CAPITAL: Lagos

MONETARY UNIT: Naira

REFINING CAPACITY: 438,750 b/cd

OIL PRODUCTION: 2.3 million b/d

OIL RESERVES: 16.8 billion bbl

GAS RESERVES: 114.9 tcf

Strikes, facilities occupations, kidnappings, and violence punctuated operations in Nigeria in 1997.

Shell, Nigeria`s largest foreign investor, regularly found itself the target of protests and violence it believed were reactions to the government`s inadequate efforts at providing benefits to an impoverished populace.

Financial constraints held back Nigeria National Petroleum Corp.`s contributions to oil and gas joint ventures (JVs). NNPC holds 55% of a JV with Shell, Elf, and Agip. Shell said it intended to spend $1.96 billion during 1997. This would have called for NNPC to put up $3 billion, but the national oil company said it could only fund $2.05 billion, which the partners rejected.

Near yearend 1997 Nigeria was in a transition between oil ministers, as a successor to Dan Etete was being sought.

Nigeria resolved to eliminate gas flaring by 2010. Most of an estimated 2 bcf of associated gas from oil production is flared, and production projects are increasing. Oil output could grow to 4 million b/d by 2010 from 2.2 million b/d in 1997. Some operators, including Shell and Mobil, hoped to beat the government`s deadline.

Larger volumes of the gas will be utilized by the Bonny LNG project and the 1,000 km West Africa Gas Pipeline from Escravos, Nigeria, to Ghana by way of Benin and Togo. However, Ivory Coast and Ghana were competing with Chevron for the Ghana gas supply contract.

The government said 13.366 billion cu m of gas-72.5% of total production-was flared in first half 1997. The rest was reinjected or used in power generation or processing. The government said this was an increase from 1996 due to greater oil and gas production.

Upstream developments

Deepwater exploration was increasing in 1997 and had been for several years. Besides the Niger delta, exploration was under way to varying degrees in the onshore Anambra, Benue, and Chad basins and the Dahomey (Benin) basin.

NNPC said that through 1996 almost 49,000 wells had been drilled and 512,000 km of 2D and 66,580 sq km of 3D seismic data collected in the country. Current exploration was spread across 89 oil prospecting licenses and 44 oil mining leases.

It said 48 indigenous companies had concessions, but only nine had made significant progress. They were NNPC (NNDC), Allied Energy, AMNI, Atlas, Cavendish, Consolidated, Dubri, Express, and Yink Folawiyo.

Nigeria`s deepwater play continued to grow. Operators in 1997 reported drilling 12 wells in 200 m of water or more off Nigeria since 1994, half of them in 1997. Five of the total were confirmed discoveries, with one additional discovery possible.

The possible discovery was the Shell group`s Nogolo-1 oil and gas find in 2,600 ft of water on OPL 219. The other 1997 discovery was the Statoil group`s Sehki-1 oil and gas find in 2,250 ft of water on OPL 218.

The 1996 discoveries were Shell group`s Bonga-1 oil find in 3,350 ft of water on OPL 212; Agip group`s Abo-1 subcommercial oil discovery in 1,565 ft of water on OPL 316; and Statoil`s Boi-1 oil discovery in 1,645 ft of water on OPL 213.

In shallower water, Mobil-NNPC progressed with fast-track development of Asasa field about 50 km off southeastern Nigeria. The field started up in June 1996 and was producing 140,000 b/d by early 1997. The estimate of proved and probable reserves tripled to about 500 million bbl in just over 2 years.

Chevron, Elf, and Mobil expected to start up eight Nigerian oil fields during 1997, including Amenam, Andobite/Ogon, Ewan, Gbokoda, Dibi, and Opola.

Conoco started production northwest of Forcados from Ukpokiti offshore field, where reserves are estimated at 32 million bbl. Peak production of 20,000 b/d was expected.

Smaller, non-Nigerian independents began to show an interest in the Niger delta. A Profco Resources Ltd. group planned to set a platform in May 1998 and start production of Ejulebe oil field in 50 ft of water northwest of Forcados in fall 1998. Four wells to be produced had 70-119 ft of net oil pay. The discovery well also had 39 ft of net gas pay. Profco also planned to evaluate development potential at Ejulebe West, the North Mefa field extension, and deeper zones below those cut in the Ejulebe 1 discovery.

Abacan Resources Corp., Calgary, took a $100 million write-off because of lower than forecast reserves at its Ngo (Ima) oil field near the Niger River delta. Abacan cut its reserve estimate by 30%.

Elf-NNPC planned to start up Ofon field near the Cameroon border in early 1998 at an initial 60,000 b/d.

Processing activity

Nigerian LPG capacity could jump to nearly 1.2 million metric tons/year in 1998, 1.8 million in 2000, 2.2 million in 2005, and 2.3 million in 2015 by one estimate. Nigerian LPG production in 1995 was 172,000 ton, all from the country`s four refineries.

First phase of the Chevron-NNPC Escravos project involves processing 170 MMcfd of gas from offshore Okan and Mefa fields to yield about 250,000 tonnes/year of LPG. Future gathering expansions from five other fields could raise capacity to 500,000 tons/year by 2010 and 750,000 tons/year by 2015.

The $550 million Escravos project started up Sept. 30, 1997, when a tanker carrying LPG departed for Houston. It was Nigeria`s first cargo of exported LPG, although the country`s first gas processing plant, in Obiafu and Obrikom oil fields 90 km north of Port Harcourt, started up in 1993.

Escravos processes the Okan and Mefa associated gas into more than 8,000 b/d of LPG and natural gas liquids, 145 MMcfd of dry gas, and 2,000 b/d of condensate.

Chevron said Escravos is part of efforts to commercialize the 20 tcf of gas in its area of operation in Nigeria.

LPG deliveries were to start in 1998 from Mobil-NNPC`s Oso project at a peak rate of 1.2 million tons/year. And the planned Nigeria LNG project would lead to export of 200,000 tons/year of LPG, probably after 2000.

NNPC let a contract to Total SA to repair and manage for 3 years its dilapidated 110,000 b/d refinery at Kaduna. The contract, valued at $100-200 million, is part of a larger agreement between NNPC and Total for managing and restructuring Nigeria`s downstream industry. Late in the year Kaduna workers delayed the repairs by protesting award of the contract to outsiders.

Petrochemical Co. Ltd., Eleme, Nigeria, could not commission a $1.8 billion petrochemical plant near Port Harcourt because it was unable to cover overhead or meet debt obligations. Capacities were 330,000 metric tons/year of resins, 150,000 tons/year more than required domestically. It would have reduced gas flaring.

Debts were $4.5 million in arrears, not counting $182 million owed to Nigerian Agip Oil Co.

Transportation

Nigeria LNG Ltd. began work on the $4.5 billion Bonny Island LNG export project, first proposed about 30 years earlier.

Capacity is to be 4.1 million tons/year. First shipments were due in 1999.

Customers are Italy`s ENEL, Spain`s Enagas, Turkey`s Botas, and Gaz de France. Bonny LNG interests are NNPC 49%, Shell 25.6%, Elf 15.4%, and Agip 10%.

The Italian government rejected plans for a regasification terminal in Italy, and Gaz de France agreed at yearend to regasify ENEL`s share in France and ship an equivalent volume of gas to Italy.