In the past two to three years, I have watched with amusement the insensitivity of Nigerian lawmakers to the Petroleum Industry Bill (PIB). The refusal of the lawmakers to pass this bill either through deliberate attempts or by circumstances beyond their control has essentially stopped fresh activities, initiatives, ideas and investments in the Nigerian oil and gas sector. The fact that several deadlines have been set, passed and the PIB has not been passed is gradually eroding any credibility that Nigeria has within the global oil and gas industry.
Several versions of the PIB have been floating around unofficially. None of these versions is widely available to the average citizen but I have read about some of the provisions in the bill in the media outlets. Beneficial and revolutionary impacts of the various versions of the bill to the Nigerian populace have been touted in the media. From what I have read in the media, nothing is mentioned about unconventional hydrocarbon resources in the PIB. As a result, I feel something is still missing in the PIB and this is the main reason for writing this article.
Before the PIB is passed, the executive and the legislative arms of government should work together to include a “Special Section” in the PIB to address the special nature of “unconventional hydrocarbon resources” within the Nigerian “frontier” and “established Niger Delta” basins. Unconventional hydrocarbon resources have the potentials to generate more royalty and tax revenues for the Nigerian government on a long-term basis. Rules guiding their developments should be incorporated now in the PIB, just as several jurisdictions around the world are dusting their hydrocarbons laws and working to include rules for the development of unconventional hydrocarbon resources. In general, this article highlights major policy issues that need to be addressed if Nigeria wants to jump-start unconventional hydrocarbon resources development with similar success stories as in North America and emerging unconventional resource plays in Europe and elsewhere around the world.
Unconventional resources are classified as unconventional because they are either unconventional hydrocarbons (e.g. heavy oil or bitumen) trapped in conventional reservoirs (high permeability sandstone or carbonate rocks) or they are conventional hydrocarbons (light oil or gas) trapped in unconventional reservoirs (low permeability (i.e. tight) sandstone or carbonate rocks; coal seams; hydrates or tight fractured basement rocks). They could also be unconventional hydrocarbons in unconventional reservoirs (e.g. immature kerogen i.e. oil shale, which is located in vast areas of Colorado State in the USA).
By their very nature unconventional resources can be regarded as “difficult”, “not easy” or “extra efforts” resources. They usually required extra or special characterization and recovery technologies. External influences, forces or agents are required to mobilize these resources; either because of high viscosity or because they are packed in dense, difficult, inaccessible or unstable rocks (reservoirs). On the other hand, conventional hydrocarbon resources are buoyant driven and are “primarily” recovered through natural forces or drives.
One other characteristic of unconventional hydrocarbon resources is that they required high initial start-up capital for commercial exploitation but could me more profitable than conventional hydrocarbon on a long-term basis because of their long life depletion behavior. For a long-term investor, unconventional hydrocarbon plays might be the most profitable investment options under a non-speculative and well-managed development scenario. For long-term investor, this is a game changer because one could invest and expect profitability that spans 2 to 3 decades. This is one the reasons behind recent spate of acquisitions of unconventional hydrocarbons-focused small and independent exploration and production companies in North America by the majors, who usually have long-term views in the management of their oil and gas portfolios.
LOCATIONS WITHIN NIGERIA
Despite paucity of geophysical, well and petro-physical data, available public domain data point to the presence of unconventional hydrocarbon resources within Nigerian frontier and Niger Delta basins. Additional data would need to be acquired to further delineate the areal extent and volume-in-place of these resources. Preliminary estimates show these might be enormous. The locations of these resources are highlighted below:
1) Bitumen and Heavy Oil
Bitumen and heavy oil within the Benin (Dahomey) basin are widely documented in the open literatures. Recent estimates show the reported in-place resource volumes might actually have been underestimated, that is, reported resource volumes might be conservative. So there are huge upside potentials of the bitumen and heavy oil resources.
2) Tight and Coal Seams (Beds) Hydrocarbon Resources
In the past, Nigerian National Petroleum Corporation (NNPC) and its Joint Venture (JV) partners have carried out exploration activities in the Nigerian frontier basins of Bornu (Maiduguri) basin, which is part of the wider Chad basin; Gongola sub-basin; Yola sub-basin and Anambra basin. In addition, within the past 2 to 3 decades, using surface outcrop and well core samples from these basins other frontier basins (like Bida and Sokoto basins), Nigerian universities’ professors/lecturers have carried out extensive geo-chemical studies. Some of the exploratory data and most of the geo-chemical studies data are available in public domain. In view of modern technologies and interpretative techniques and tools; systematic assembling and re-interpretation of these data indicate the presence of:
shale gas, shale oil and coal seam gas (i.e. coal bed methane – CBM) in the Anambra basin,
shale oil in the Yola basin;
shale gas in the Gongola basin;
shale gas in the Borno (Maiduguri) basin.
