NIGERIA’s STATE HYDROCARBON company and its petroleum regulatory department are worried about the increasing cost of drilling in the country. They are also concerned about aspects of compliance with performance regarding budget, as well as local content in areas of reservoir studies. These issues, in addition to the usual sloppiness from government quarters have ensured that the round of budget discussion for the year 2008 have dragged into the second month of the budget year. “ExxonMobil used to be a major example of low cost and high efficiency in drilling, but now their costs have gone through the roof’, officials of the Department of Petroleum Resources complain.
Industry sources argue that drilling rates for shallow offshore wells drilled by jack up rigs have increased by 45% on average. Drilling rates for Jack Up rig have shot up from between $130- 150,000 a day to $180,000 to 200,000 per day within the last one year.
Deepwater rates for a 9,000 feet well have shot from $400,000 a day to $600,000 a day.
But government officials counter that these sort of figures don’t cut it, especially because drilling contracts are usually long term. “We’d prefer they give us item by item”, they say. “But operators flinch when you say: let us have your details”, argues a DPR official.
Nigeria is one of the few countries in the world running Joint Venture operations, where government partners actually put money into operations.
The Nigerian regulatory authorities are also concerned that TOTAL, the French major, has not domesticated its reservoir management studies as stipulated by the local content regulations. Chevron is seen to fulfill local content regulations in reservoir management studies, but the DPR and NNPC are worried that the company is running all its key projects out of sight of the authorities. “They are not communicating adequately on South Offshore Water Injection project, North Offshore Water Injection Project, nor are we getting much details on Tubu field project.” Of all the companies, Shell has had the best rapport with the upper levels of the Nigerian government, especially the President, in the last six years, but working level government officials are wary of this relationship. And the dissonance has led to spats between these officers and the company. “They (Shell), spent money on shelf (onshore and shallow water) projects way above agreed budget last year”, grumble petroleum engineers in government, “because they had the sympathies of the last civilian administration, who approved a supplementary budget”. The officials say that the incumbent government has insisted that any detailed budget discussion has to be directly with the regulatory units, below the Minister’s level.