Following a recent directive from the Presidency, the Nigerian National Petroleum Corporation is to resume oil exploration in the Chad Basin and other areas classified as Frontier Inland Sedimentary Basins. An arm of the corporation, New Frontier Exploration Services Division, has begun preliminary work on seismic data acquisition and processing, propelled by a corporate belief that available technologies may yield results where previous exploratory efforts have failed.
The search for oil in the Chad Basin has been on and off for many decades. For half a decade, between 1994 and 1998, for instance, multinational oil prospecting companies, namely, Shell Nigeria Exploration and Production Company, Elf Petroleum (now TotalfinaElf) and Chevron Nigeria Limited, among others, acquired and explored acreages within the basins now targeted in NNPC’s fresh initiative. All the efforts ended up in what industry operators call “dry holes,” after enormous resources had been expended.
The NNPC, which also lost billions of naira in the fruitless search by its upstream subsidiary, Nigerian Petroleum Development Company, remains positive about prospectivity of the inland basins. In a statement on June 2, 2010, the Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke, alluded to “discoveries of commercial hydrocarbon deposits in neighbouring countries of Chad, Niger and Sudan, which have similar structural settings with the Chad Basin.” According to her, “we may find oil in commercial quantity” if we “aggressively explore the Chad Basin.”
Without doubt, Nigeria needs to raise its crude oil reserves base to as high a level as geology would permit. The world and its energy-driven technologies and systems have yet to find a viable alternative to crude. So, there is every reason for a resource-endowed country like Nigeria to maximize its potential in that area. What Government needs to think through are the policy options that could make such an enterprise sufficiently rewarding.
The Minister of Petroleum Resources has alluded to oil discoveries in Chad, Niger and Sudan, but she appears to have overlooked the fact that it was private capital that produced the results. Private oil prospecting companies from Europe and the United States had borne the entire costs of exploration. All they needed and were provided was an enabling environment – state policies, industry regulations, tax/fiscal regimes, legal systems, etc that compare favourably with others in the modern world. Governments of the aforementioned countries did not invest public funds to prospect for oil.
Oil exploration ranks among the most capital-intensive ventures in the world after space programmes and missile defence systems. And Nigerians are aware of the Federal Government’s staple excuses whenever it defaults in its yearly cash call obligations to Joint Venture partners of the NNPC. On a number of occasions, it has directed the JV partners, including Shell Petroleum Development Company, Mobil Producing, Chevron, TotalfinaElf and Nigerian Agip Oil Company to seek alternative sources of funding. It is also common knowledge that the government’s preference in recent times has been for Production Sharing Contracts.
It is, therefore, puzzling that the government wants the inefficient NNPC, which is technically insolvent at the moment and has failed in every single project it has undertaken, to carry out further exploration activities. The enthusiasm so far displayed by NNPC functionaries is probably borne out of the realisation that they will have another opportunity to divert revenues and fritter resources.
Nigerians cannot be fooled by the simplistic extrapolations of the Petroleum Resources Minister who naively believes that similarities in geological formations of parts of Chad, Niger and Nigeria are enough to guarantee the presence of commercial quantities of crude oil in the Chad Basin and Benue Trough. If such evidence existed, the Western oil firms (in Chad and Niger) would have since advised their sister companies in Nigeria to move into the so-called inland sedimentary basins.
The Federal Government should retract its directive to the NNPC and save this country from further plunder and embarrassment. Let the government show that it remains focused, that the private sector is the preferred vehicle for investments and productivity in key sectors of the economy. The NNPC must not be allowed to engage in another unprofitable venture. Let the government put in place appropriate incentives and allow private oil prospecting companies move wherever their technological capabilities can squeeze crude oil out of the earth’s crust.
