INTRODUCTION
In the past two to three years, I have
watched with amusement the insensitivity of Nigerian lawmakers to the Petroleum
Industry Bill (PIB). The refusal of the lawmakers to pass this bill either
through deliberate attempts or by circumstances beyond their control has
essentially stopped fresh activities, initiatives, ideas and investments in the
Nigerian oil and gas sector. The fact that several deadlines have been set,
passed and the PIB has not been passed is gradually eroding any credibility
that Nigeria has within the global oil and gas industry.
Several versions of the PIB have been
floating around unofficially. None of these versions is widely available to the
average citizen but I have read about some of the provisions in the bill in the
media outlets. Beneficial and revolutionary impacts of the various versions of
the bill to the Nigerian populace have been touted in the media. From what I
have read in the media, nothing is mentioned about unconventional hydrocarbon
resources in the PIB. As a result, I feel something is still missing in the PIB
and this is the main reason for writing this article.
Before the PIB is passed, the executive and
the legislative arms of government should work together to include a
"Special Section" in the PIB to address the special nature of
"unconventional hydrocarbon resources" within the Nigerian
"frontier" and "established Niger Delta" basins.
Unconventional hydrocarbon resources have the potentials to generate more royalty
and tax revenues for the Nigerian government on a long-term basis. Rules
guiding their developments should be incorporated now in the PIB, just as
several jurisdictions around the world are dusting their hydrocarbons laws and
working to include rules for the development of unconventional hydrocarbon
resources. In general, this article highlights major policy issues that need to
be addressed if Nigeria wants to jump-start unconventional hydrocarbon
resources development with similar success stories as in North America and
emerging unconventional resource plays in Europe and elsewhere around the
world.
UNCONVENTIONAL RESOURCES
Unconventional resources are classified as
unconventional because they are either unconventional hydrocarbons (e.g. heavy
oil or bitumen) trapped in conventional reservoirs (high permeability sandstone
or carbonate rocks) or they are conventional hydrocarbons (light oil or gas)
trapped in unconventional reservoirs (low permeability (i.e. tight) sandstone
or carbonate rocks; coal seams; hydrates or tight fractured basement rocks).
They could also be unconventional hydrocarbons in unconventional reservoirs (e.g.
immature kerogen i.e. oil shale, which is located in vast areas of Colorado
State in the USA).
By their very nature unconventional
resources can be regarded as "difficult", "not easy" or
"extra efforts" resources. They usually required extra or special
characterization and recovery technologies. External influences, forces or
agents are required to mobilize these resources; either because of high
viscosity or because they are packed in dense, difficult, inaccessible or
unstable rocks (reservoirs). On the other hand, conventional hydrocarbon
resources are buoyant driven and are "primarily" recovered through
natural forces or drives.
ECONOMIC INCENTIVES
One other characteristic of unconventional
hydrocarbon resources is that they required high initial start-up capital for
commercial exploitation but could me more profitable than conventional
hydrocarbon on a long-term basis because of their long life depletion behavior.
For a long-term investor, unconventional hydrocarbon plays might be the most
profitable investment options under a non-speculative and well-managed
development scenario. For long-term investor, this is a game changer because
one could invest and expect profitability that spans 2 to 3 decades. This is
one the reasons behind recent spate of acquisitions of unconventional
hydrocarbons-focused small and independent exploration and production companies
in North America by the majors, who usually have long-term views in the
management of their oil and gas portfolios.
LOCATIONS WITHIN NIGERIA
Despite paucity of geophysical, well and
petro-physical data, available public domain data point to the presence of
unconventional hydrocarbon resources within Nigerian frontier and Niger Delta
basins. Additional data would need to be acquired to further delineate the
areal extent and volume-in-place of these resources. Preliminary estimates show
these might be enormous. The locations of these resources are highlighted
below:
1) Bitumen and Heavy Oil
Bitumen and heavy oil within the Benin
(Dahomey) basin are widely documented in the open literatures. Recent estimates
show the reported in-place resource volumes might actually have been
underestimated, that is, reported resource volumes might be conservative. So
there are huge upside potentials of the bitumen and heavy oil resources.
2) Tight and Coal Seams (Beds) Hydrocarbon
Resources
In the past, Nigerian National Petroleum
Corporation (NNPC) and its Joint Venture (JV) partners have carried out
exploration activities in the Nigerian frontier basins of Bornu (Maiduguri)
basin, which is part of the wider Chad basin; Gongola sub-basin; Yola sub-basin
and Anambra basin. In addition, within the past 2 to 3 decades, using surface
outcrop and well core samples from these basins other frontier basins (like
Bida and Sokoto basins), Nigerian universities' professors/lecturers have
carried out extensive geo-chemical studies. Some of the exploratory data and
most of the geo-chemical studies data are available in public domain. In view
of modern technologies and interpretative techniques and tools; systematic
assembling and re-interpretation of these data indicate the presence of:
shale gas, shale oil and coal seam gas
(i.e. coal bed methane - CBM) in the Anambra basin,
shale oil in the Yola basin;
shale gas in the Gongola basin;
shale gas in the Borno (Maiduguri) basin.
