Nigeria to earn N32trn from Kolmani oil fields as drilling begins: Report

*Drilling on the Kolmani Oil Prospecting Licence 809 and 810 at Kolmani field sites in Bauchi and Gombe states will be the first oil drilling in Northern Nigeria after oil discovery in commercial volume

Alexander Davis | ConsumerConnect

Nigeria may soon witness another breakthrough in oil explorations as the first of such activities debuts on the Kolmani River range spanning Bauchi and Gombe states in the Northern part of the country.

The new oil fields reportedly have 1billion barrels oil reserve that could generate over N32 trillion, when fully developed and exploited.

Multiple sources at the Nigerian National Petroleum Company Limited (NNPCL) at the weekend revealed that President Muhammadu Buhari was expected to supervise the first oil drilling in the North Tuesday, November 22, 2022, Daily Trust report said.

It was learnt the latest  development is historic for Nigeria, as the West African country now boasts crude oil reserves in both its Southern and Northern areas.

The oil finding activity, said an official, will be the first major oil exploration since NNPC transformed into a commercially viable entity in the country.

Drilling on the Kolmani Oil Prospecting Licence (OPL) 809 and 810 at the Kolmani field sites in Bauchi and Gombe states will be the first oil drilling in Northern Nigeria after oil discovery in commercial volume was announced nearly two years ago, report stated.

NNPC Limited, the newly commercialised state-owned oil company, and New Nigeria Development Company (NNDC), a conglomerate owned by the 19 Northern States of Nigeria manage the new oil assets in the North.

Report also indicates the NNDC won the OPL 809 and 810 since 2007, and agreed with NNPC on developing the oilfields and getting proceeds in a Production Sharing Contract (PSC), which NNPC already operates with some International Oil Companies (IOCs) and National Oil Companies (NOCs) exploring oil in the  Niger Delta region.

How Nigeria may earn N32trillion from oil wells

With an estimated 1billion barrels of crude oil reserve from the new Northern oil wells, Nigeria is expected to gain nearly $73 billion or N32.3 trillion at an average global crude oil price of $73 per barrel benchmark used for the 2023 budget proposal.

This earning could be realised over a period of 10 years, depending on when commercial production begins.

Currently, the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), said crude oil reserves were at 37 billion barrels, according to report.

With 1billion oil and perhaps gas reserves coming from the Kolmani fields, Nigeria’s oil and gas reserves could shoot up higher.

Crude reserve analysis

Analysis of the current crude reserve showed that the reserve slightly grew by 0.37 percent to 37.046bn barrels as of January 2022, from 36.910bn barrels in 2021. Gas reserves also rose by one percent to 208.62 Trillion Cubic Feet (TCF) from 206.53TCF.

It is expected that gas reserves could grow to 220TCF in less than 10 years and 250TCF afterwards.

The Nigerian Petroleum Development Company (NPDC), a subsidiary of NNPC Limited, had drilled Kolmani River 2 well in 2019 and the Kolmani River 3 well in 2021.

By September last year, NPDC began shopping for oil exploration firms that could develop the OPL 809 and OPL 810. According to its requirements, the firms will provide financial and technical services for the integrated development of the assets, report said.

NNPCL officials reportedly said that the oil field in Bauchi and Gombe axis would be developed by Sterling Global Oil on behalf of NNDC and NNPC Limited.

The integrated development process of the project entails that NNPC will not only drill the crude there but also build a refinery that will process it into white products and also build a power plant which will utilise the energy from the wells to produce electricity.

This is because at over 700km from the coast, export and utilisation options of the crude is tough.

At the upstream level, source learnt that there would be reprocessing of about 738 square kilometres of high-resolution 3D seismic data that have been captured earlier for the prospects area.

The developers will also engage in delivering the integrated field studies and development plan for the Kolmani Main and the Kolmani South East fields, which are the two prospect areas.

After this is done, the practical drilling and exploration begins and this is what President Muhammadu Buhari will be kick-starting Tuesday, according to NNPC officials familiar with the development stages of the oil fields.

The process as well entails actual production of oil and associated gas at the oil wells.

Proposed Kolmani Refinery

At the midstream level, NNPC and its partnering NNDC, will establish gas processing facilities and a power plant that could generate at least 150 megawatts (MW) of electricity around the oilfield.

While expert firms operate the oil and gas midstream assets on their behalf, the partners will construct, operate and maintain a condensate refinery that could refine a minimum of 50,000 barrels per stream day (bpsd).

Currently, Nigeria has 450,000bpsd refining capacity comprising the Kaduna, Warri and Port Harcourt refineries.

The 650,000bpsd Dangote Refinery is also coming on board in Lagos, thereby making three large-scale refineries in the South and one in the North.

Once realised, the Kolmani Refinery would join Kaduna Refinery in the North.

Ultimately, the plan is to create an industrial hub around the oil field that will spur national economic growth, create employment opportunities, promote social prosperity, enhance energy security, and provide optimal returns to investors.

NNPC spends over N34bn on oil exploration

NNPC Limited has continually spent on frontier exploration, as captured in its FAAC report.

With the new Petroleum Industry Act (PIA) 2022, funding for frontier exploration has risen to 30 percent, which means the reformer NNPC Limited would have more funds to develop oil fields in Nigeria.

On 2022, NNPC was said to spent N14.3billion on frontier exploration service.

The August FAAC report of NNPC Limited showed that it spent N3.8bn in January, N1.2bn in March, N2.9bn in April, N2.1bn in May and N4.2bn in June. It targets spending N29.4bn at the end of year on new oilfields exploration.

A similar report in 2021 showed that NNPC spent N20.681bn on frontier oil exploration in the first seven months of last year.

The oil find in the north is coming at a time when crude oil production in the south has dropped to about 1.2 million barrels per day mainly due to oil theft and vandalism.

Oil production in the north could be a backup to shore up revenue for Nigeria as it witnesses a huge budget deficit so far, experts say.

Commenting on the impact of the new oil exploration in the North, Mr. Alechenu Anebi, a petroleum expert, believes it will make all the difference for the North and curb the desire for oil theft and sabotage in the Niger Delta.

Anebi said: “When there is no alternative, the country is often held to ransom by restive youths and saboteurs around oil facilities in the South; with the start of oil production in the North, I believe appetite for such vices will drop.

“I also think it is good for Nigeria because we will have more refining capacity and the fuel scarcity we see in the north because you have to bring petrol from Lagos and other coastal areas will stop as there will be a refinery and oil wells supplying white products in the north.”

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