Other oil firms may follow the trend set by the Shell Petroleum Development Company of Nigeria Limited by selling off some of their oil blocks, a top oil and gas official said yesterday. Ademola Adeyemi-Bero, MD/CEO, BG Exploration and Production, Nigeria, said at the 36th edition of the information value chain breakfast forum organised by Digital Jewels which was held yesterday in Lagos, that the move by Shell may be adopted by other oil companies operating in Nigeria.
In a presentation titled ‘The changing face of the Oil & Gas industry: implications for professionals, institutions and governments', Mr Adeyemi-Bero said it was not a bad move.
"Other companies could follow suit soon" Mr Adeyemi-Bero said. "Other oil firms like Exxon Mobil, Chevron and the others would most likely do what Shell has done" he said.
Shell has been looking to divest its 30 percent interest in the following Nigerian blocks: OML30, OML34, OML40 and OML42. Experts say some of the discoveries on these blocks started production in the 1960s. However, at present, the majority of production appears to be shut-in, with 2009 average production estimated by IHS (Information Handling Services) at approximately 21.5kbblpd (from OML30 and OML34 only).
Just last year, Afren announced the acquisition of the OML26 block, in Nigeria, from Shell, while a report from Renaissance Capital, an investment bank said Kulczyk Oil Ventures on Friday announced that the Neconde consortium was the winner of Shell's OML42 block auction.
Experts have said there are several reasons why they think Shell might have decided to shift its operations towards deep offshore and divest some of the onshore assets.
Significant discoveries
First they argue that deep offshore assets tend to be much larger in size than onshore. Some say in order to make a meaningful impact on the company's production for a company of size of Shell, one really need significant discoveries.
"It is no secret that Shell had a very difficult time to establish a healthy working relationship with the local population and that most of the assets that it is trying to divest are either shut-in or produce at restricted rates. They are less likely to have these types of issues in deep offshore assets" Dragan Trajkov, oil and gas analyst, Renaissance Capital, an investment bank said.
He also said that it is believed that the potential Petroleum Industry Bill (PIB) and the already-passed Local Content Bill might have had some impact on their decision.
"Especially the fact that the early version of the PIB was proposing that the majors may be required to relinquish some of the undeveloped fields. However, we don't think this was the major determining factor, but rather a combination of all these three things together" he said.
Mr Adeyemi-Bero said the Local Content Bill is a step in the right direction, if properly managed. "The bill is a right move".
Bridging existing gaps
He however said there are gaps that should be addressed by the bill. "The bill should bridge existing gaps. We do not have a steel industry to support the oil and gas industry, which basically makes use of iron and pipes. The incentive is not there. We must have the product we need here, or a means by which we can get it in easily".
He also said that the nation needed training schools for addressing technicians and technical institutions so that we do not need to look around for certified technicians outside the country.
"The government needs to put some money aside for local industries to be able to implement their contract. Basically, expatriates are not the problem. The lapses in the bill should be addressed, to include financing, skilled labour and resources accessibility" he said.
Charles Ebereonwu, spokesperson for Total, another oil major, said the he was not in a position to say if the company is about to embark on any direct sales of its oil blocks. He however said as part of the joint venture with Shell, the firm is also indirectly involved in the sales, as well as Nigerian National Petroleum Corporation and the other companies in the joint venture.
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