Other available public data also point to
the presence of:
shale oil the Benin (Dahomey) basin;
shale oil and shale gas within the
established or proven hydrocarbon province of the Niger Delta, especially in
the thick shaley intervals below and above known "conventional hydrocarbon
reservoirs" in the western edge of the Niger Delta, around the "Benin
flank" of the basin.
3) Fractured Basement Resources
Until recent years, a commonly held opinion
in exploration geology is that hydrocarbons are rarely found in basement rocks
but recent successful identification, evaluation, and exploitation of
hydrocarbons within basement rocks around the world are dispelling this myth.
If favorably situations exist (e.g. fractured basement rocks that intrude into
hydrocarbon migration paths, etc.) then hydrocarbons might trapped in basement
rocks. In recent times, oil and gas have been produced from prolific basements
reservoirs in some part of Asia and the Middle East.
Within the Nigerian Benin (Dahomey)
frontier basin, there have been several speculations on the presence of
hydrocarbons in basement rocks especially within the basement high of Okitipupa
high/Ilesha spur axis. Three wells (Araromi-1, Gbekebo-1, and Bede-1) have
penetrated this section of the eastern part of the Benin (Dahomey) basin and
evidence has shown that the basement rocks are highly fractured and are
adjacent to hydrocarbon source rocks that are in oil and wet-gas windows. These
are some of the main criteria for giant hydrocarbon accumulations in basement
rocks. Existing wells within and around Okitipupa high would have to be
deepened and one or two horizontal wells might need to be drilled into the
basement rocks to further confirm the potential for hydrocarbon accumulations
in the fractured basement high within the eastern part of Benin (Dahomey)
basin.
DEVELOPMENT APPROACH
Bitumen and heavy exploration and
development are currently governed by the Nigerian Minerals and Mining Act of
2007 (NMMA 2007), which offers very favorable fiscal terms for the exploration
and development of bitumen and heavy oil. This is a very good and attractive
piece of legislation. To jump-start the development of the other unconventional
resources (tight hydrocarbon resources, coal seam gas (i.e. CBM) and fractured
basement hydrocarbons resources) government should incorporate a "special
section" in the PIB to address the special nature of these resources. The
special section should adopt all of the favorable fiscal terms in the NMMA
2007. In addition, the open acreage licensing policy (OALP) should also be
adopted for these other resources. The reason for recommending the adoption of
favorable fiscal terms of the NMMA 2007 and the OALP is because, unlike the
conventional hydrocarbon resources in the Niger Delta that have been
extensively de-risked with little or no exploration and development risk,
unconventional hydrocarbon resources need further de-risking activities. Hence,
there are needs for some form of incentives to encourage further exploration
and development activities.
Once the "special section" on
unconventional hydrocarbon resources has been incorporated into the PIB, the
national assembly should pass the PIB as soon as possible and avoid further
delay. Experts within the Frontier Exploration department of NNPC should also
recruit and work with Nigeria universities' professors/lecturers and Nigerian
geo-science and petroleum engineering experts as consultants to collect,
organize and package all existing proprietary and open publication data as well
as data that are currently been acquired by NNPC in the frontiers basins. These
data should be made available in open industrial standard formats. The use of
Nigerian dons is particular very important because they have carried some of
the highest quality works on Nigerian frontier basins.
The government should then conduct
extensive "road shows" to promote Nigeria unconventional hydrocarbon
resources in some North America cities to attract small companies, independents
and majors. North America-based companies have been the major innovators in
unconventional hydrocarbon resources development in the past decade and making
efforts to attract these companies is very critical to fast tracking the
development of Nigerian unconventional hydrocarbon resources.
CONCLUSION
Unconventional hydrocarbon resources within
Nigeria border have potentials to create addition steady revenues for the
Nigerian treasury for a very long time. It is hoped that the ideas enumerated
and discussed in this article could be incorporated as special provisions in
the PIB before it is based to law to address the special nature of
unconventional hydrocarbon resources.
Dr. Oluropo Rufus Ayodele is a
Houston-based petroleum engineer, currently with Shell International
Exploration and Production Inc (SIEP), Houston, Texas. He works in the
Unconventional Technologies sub-unit of Shell Project and Technology (P&T)
business unit. He holds a PhD in petroleum engineering from the University of
Alberta, Canada and he is a registered/professional engineer (P.Eng.) in the
Province of Alberta, Canada.
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