CAPITAL: LAGOS

MONETARY UNIT: NAIRA

REFINING CAPACITY: 438,750 B/CD

PRODUCTION: 1.9 MILLION B/D

OIL/CONDENSATE RESERVES:

22.5 BILLION BBL

NATURAL GAS RESERVES: 124 BCF

Nigeria under President Olusegun Obasanjo promised numerous political and economic reforms, but the first year of the regime was marked by considerable unrest. Obasanjo took office at midyear, promising to end corruption and set up a democracy.

The country hoped to hike oil production to 4 million b/d by 2010 vs. 2.03 mil-lion b/d in mid-1999 and boost reserves to 40 billion bbl from 24 billion bbl. Promised incentives to those ends were favorable fiscal policies, guaranteed margin, and a conducive business environment.

Ethnic violence and sabotage flared on numerous occasions during 1999, resulting in fatalities, production shut-ins, kidnappings, evacuations, and other disruptions.

Shell?s Nigerian unit proposed an $8.5 billion, 5-year gas and oil field development program, but it was seen as a shift in emphasis away from the strife-ridden delta areas to more stable territory.

Shell had to cut its delta production by 100,000 to 150,000 b/d in 1999 due to violence. It had already trimmed 100,000 b/d in 1998 as its share of OPEC cuts. Shell also was looking at the layoff of as much as 20-25% of its Nigerian work force of 4,500 staff and 10,000 contract workers.

Near year end Obasanjo said the government would soon invite bids for offshore tracts and involve Norway in off-shore development. Norway is not an OPEC member, but Obasanjo said Norway and other OPEC members appreciated Norwegian production restraint aimed at stabilizing world oil prices.

Restructuring of the gas sector was also a high priority.

Obasanjo called on all parties to Nigeria?s oil business to cooperate with his administration?s policy of transparency and openness and to refrain from bribery.

Cash-flow problems were expected to be eased after the government accepted external auditing of Nigerial National Petroleum Corp.?s accounts under a deal with the International Monetary Fund.

Baker Hughes showed six active rigs, four of them offshore, running in September, down from 12 rigs, nine of them off-shore, running in January 1999 in Nigeria.

Exploration action

As 1999 began, Famfa Oil Ltd. of Nigeria, operator, and Texaco announced discovery in November 1998 of several hundred million barrels of recoverable, 35-45! gravity oil on 617,000 acre OPL Block 216. The 1 Agbami, in 4,700 ft of water 70 miles off the central Niger delta, was the country?s deepest water depth well. It has 420 ft of pay at 8,200-12,400 ft in multiple zones each 400 ft to more than 1,000 ft thick. At that time Texaco?s Nigerian production totaled 65,000 b/d from Pennington and adjacent fields.

Statoil and Texaco claimed a significant discovery at the Nnwa-1 on OPL 218 about 70 miles off the central Niger Delta. In 4,206 ft of water, it cut more than 310 net ft of pay in multiple oil zones from 8,700 ft to 14,645 ft total depth. Early data indicate that the reservoirs could hold as much as several hundred million barrels of recoverable oil, Texaco said. The centers of blocks 216 and 218 are about 50 miles apart.

Late in the year, Exxon Mobil Corp. signaled success at the deepwater Erha-1, 165 km southeast of Lagos. It flowed 2,800 b/d of oil.

Development programs

Field activity seemed on the upswing in fourth quarter 1999 with strengthened prices and growing political confidence.

Shell Petroleum Development Co. late in the year launched a $1 billion development of EA oil and gas field 90 km south of Warri in shallow water. The field is part of an $8.5 billion, 5-year program Shell announced earlier in the year.

EA, on OPL 79, has estimated reserves of 350 million boe. The development was to involve multiple platforms with pipelines to shore. Production, starting in second half 2002, would rise to 120,000 bo/d and 100 MMcfd of gas.

Shell planned to export oil through existing terminals and pipe gas to the Nigeria LNG project that started up in October 1999.

The company said that it discovered the field in 1965 but that the complex geological setting prohibited early develop-ment. New drilling technology made EA economic, it said.

Shell?s 5-year plan called for combined oil production hikes of 600,000 b/d.

Shell proposed to develop six onshore discoveries, the Bonga deepwater strike on Block 212, and three shallow-water finds on blocks H and K. Tied to those projects were onshore gas-gathering facilities, a gas pipeline from the offshore fields, and a third LNG production train at Bonny Island.

Shell and its partners, mainly Elf and Agip, would meet 70% of project costs. The rest would come from NNPC.

Moni Pulo Ltd. of Nigeria started up Abana field on Block OPL 230 at the mouth of the Calabar River near Cameroon waters. The field employs a floating production facility in 6 m of water with capacities of 50,000 bo/d and 42,000 bw/d. It is capable of injecting seawater into the reservoir.

Abana oil moves through a 28-mile pipeline to a 60,000 b/d capacity floating production, storage, and offloading vessel in adjoining Block OPL 98 to the west. That facility also serves Agbani field, started up in February 1999 at 30,000 b/d. Agbani operator is Addax Petroleum Development (Nigeria) Ltd., a Swiss company that purchased Ashland Oil Inc.?s Nigerian E&P assets.

Processing activity

Chevron was building a gas-to-liquids conversion plant in Nigeria that was set for completion in 2002. The $1 billion pro-ject, a joint venture with South Africa?s Sasol, would become the world?s largest GTL project.

Another NGL project in the delta was to join the Chevron project that started up in 1998 and further reduce gas flaring.

Shell Nigeria planned to supply associated gas for 20 years from its Cawthorne Channel fields to the new plant.

Global Energy & Refining Ltd. was to build compression and cryogenic facilities with 150,000 MMcfd capacity and supply 12,000 b/d of NGL. Dynegy Global Liquids was to purchase and transport all liquids produced by Global during 5 years. Deliveries were to start at midyear 2000.

Transportation

The country realized a decades-old dream when Nigeria LNG Ltd. started up its 5.9 million tonne/year plant at Bonny in Rivers State. First LNG was shipped in October to Montoire, France.

In a separate project just starting, Nigeria was about to realize another dream to export gas westward to several other countries.

NLNG had sales contracts with Italy?s ENEL for 3.5 billion cu m/year of gas, Spain?s Enagas SA for 1.6 bcm/year, Turkey?s Botas for 1.2 bcm/year, and Gaz de France for 500 million cu m/year.

Shell Petroleum Development was expected to supply 53.33% of the plant?s feed gas requirement of 26.6 million cu m/stream day. Elf Aquitaine SA and Nigeria Agip Oil Co. were to account for 23.33% each.

Ownership in NLNG is Nigeria National Petroleum Corp. 49%, Shell Gas BV 25.6%, Elf 15%, and Agip 10.4%. The $3.8 billion project was launched in the 1980s to make use of Nigeria?s natural gas production, much of which is flared.

Nigeria expected to collect revenues of $1 billion/year from the initial two trains over the 22-year term of the sales and delivery agreements between NLNG and its buyers.

M e a n w h i l e , N N P C , R o y a l Dutch/Shell, and Chevron signed a joint venture to build the $460 million West African Gas Pipeline to ship 120 MMcfd of gas to Benin, Togo, and Ghana. A $2 million first-stage feasibility study was completed.

NNPC was responsible for funding 25% of the project?s preliminary costs. Still to be determined at yearend 1999 were the environmental impact, exact route, and other regulatory provisions.