Nigeria, Sao Tome Reignite Oil Exploration Drive on Abandoned Coastal Acreage  

Peter Uzoho 

More than 20 years after an unsuccessful attempt to record a commercial oil discovery within the Nigeria-Sao Tome & Principe Joint Development Zone (JDZ), the two countries are calling for willing investors, particularly independent producers in Nigeria, to go into aggressive search for hydrocarbon in the ultra-deep frontier basin.

The Nigeria-Sao Tome & Principe Joint Development Authority (JDA) has promised investors willing to embark on further oil search in the area better fiscal incentives including lower signature bonuses and less regulatory demands.

The JDZ, an ultra-deepwater acreage with a major untapped hydrocarbon frontier, is a 34,540 square  kilometers maritime area in the Gulf of Guinea with significant oil potential. 

Established by a 2001 treaty, JDZ allows Nigeria and Sao Tome to share resources under a 60:40 arrangement, and operates under the model of Production Sharing Contract (PSC), to manage exploratory and commercial activities.

However, despite high hopes, the area has seen limited success and slow progress as even the 270 million barrels of crude found in 2006 was deemed marginal and non-commerciable, resulting to the exit of international oil companies (IOCs) including Chevron, Texaco, Total and others from further exploration in the area. 

Speaking to THISDAY, Acting Chairman of the JDA, Mr Mohammed Ibrahim, called on local oil and gas companies and investors to take advantage of the opportunities presented by the authority and take ownership of the exploration in the highly untapped coastal basin. 

Ibrahim recalled that previous attempts at exploring for hydrocarbons in the zone following a licensing round that was done in 2003-2007, led to the discovery of about 270 million barrels of oil by the IOCs in 2006 but was deemed marginal and non-commerciable by the oil major generated about $123 million. 

He said the authority realised $123 million in signature bonus from the bid round conducted at the time. According to him, the enthusiasm died down when drilling started and the discoveries were not commercially viable.

He explained: “They were very marginal. All our assets are ultra-deep. That means they are deep in the water. They have to be commercially viable for people to go there and explore and produce.

“I’ll give you an example. Obo 1 has a discovery between 50 to 100 million barrels. It has to be much more than that to make economic sense for an IOC to go there and carry out exploration and production activities.”