Buhari Kick-starts Oil Drilling in North as $3bn Kolmani River Oil Wells Take Off

Prominent Nigerians, including President Muhammadu Buhari, a retinue of governors from the northern region, ministers, the presidential candidate of the All Progressives Congress (APC), Bola Tinubu and oil industry operators yesterday expressed optimism over the opportunities presented by the drilling of first oil in the north.

A visibly elated Buhari, in his speech, said it was to the credit of his government that at a time that financing of fossil fuel projects was drying up due to the energy transition drive, his administration was able to attract $3 billion to the sector.

Buhari described the day as important in the economic history of the nation as it moves closer to production of oil and gas in the Upper Benue Trough, specifically, the Kolmani River oil and gas field, straddling Bauchi and Gombe States in the north-east.

According to the provisions of the Production Sharing Contract (PSC), while the Nigerian National Petroleum Company Limited (NNPC) is the concessionaire of the blocks, the NNPC Exploration and Production Limited (NEPL) and New Nigeria Development Company Limited (NNDC) are the contractor parties.

In addition, AOML Consortium signed a strategic partnership with the contractors to provide funding and technical capabilities for the integrated oil and gas development project and to be compensated from the contractor’s profit oil after commencement of operations.

It also has an in-situ integrated development plan, which guarantees evacuation and monetisation route for the hydrocarbon in the location, thereby eliminating the high cost and burden of building a crude and product pipelines.

The first phase of the integrated development project would entail an oil refinery of up to 120,000 barrels per day capacity, a gas processing plant of up to 500 million standard cubic feet per day, a power plant of up to 300-megawatt capacity and a fertiliser plant of 2,500 tons per day.

Buhari noted that the feat was significant considering that efforts to find commercial oil and gas outside the established Niger Delta Basin was attempted for many years without the desired outcomes.

However, he explained that the successful discovery of the Kolmani oil and gas field by NNPC and her partners has finally broken the jinx by the confirmation of huge commercial deposits of hydrocarbons in Kolmani River field.

The president noted that the discovery of the oilfields emanated from his administration’s charge to the NNPC to re-strategise and expand its oil and gas exploration footprints to the frontier basins of Anambra, Dahomey, Sokoto, Benue trough, Chad and Bida Basins. Similar activities across the other basins, he pointed out, are currently actively ongoing.

“We are pleased with the current discovery of over 1 billion barrels of oil reserves and 500 billion Cubic Feet of Gas within the Kolmani area and the huge potential for more deposits as we intensify exploration efforts.

“It is good to note that the discovery has now attracted investment for an end-to-end integrated development and monetisation of the hydrocarbon resources.

“As a fully integrated in-situ development project comprising upstream production, oil refining, power generation and fertiliser, the project promises many benefits for the nation. This includes but not limited to energy security, financial security, food security as well as overall socio-economic development for the country,” the president noted.

The president added that considering the land-locked location and the huge capital requirement, the economics of the project was a challenging proposition.

“Consequently, from the onset, I instructed NNPC Limited to utilise and leverage their vast asset portfolio across all corridors of its operations to de-risk the project to attract the much-needed investment. I have directed NNPC to continue along these lines.

“It is therefore to the credit of this administration that at a time when there is near zero appetite for investment in fossil energy, coupled with the location challenges, we are able attract investment of over  $3 billion to this project,” Buhari said.

He explained that the project would be a reference subject for favourable discussion in the industry as Nigeria pursues a just energy transition programme that would culminate in the country achieving net-zero position by the year 2060.

Furthermore, the president said he had engaged the governors of Bauchi and Gombe states, and both had given him assurances of their unwavering commitment and willingness to ensure support and cooperation in the localities as the activity affects the local populations.

He urged the NNPC Ltd, the NNDC and their strategic partners to ensure that all lessons learnt from years of experience as an oil-producing nation are utilised to ensure harmonious relationship with the local communities.

The Minister of State, Petroleum Resources, Timipre Sylva, in his remarks, noted that despite the enormity of challenges that NNPC was confronted with, the day collectively witnessed and celebrated the drilling for hydrocarbons in the north.

Sylva stated that one of the key mandates of the Ministry of Petroleum Resources was to grow reserves from the current 37 billion barrels of oil to 40 billion barrels of oil by 2025.

He reiterated that the commencement of drilling of Kolmani fields which could hold as much as one billion barrels crude oil reserve, would significantly contribute in boosting Nigeria’s oil reserves and ensure continuous energy sufficiency.

Sylva stated that the opportunity for investment and fantastic returns remain undiminished and was continually available to the discerning investor, expressing excitement at the partnership between NNPC Limited, Sterling Global Oil, and NNDC to carry out this drilling campaign.

The minister argued that the risks arising from Nigeria’s current challenges of energy poverty, lack of access to clean cooking fuel, insecurity and unemployment are pervasive across the country, adding that so is the value proposition to all stakeholders.

