World Report

The coming onstream of Shell’s Bonga field is the latest chapter in an association with Nigeria going back more than half a century

Shell’s onshore activities are centered on the Niger delta in the southwest of the country.

ocated 75 miles off Nigeria’s coast in depths of more than 3,000 feet, and extending over an area of 230 square miles, is Royal Dutch Shell’s giant Bonga oil and gas field. Production facilities comprise 16 deepwater wells connected to one of the world’s largest floating production storage and offloading vessels, with the capacity to hold two million barrels of crude.

Developed at a cost of £2.1 billion, Bonga started pumping oil for export to the US and European markets in December last year. Its output will make a major contribution towards the federal government’s aspiration to raise national crude oil production to four million barrels per day.

Basil Omiyi, Managing Director of Shell Petroleum Development Company of Nigeria (SPDC) says: “Offshore developments, including Shell’s Bonga field, could boost the country's daily production capacity by some 1.2 million bpd.”

Basil Omiyi
Managing Director of SPDC and Country Chairman for Nigeria, Royal Shell Group

‘Reforms will reduce poverty and create wealth, relying on the private sector’

According to Malcolm Brinded, Executive Director of SPDC’s sister company, Shell Nigeria Exploration and Production Company (SNEPCO), Bonga is targeting an increase of around 25 per cent in Shell-operated production in Nigeria and a rise of approximately 10 per cent in Nigeria’s oil production as a whole.

“Nigeria’s deepwater is a frontier growth opportunity for Shell. We have several recent discoveries offshore and a strong acreage position. Bonga is a highly valuable asset for Nigeria and for Shell, and has come onstream to meet demand at a time when energy prices are high.”

The deepwater field represents a major expansion of activity for Shell, whose operation in Nigeria has until now been concentrated in the Niger delta.

Edmund Daukoru
Minister of State for Petroleum and President of OPEC

‘Nigeria has a lot of opportunities projects of all scales’

SPDC discovered Nigeria’s first commercial oil field at Oloibiri, Bayelsa State, in 1956. From a modest production of 6,000 barrels of crude oil per day in 1958, when the first cargo of oil was exported, the rate of daily production by the company has steadily increased to an average of more than one million barrels per day. The largest joint venture company in Nigeria, it pumps nearly 50 per cent of the country’s output of crude and holds approximately 50 per cent of its total oil and gas reserves.

Shell has invested heavily in local training programmes. SPDC employs more than 4,000 people – the vast majority Nigerians – and a further 15,000 are retained through contracts. Nigerians currently make up around 75 per cent of Bonga’s core offshore staff.

Chima Ibeneche, Managing Director of SNEPCO, said recently that it is also expected that Nigeria will attract 40 per cent of the total £28 billion of deepwater spend over the next five years.

While oil dominates, the expansion of the gas sector represents a major opportunity for both Shell and Nigeria. Over the last five years SPDC has made a significant investment of more than £1.2 billion to develop major associated gas gathering projects.

Much of this investment has been dedicated to SPDC’s role as the lead partner in the Nigerian Liquefied Natural Gas (NLNG) export plant on Bonny Island, which has successfully supplied both North American and European markets for the last six years. With discussions under way for a seventh and eight production train, NLNG is set to become the second largest LNG complex in the world, and the fastest growing.

Through its subsidiary, Shell Gas Nigeria, Shell has taken the initiative in the downstream market, becoming the major contributor to the realisation of natural gas taking over from liquid fuels and becoming the first choice fuel of Nigerian industry by 2010.

Investment in community development totals $25m

Shell’s dominant position in Nigeria’s oil industry and its key role in the economy as a whole entails huge responsibilities. One of the ways in which it attempts to meet these is through its Sustainable Community Development (SDC) programme, in which it has invested a total of $25 million (£14 million).

Focused on the Niger delta, the programme includes initiatives on health, economic empowerment, education, agriculture, job creation, women’s programmes, youth training and sponsorship.

Emphasis is placed on partnerships, not just with the communities themselves, but also with government and strategic local and international development organisations and non-governmental organisations (NGOs).
SPDC recently entered into two such partnerships: with USAID, a 5-year $20 million (£12 milion) agreement that will develop Nigerian capacity in agriculture, health and business enterprise; and with Africare, a 3-year $4.5 million (£2.6 million) partnership that will focus on reducing deaths from malaria.

SPDC has signed an $11 million (£6 million) Cassava Enterprise Development Project with USAID and the International Institute for Tropical Agriculture (IITA) that has the potential to increase the income of farmers in the delta two- to three-fold.

SPDC sees itself as being at the forefront of the federal government’s initiative to advance indigenous involvement in the oil and gas industry and has made significant moves towards the use of Nigerian contractors for services such as the provision of drilling rigs, workover units, drilling, well completion, dredging, facilities construction and fabrication.

Approximately $727 million (£421 million) worth of contracts were awarded to Nigerian companies in 2004, with 20 per cent of these coming from the delta. SPDC has also established training schemes to equip technical school leavers and university graduates with the skills to work in the industry.