The Bonga is a giant field in the deep offshore water terrain. There is what is referred to as Bonga Main on which the first Floating Production storage and offloading (FPSO) in Nigeria was brought to produce and process crude oil.
Currently the operators of Bonga are doing life extension for the FPSO. There are also Bonga Northwest and Bonga South West. The development of Bonga South West is the one attracting the attention of everybody. This should have happened some few years back, but somehow each time industry stakeholders get prepared with the expectation that it would happen, the unexpected happens.
According to industry sources, the development of Bong South West has been promoted about three times in the past and each time some problems would come up and scuttle it. This has also affected the development of Aparo field which straddled it.
The last was 2015/2016 when everybody thought the project would go ahead after the contractors have had their bids duly evaluated, but when the industry was expecting the contract would be awarded it was cancelled. So this time around, the bidding process started again last year, it has gone up to technical and what is remaining now is commercial evaluation, which would lead up to the award of the contract. Currently, the question being asked by many stakeholders is, will Bonga South West Happen or will it not?
The economics of the field Businestandardsng.com learnt has been the main reason why it has been difficult for it to be developed. Most times when its Net Present Value (NPV) is computed, it often comes out negative. Suggesting that it may not be commercially viable at those times that stakeholders felt the contract should have been awarded
The recent execution of agreements to renew Oil Mining Lease OML 118 for another 20 years however gives some level of confidence that the development of Bonga South West is around the corner.
The new PSC will facilitate Bonga South West Aparo (BSWA) project, led by Shell Nigeria Exploration and Production Co. (SNEPCO). It had previously been said that BSWA may hold 1 billion barrels of oil.
According to some stakeholders, the failure to allow the development of Bonga South West to go ahead was perhaps deliberate. As it was alleged that Shell and Co Venturers, namely Total and Agip, even including NNPC were not willing to move to that level until the issue of the lease of the field has been sorted out.
You cannot develop an FPSO that has a life span of almost 20 years when government has not given approval to the lease of that OML, an industry operators said.
The number of issues that surrounded the renewal of the lease have now been sorted out, especially as it relates to fiscal arrangement and the obligations of Shell Nigeria Exploration and Petroleum Company (SNEPCO) and it co venturers to government on the asset. These have now been sorted out, Shell and fellow partners are also believed to have made necessary payments to government, so the coast is now clear for government to give approval to NNPC, Shell, Agip and Total to go ahead with the development of the field. This was what happened recently.
Should the development be allowed to take off, what would then happen would be that a lot of projects would emanate from this development? The total investment involved is estimated to be around $10 billion, even though one could say that is the exact amount, other things could come up that may lead to price variation. A lot would also depend on what the contractors are willing to take for the various scopes. In the real sense of it, it is after all the necessary negotiations have been concluded that actual cost of the project would be known. May be plus or minus $10bn.
The fact how Now the government has made some money from the renewal of the lease and when it is then developed it would throw up a lot of benefits to the Nigerian economy. A lot of companies would be engaged, both foreign and local contractors would be used in the development of project.
The recent execution of agreements to renew Oil Mining Lease OML 118 for another 20 years however gives some level of confidence that the development of Bonga South West is around the corner.
The Nigerian National Petroleum Corporation (NNPC) and its Production Sharing Contract (PSC) partners -Shell Nigeria Exploration and Production Company (SNEPCo), Total Exploration and Production Nigeria Limited (TEPNG), Esso Exploration and Production Nigeria Limited (EEPNL) and Nigerian Agip Exploration (NAE) – have executed agreements to renew Oil Mining Lease (OML) 118 for another 20 years.
The five agreements signed include, Dispute Settlement Agreement, Settlement Agreement, Historical Gas Agreement, Escrow Agreement and Renewed PSC Agreement.
Mele Kyari, the Group Managing Director of the Corporation, was quoted as saying that over $10bn of investment would be unlocked as a result of the agreements which signaled the end of the long-standing disputes over the interpretation of the fiscal terms of the Production Sharing Contracts (PSC) and the emplacement of a clear and fair framework for the development of the huge deep-water assets in Nigeria.
Bayo Ojulari, Managing Director of SNEPCo in his remark during the signing of the agreements, noted that the agreements marked the end of a twelve-year dispute that had marred business relationship and affected trust and investment.
“Today, we have signed agreements that define the future of deep-water for Nigeria. This is the first deep-water block that was developed in Nigeria and it is also the first one that we are resolving all the disputes that will lay the foundation for the resolution of other PSCs,” the SNEPCo helmsman stated.