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FID delay shuts in over 750,000bpd oil production in Nigeria

The delay in reaching Final Investment Decision, FIDs, on some critical oil and gas projects has resulted in the shut in of over 750,315 of crude oil production in Nigeria.

Nigeria’s bucket list of oil and gas projects where FID has been delayed include Shell’s Bonga South-West/Aparo (143,274 barrels per day), ExxonMobil’s Bosi (126,784 bpd), Chevron’s Nsiko (95,685 bpd), ExxonMobil’s Owowo West (138,301 bpd), ExxonMobil’s Uge-Orso (99,532bpd), and Nigerian Agip Exploration Limited’s Zabazaba (146,739 bpd).

These projects were announced several years ago.

It will cost Shell a total of $9.7 billion to float the Bonga project, ExxonMobil $6.2 billion for Bosi, and Chevron $8.2 billion to bring Nsiko to a laudable close.

ExxonMobil will need $8.2 billion for the Owowo West project, and $6.1 billion for Uge-Orso, while Nigerian Agip Exploration Limited had already booked $9.2 billion for Zabazaba.

Indications are that promoters of these projects may not take an FID anytime soon owing to low revenue arising from low demand for crude oil on the international market, as well as concern regarding the current fiscal regime in place regarding cost recovery.

The COVID-19 pandemic had forced the oil majors to cut down on costs, including writing down projects and laying off some of their staff.

As it stands, the IOCs are now picky on projects depending on their scale of importance.

While announcing its second-quarter results last week, Royal Dutch Shell’s, chief executive, Ben van Beurden said it has met all conditions for the FID and contracts awarded on the Train 7 with the Nigeria LNG, NLNG, however, it did not list Bonga South-West/Aparo among its 2020 portfolio development projects.

As a matter of fact, the Shell CEO had reported a financial loss of $18.3 billion for the second quarter 2020, down from a net profit of $3bn over the same period last year and $2.7bn in the first three months of 2020.

Speaking on the result, Beurden said “Shell has delivered resilient cash flow in a remarkably challenging environment”, adding that it would continue to focus on safe and reliable operations as its decisive cash preservation measures will underpin the strengthening of its balance sheet.

Oil prices had slumped from over $100 per barrel to below $20 per barrel in the wake of the coronavirus ravaging.

However, international Brent has since climbed over $40 per barrel in the course of the year. It traded at $44.03 around 11:30 am Ni Igerian time on Tuesday.

While Shell cut its capital spending for 2020 in March from around $25bn to $20bn, ExxonMobil on Friday slashed capital spending by 30 percent this year to around $23bn after it reported its biggest-ever quarterly loss of $1.1bn. Exxon suffered a loss of $610m in Q1 2020.

In another swipe, Chevron Corporation posted its worst quarterly loss of $8.3bn in Q2 in at least three decades.

“While demand and commodity prices have shown signs of recovery, they are not back to pre-pandemic levels and financial results may continue to be depressed into the third quarter of 2020,” Chevron’s Chairman and Chief Executive Officer, Michael Wirth, said while announcing the results.