…Petroleum industry should switch to EOR mode
Despite the number of development plans awaiting Final Investment Decisions for deepwater fields in the country, long term outlook suggests that the entire Niger Delta petroleum play may have completed full cycle maturity.
The bleak shadow means that acute fall in production might follow the prevailing poor rate of exploration successes even in the deepwater where new acreages awarded between 2005 and 2007 have failed to translate to significant reserves additions to the national asset profile.
Eminent geologist and industry captain, Mr Austin Avuru, told The Oracle today in an exclusive chat that onshore, swamp, shallow water and deepwater terrains in the Niger Delta have shown maturity, and may not yield new world class reserves as witnessed in 1990s and early 2000s.
The emerging reality, according to him, challenges both government and players in the industry to enter the next industry operations mode that emphasizes enhanced recovery and efficient portfolio mix in order to optimize value from existing assets.
Mr Avuru, who recently retired as the Chief Executive Officer of London listed Seplat Petroleum Development Company Plc, is now an investment promoter and consultant in the upstream and midstream energy sector.
According to him, Nigerian petroleum asset lease administrators should therefore be efficient in stimulating exploration for by passed reserves and switching operations in the industry into the enhanced asset recovery mode.
“Well, the entire Niger Delta terrain is maturing actually, not just the onshore. As you well know, if you assets in the swamp and shallow offshore are all maturing.
“To tell you the truth, even in the deep offshore where production started in the 1990s and early 2000s the basin is no longer a new terrain. The first deepwater producing fields including Abo the Bonga are about 25 years old! And in the next five years, you may start seeing decline in all the primary assets in the deep offshore; whether it is Abo or Bonga. I know that Bonga will likely slide into Bonga North and all that, but the Bonga Main will start seeing decline in the next five years.
“So, really the entire Niger Delta oil and gas terrain, from that point of view, is already maturing. There is no where you go and see all those primary greenfield discoveries that are large. I think those days are gone for the deepwater.”
Mr Avuru pointed out that investors and government’s asset managers should focus on advanced exploration and asset recovery techniques to create the best value out of their leases.
“So, yes, anybody investing in the Niger Delta terrain today should know that he is investing in a basin that is maturing. So, the opportunity you are seeking is to be part of the last batch of players seeking to squeeze out the last barrel. These are basically the opportunities available in the Niger Delta, no matter the terrain.
“If you look at the rash of discoveries in our deep offshore, all of those geological principles whether it is toe thrust or any other basin floor finds have all been tested and therefore the big operators know today from geological point of view where the opportunities are. That does not exclude the likelihood of few new discoveries though. But the rash of discoveries that have the likes of Bonga and the rest that built up 8.0 billion barrels in a space of five years will not likely happen again,” he argued.
In responding to calls for advanced oil search in the existing leases and roll out of new acreages in the deepwater as means of spurring new reserves addition, Mr Avuru agreed that there is need for enhanced exploration across all the existing terrains in the Niger Delta. He however explained that new exploration campaigns would likely target bypassed areas, including deployment of novel technology in seeking deeper seated reserves.
“New explorations will likely target the bypassed plays, but in terms of geological modelling I think all the models have been tested and we kind of know the story of the deep offshore now,” he pointed out, adding that “the places that are left to be discovered are not limited to either onshore or swamp or shallow offshore or deep offshore.”
“I am saying that primary discoveries have been exhausted. I mean big discoveries in new basins just like we are seeing big gas discoveries in eastern offshore of Africa. Those are primary discoveries: greenfield, usually large discoveries. After that rash of discoveries, then you go back and use the model you have built and then start looking for bypassed plays.
“So, bypassed plays could be that you will have to drill deeper. And that could be in shallow offshore, it could be deep offshore, it could be on land. And there are some others that were simply missed by not drilling wells. So, additional appraisal development wells could pick up some reservoirs and so on. So those are the opportunities that are left.
“There are still discoveries to be made which is why we are still drilling new wells till today. But they are not necessarily the primary targets that are greenfield. That is why I am saying that anybody investing in the Nigerian oil and gas basins today will come in with the mindset that you are investing in a mature basin and therefore you are coming to optimise the production of already discovered reserves.”
On enhanced exploration and asset recovery, Mr Avuru stated that the prevailing circumstances in the field of play makes it imperative for investors to deploy advanced recovery technology to squeeze out more oil and gas from operated production assets.
He pointed at better geological and petroleum engineering modelling tools now enable operators recover the bypassed plays in operated leases.
“Some 20 years ago our recovery factor in Nigeria used to be 30 percent. When you run your models in those day and you draw your map, you apply 30 to 35 percent recovery factor. Those recovery factors are pushed to almost 50 percent now. By the time you start applying more technology and more secondary recovery methods, you may push the recovery factor towards 60 percent.
“So those are the type of things where the emphasis is: to optimize production for the already discovered fields; and to discover all the bypassed plays. We have a lot better technology now-between 3D and 4D- a lot better geological and petroleum engineering modelling tools now that will enable us recover the bypassed plays. So, those are the opportunities available and those opportunities can earn a lot of barrels,” he advised.
In the face of low price cycle, energy transition and maturing plays, Mr Avuru also advised investors adopt the right portfolio mix in order to create and earn value from the full energy matrix.
He recommended that operators and investors in the upstream petroleum industry should adopt a wide range of business integration models that would enable them push multiple commodities into the market, develop the right size and funding capacity through partnerships, and create presence across the full industry value chain.
“There has to be integration in both directions: integration in your mix of business, not just looking for black oil. You just have to be the company for every product. When you drill a well, whether you find oil, you find gas or you find condensate you deliver it to the market; especially the domestic market to stimulate economic growth as we discussed.
“Then we should also look at integration in terms of the size of operators as we go more and more into the difficult environment for raising funding. Banks are shying away from putting money into oil and gas. A number of equity investors are putting difficult conditions, so you will get to a situation where fringe players that don’t have strong balance sheet will not make any impact.
“So, there will also need to be integration of successful operators joining forces to have the right size. You spoke about deepwater. Indigenous companies are not there not because they cannot handle the technology or the planning for a deepwater development. It is the muscle! A typical deep offshore of about 500 million barrels development will cost about $3 billion. Where is an indigenous company going to raise that from?
“So, it is when you start handling that kind of balance sheet that could raise about $3 billion of development funding, because you have the balance sheet to support it, that is when you grow as far as deepwater and into other terrains.
“So, integration to create size, integration to create a composite business including midstream processing, are the two directions for those who want to be serious players in the industry in the future must pay attention to.”