NNPC’s Group Chief Executive Officer, Mallam Mele Kyari, also speaking at the ceremony, stated that aside the Kolmani oil and gas fields, activities on Chad, Sokoto, Bida, Anambra, Dahomey basins, Calabar and even ultra-deep waters in the Niger Delta, among others, had been ongoing.

He explained that following the directive from the president to the NNPC to re-strategise, the company deployed its resources until the discovery of oil and gas in Kolmani in 2019.

“Our teams are currently engaged in several exploratory activities and have commenced re-entry into the Chad basin with assurance of improvement in the  security situation,” he stated.

He noted that the development framework put in place already guarantees financing and access to relevant technology required to deliver the integrated project.

Kyari stated that the NNPC and its partners were also looking at pipeline application framework to distant markets as it continues to explore for more oil in the region.

He assured that the establishment of a refinery, fertiliser plant, power plant and associated oil and gas processing facilities would translate to greater energy security for Nigeria and provide thousands of jobs and opportunities that would deliver revenues to the federation.

He stated that NNPC partners had indicated unquestionable zeal to support its campaigns for commercial activities and for the delivery of the project, stressing that the cooperation of both Gombe and Bauchi had been very helpful.

The Group Managing Director, NNDC, Shehu Mai-Borno, in his remarks, stressed that the inauguration of the project put paid to doubts whether oil and gas resources could ever be found in the north.

He added that it would halt the stagnancy of Nigeria’s oil reserves, describing it as a lifeline from the  Buhari administration. He noted that the drive of all stakeholders led to the success of the search for oil.

Also SEEPCO MD, Mohit Barot, said the feat wouldn’t have been possible if not for the cooperation of all, noting that it was the beginning of a long partnership.

Governor of Gombe State, Inuwa Yahaya, in his comments, described the event as historic, noting that with the new oil find, the north should expect more development.

He noted that the discovery would have been impossible without the matching order handed down by the president to the NNPC and other government agencies.

He lauded Buhari’s commitment to the economic development of the region but called for caution against the backdrop of restiveness caused by oil and gas exploration in the Niger Delta.

Also speaking, Governor of Plateau state and Chairman of the Northern Governors Forum (NGF), Simon Lalong, stressed that by his action, the president had rescued one of the enduring legacies of the Sardauna.

While calling for caution on the environmental impact of oil exploration, Lalong expressed hope that jobs would be created while the country strives to maximise the full potential of its hydrocarbons.

Senate President, Ahmad Lawan, in his remarks, described the inauguration as a landmark achievement, recalling that it was also under the Buhari administration that the Petroleum Industry Act (PIA) was passed.

He urged industry operators to strive to discover more oil before the expiration of the tenure of the current administration, since, according to him, the PIA has provided the right framework for funding of frontier basins.

He warned that the misappropriation of the funds going to the Niger Delta region should not be allowed to happen to the funds expected from the sale of crude products from the facilities.

Tinubu also lauded Buhari, saying, “finding a way, where there is no way,”, remains a difficult task, apparently referring to initial doubts about oil discovery in the north.

He thanked Buhari for remaining true to himself despite the horde of criticisms, advising him to remain focused on delivering on his promises to Nigerians.

Some other personalities present at the event were the Attorney General and Minister of Justice, Abubakar Malami; Yobe State Governor, Mai Mala Buni; Governor of Sokoto State and Chairman Nigeria Governors Forum (NGF) Aminu Tambuwal; Bauchi State Governor, Bala Mohammed as well as National Chairman of the APC, Abdullahi Adamu and several Emirs.

Other dignitaries were the Governor of Borno State, Babagana Zulum, Secretary to the Government of the Federation, Boss Mustapha and Governor of Adamawa state, Ahmadu Fintiri.

The Kolmani Integrated Development Project of Oil Prospecting Licenses (OPLs) 809 and 810 at the Kolmani field site,  straddles Bauchi and Gombe States and is a novel partnership that will see the trio of Africa Oilfield Movers Ltd consortium, New Nigeria Development Company (NNDC) and NNPC E&P Ltd (formerly NPDC) producing and monetising the field.

In another phase of the project, there would be a downstream oil terminal/depot for offtake and distribution of the white products coming out of the refinery and further development of the integrated project.

The journey to the epoch-making occasion commenced in the 1990s when Oil Prospecting Licenses (OPLs) 809 and 810 were initially awarded to Shell and Chevron respectively as part of their frontier obligation under the Production Sharing Contractual (PSC) Agreement on Oil Mining Licenses (OMLs) 118 and 132 for consolidated cost recovery.

The companies explored the acreages and drilled a well each in their respective blocks. Kolmani River-1 was drilled on OPL 809 by Shell and Nasara-1 was drilled by Chevron on OPL 810 as part of their minimum work programme obligation. But both companies reported sub-commercial discovery of hydrocarbon in their blocks.

Beyond the sub commercial discoveries, the landlocked location of the blocks made it impossible for the export of any oil find, hence the two oil giants returned the blocks to the regulator’s basket.