Other available public data also point to the presence of:
shale oil the Benin (Dahomey) basin;
shale oil and shale gas within the established or proven hydrocarbon province of the Niger Delta, especially in the thick shaley intervals below and above known “conventional hydrocarbon reservoirs” in the western edge of the Niger Delta, around the “Benin flank” of the basin.
3) Fractured Basement Resources
Until recent years, a commonly held opinion in exploration geology is that hydrocarbons are rarely found in basement rocks but recent successful identification, evaluation, and exploitation of hydrocarbons within basement rocks around the world are dispelling this myth. If favorably situations exist (e.g. fractured basement rocks that intrude into hydrocarbon migration paths, etc.) then hydrocarbons might trapped in basement rocks. In recent times, oil and gas have been produced from prolific basements reservoirs in some part of Asia and the Middle East.
Within the Nigerian Benin (Dahomey) frontier basin, there have been several speculations on the presence of hydrocarbons in basement rocks especially within the basement high of Okitipupa high/Ilesha spur axis. Three wells (Araromi-1, Gbekebo-1, and Bede-1) have penetrated this section of the eastern part of the Benin (Dahomey) basin and evidence has shown that the basement rocks are highly fractured and are adjacent to hydrocarbon source rocks that are in oil and wet-gas windows. These are some of the main criteria for giant hydrocarbon accumulations in basement rocks. Existing wells within and around Okitipupa high would have to be deepened and one or two horizontal wells might need to be drilled into the basement rocks to further confirm the potential for hydrocarbon accumulations in the fractured basement high within the eastern part of Benin (Dahomey) basin.
Bitumen and heavy exploration and development are currently governed by the Nigerian Minerals and Mining Act of 2007 (NMMA 2007), which offers very favorable fiscal terms for the exploration and development of bitumen and heavy oil. This is a very good and attractive piece of legislation. To jump-start the development of the other unconventional resources (tight hydrocarbon resources, coal seam gas (i.e. CBM) and fractured basement hydrocarbons resources) government should incorporate a “special section” in the PIB to address the special nature of these resources. The special section should adopt all of the favorable fiscal terms in the NMMA 2007. In addition, the open acreage licensing policy (OALP) should also be adopted for these other resources. The reason for recommending the adoption of favorable fiscal terms of the NMMA 2007 and the OALP is because, unlike the conventional hydrocarbon resources in the Niger Delta that have been extensively de-risked with little or no exploration and development risk, unconventional hydrocarbon resources need further de-risking activities. Hence, there are needs for some form of incentives to encourage further exploration and development activities.
Once the “special section” on unconventional hydrocarbon resources has been incorporated into the PIB, the national assembly should pass the PIB as soon as possible and avoid further delay. Experts within the Frontier Exploration department of NNPC should also recruit and work with Nigeria universities’ professors/lecturers and Nigerian geo-science and petroleum engineering experts as consultants to collect, organize and package all existing proprietary and open publication data as well as data that are currently been acquired by NNPC in the frontiers basins. These data should be made available in open industrial standard formats. The use of Nigerian dons is particular very important because they have carried some of the highest quality works on Nigerian frontier basins.
The government should then conduct extensive “road shows” to promote Nigeria unconventional hydrocarbon resources in some North America cities to attract small companies, independents and majors. North America-based companies have been the major innovators in unconventional hydrocarbon resources development in the past decade and making efforts to attract these companies is very critical to fast tracking the development of Nigerian unconventional hydrocarbon resources.
Unconventional hydrocarbon resources within Nigeria border have potentials to create addition steady revenues for the Nigerian treasury for a very long time. It is hoped that the ideas enumerated and discussed in this article could be incorporated as special provisions in the PIB before it is based to law to address the special nature of unconventional hydrocarbon resources.
Dr. Oluropo Rufus Ayodele is a Houston-based petroleum engineer, currently with Shell International Exploration and Production Inc (SIEP), Houston, Texas. He works in the Unconventional Technologies sub-unit of Shell Project and Technology (P&T) business unit. He holds a PhD in petroleum engineering from the University of Alberta, Canada and he is a registered/professional engineer (P.Eng.) in the Province of Alberta, Canada.