stressing the importance of having pockets of industries at different locations. You may want to shed more light on that.

What I said was that gas has been found in the Sedimentary Basins and therefore more exploration needs to be done. The Gas Master Plan was launched during the stewardship of Diezanni Allison Madueke. Even though, it has not quite gathered traction, the strategy is that gas would be taken from the Niger Delta and there would be a network of pipelines across the country that would take gas to all nooks and crannies of the country for electricity generation, for ammonia fertilizer plants, for urea plants, LPGs in a bid to boost the economy and create opportunities.

So, what I was saying was that in the event that gas is found in say Benue, Gombe area, it means, the map would have to be adjusted. You don’t need gas to come from the Niger Delta area. I was advocating for the intensification of exploration work as quickly as possible where we have pockets of gas deposits so that the Master Plan can be revised and made to align with where the gas resources are. That way, you will have fewer distances of pipelines to lay and to vandalize. Another thing about inland basins is that your IPP (Independent Power Plant) can be built on the field; your urea/ ammonia plant can be set up there and then. So you don’t need any pipeline taking gas to anywhere. Once you build your urea/ ammonia plant and set up your IPP, you enter the grid from there and the man on the other end will see the light. The strategy is flawed in principle because of urgency and lack of careful planning. We have a lot of IPP plants like Olorunshogo, Geregu, and Omotosho etc across the country, expecting gas from the Niger Delta. How about putting the IPP right there at the Niger Delta? Okpa field has the IPP by Agip right there and I think it is the only one. Omotosho, Geregu and Olorunshogo are in Kogi, Lagos and Ondo States expecting gas from elsewhere and so if somebody cuts the pipeline, that’s all. So strategy wise, we were in a hurry.

 

Licenses were given to marginal field operators but many of them are not doing very well. Beside their financial challenges, what other hurdles are they battling?

 

I will call it economic challenge because the marginal field is all about economics. There are other challenges like the host communities challenges. If you are in Ogoni where it is difficult to move forward, you have the marginal field but you won’t be able to do anything. Another issue is the nature of crude oil in your field. There is what we call heavy oil, which is sluggish to fill. Take for example kerosene, and engine oil. If you pour both, one is faster, the other is sluggish. That speaks about what we call the viscosity of crude oil.  If it’s like that in the reservoir, they call it dead oil. Like I said, the deeper you go while drilling, the hotter it becomes and the more pressurized things are. If you manage to puncture something by drilling into something like a balloon, oil will start coming out by itself. When you have low gravity oil, it is unable to come out; you’ll need secondary effort to push it out which comes with its own attendant cost. By the time you build cost into the economics of everything, it is no longer viable. So even if you have community problem and you throw money at it, you put that money into the economics, it becomes part of your expenditures. The hypothesis here is, if I spend X, can I make Y? How much profit is being made and is it worth the money being spent? There is technology as well as infrastructure issues. My field is at one stranded location and the person I can lay pipeline to help me evacuate it is so far away. By the time I put the cost into the economics again, it may not make sense.  So, can I truck it? Again the cost of trucking not forgetting the associated security risk is another cause for concern. There is also the challenge of people who don’t even know what to do, political people who own blocs. They are given expert advice but they don’t listen.

 

What is your advice to government on the way out of these pitfalls in subsequent bidding rounds?

First of all, their selection criteria in terms of who is awarded should be all-encompassing. They should have the financial resources and technical competence as well as the managerial team to do it. And then, they should come up with a solution that is acceptable to the host community to be able to do it. People shouldn’t just rush into bidding but there is need to engage consultants to help in the screening process of what is available so that you know what you are bidding for.

 

What should be the strategy for catching up with Angola in terms of production level?

Let me put it this way. They don’t have our reserves and they are fortunate not to have onshore presence and exposed as we are. They had a template from Nigeria because when they started, they came to Nigeria to find out how things are run here. So they have a book that has some pages on the way things are done but Nigeria started from nothing. Do not forget also that they came out of a long protracted civil war which was fought along ideological lines. So when oil and gas activities started, people were not there but it has become the mainstay of the economy now. They have seen a lot of discoveries, interests and investments from the big guys. Angola is a country of about 14 million people with a landmass of one  half the size of Nigeria. They are rich in solid minerals and they a good land for agriculture. So, it is already a prosperous country that is naturally endowed with oil and gas resources offshore. 14 million people with large volume of oil and gold and copper and all of that, they must be above us. Their Per Capita Income is very high. This is what is behind their success. They have seen where Nigeria is making mistakes and they are avoiding those mistakes as much as possible. Nigeria hasn’t optimized what she is doing yet to attain our full potentials. If we do, we’ll surely be ahead of Angola. If we are able to reach our 2.2 million barrel per day, we’ll be ahead of them. Most emerging oil and gas nations in Africa always make reference to Nigeria at international conferences and they avoid the mistakes that we have made and still making. It is easier to learn from other people’s experience but when you don’t have anyone to learn from, it can be quite challenging. With the right leadership, we can get there because our crude is sweet crude devoid of sulphur content unlike what some of these countries have. So, they need huge sums to clean it up a bit more.

 

NAPE’s Annual International Conference and Exhibition is one conference everybody looks forward to. What should we expect this year?

The first thing is the theme: a roadmap for the Nigeria’s oil and gas industry in a diversifying economy. We know there is a lot of effort at diversifying the economy. At this year’s conference, we have already seen very good interest being shown by some of the IOCs and some of the key players in the sector. For instance, Chevron has accepted already  to sponsor the opening ceremony and they are also asking for permission to deliver the keynote address. We also have Exxon Mobil showing interest, so the programme is selling itself, but we want to ensure that we speak to the topic because we want to come up with a message at the end of the day for the Nigerian people and Nigerian government. What we see is that the Agriculture Ministry, the Solid Minerals Ministry, Power and Infrastructure are opportunities to diversify the economy of this nation. We want to find a way to bring them into our Management Sessions for discussions. If you bring Audu Ogbeh to talk about agriculture, he will be speaking not only to the industry and the companies but also to individuals who will now know that beyond oil and gas, they can also invest in opportunities in agriculture too. Do not forget that in the old NAPE conferences, we used to have companies like AGIP exhibiting some agricultural products like yam and plantain, just as a way of supporting the host communities. We want to bring all of this back and create an enabling environment and do not forget that we are geologists and geoscientists and part of our course content is solid, liquid and gaseous minerals. To this extent, we are bringing the Solid Minerals Minister to join us at the conference about the opportunities that exist therein so that companies that take decisions based on these opportunities. We want to carefully open the eyes of government, companies and investors to the opportunities that would be of benefit to them in a manner that will be linked with the oil and gas industry.

 

We must thank you for the time spent with us

It’s my pleasure always.

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