Nigeria secures $1.2 billion for 36 new on- and offshore wells

The Nigerian National Petroleum Corporation recently agreed to a joint venture for $1.2 billion with Chevron Nigeria.

The Nigerian National Petroleum Corporation (NNPC) recently agreed to a joint venture for $1.2 billion with Chevron Nigeria, the Wall Street Journal reported. The venture is called Project Cheetah and will consist of 23 onshore and 13 offshore wells, according to a press release from the NNPC.

The funding will come from Nigerian and international leaders, including the Standard Chartered Bank and United Bank for Africa and is a major part of the Accelerated Upstream Financing Programme, according to Energy Business Review. This program was started by the NNPC and is meant to help the Federal Government pay its JV oil partners. According to the Wall Street Journal, Nigeria has had problems with fulfilling promises to its oil partners, which has affected production.

"I have always believed that issues of Federation Accounts must be left sacrosanct and not be toyed with," Dr. Ibe Kachikwu, Group Managing Director of the NNPC, said at a ceremony in London announcing the agreement. "The Accelerated Upstream Financing Programme is designed to help us achieve this objective."

Ready for success
The project will take place over the next three years in two stages, the press release stated. The first stage will take place over 2015 and 2016. It includes drilling 19 wells. NNPC estimates that the first stage will produce 21,000 barrels of oil and condensate, plus 120 million standard cubic feet of gas per day.

Stage two will be implemented between 2016 and 2018, comprising 17 wells. This stage should yield 20,000 barrels plus 7 million standard cubic feet of gas per day.

The project as a whole is expected to bring in up to $5 billion for the Federation Account and is predicted to generate 61 million barrels of oil per day at peak operation. Peak gas production should result in 127 million standard cubic feet of gas per day. This is equivalent to about 400 megawatts of electricity, which will boost the country's power supply.

Moving forward
According to Energy Business Review, Nigeria is the largest oil producer in Africa, with the ability to export 2 million barrels a day. According to The Wall Street Journal, 90 percent of Nigeria's foreign exchange earnings and 70 percent of government earnings come from oil exports. NNPC/CNL is the third largest oil producer in Nigeria. The project is expected to keep current production up and begin to replace older wells.

Project Cheetah is the first project under the Accelerated Upstream Financing Programme. Kachikwu said this new model of funding will be the standard for future upstream financing, according to Energy Business Review.

The NNPC also announced that it plans to review its other Production Sharing Contracts with hopes to bring additional benefits to Nigeria.

"We intend to begin the process of the re-negotiation of the PSCs to see what value chain and improvements we can have from these contracts," Kachikwu announced at the France-Nigeria Business Forum. "Some of the contracts were negotiated over 20 years ago and they have since been overtaken by new realities in the industry."

For more information about Nigeria's oil industry, visit PennEnergy's research area.

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