Emadeb Warns Stranded Barrels, Costly Signature Bonuses Threaten Nigeria’s Oil Revival

• CEO says operators paid for rigs for 9 months but cannot drill as swamp rigs dry up

•Calls for $2m signature bonus, scrap of NPV deductions

Peter Uzoho

Nigeria risks leaving newly discovered barrels stranded underground despite a wave of indigenous operators ready to produce, if the federal government refused to urgently fix evacuation, rig scarcity, signature bonus and net present value (NPV) deductions.

The Group Chief Executive Officer of Emadeb Energy Group, Mr. Adebowale Olujimi, gave the warning yesterday in his lead presentation titled “Energy Security in an Era of Global Disruption: Positioning Nigeria for Resilience, Competitiveness, and Prosperity” at the ongoing 44th annual international conference of the Nigerian Association of Petroleum Explorationists (NAPE) in Lagos.

He said the first and most urgent concern facing the industry was evacuation as ome operators who drilled in the last one year have not been able to evacuate their crude, especially in the shallow water terrains.

“I’m aware today that some of our colleagues who have drilled in the last one year, have not been able to evacuate, because it’s not an easy task, because the task for you to evacuate is another different ballgame, especially when you’re within the shallow waters,” he said.

He said many fields allocated to local oil companies between Escravos and Akwa Ibom remain challenged by evacuation.

 Without collaboration between local entities and international oil service companies, he said many assets will remain stranded and bank funds will remain locked up.

He urged the regulator, the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) to do more to make that partnership work.

According to him, Emadeb itself had to invest $40 million to $50 million to build a mini-terminal in its area of operation just to get oil to market, saying that shows how expensive and difficult evacuation has become.

Olujimi added that marine costs have also gone up sharply.

He explained that getting from the field to any evacuation point now requires vessels and marine assets whose costs have risen, with global disruptions such as the Strait of Hormuz crisis adding to the pressure.

The second concern he raised was rig scarcity, saying the biggest challenge facing the nation was the shortage of rigs that work in shallow and swamp waters.

“We’re trying to raise our production next to about 15,000 barrels within the next six months. Unfortunately, challenges are there, which we still have to follow as an industry, but we have to surmount it: availability of rigs right now. I think the biggest challenge we have as a nation here is that fewer rigs that work in the shallow waters is actually the biggest problem here,” Olujimi said.

He said even Seplat has been waiting for rigs for months, arguing that Emadeb paid in full for rigs eight to nine months ago but has yet to get its campaign underway.

He said by now, the company should have been rounding up drilling of two additional wells to raise production to 12,000 to 15,000 barrels if not for the challenges raised.

“For us at Emadeb, we’ve even paid for rigs in full for the last eight to nine months. But unfortunately, we’re supposed to be having our campaign, and by now we should be rounding up maybe to drilling two additional wells to raise our production to 12,000 to 15,000 barrels,” he said.

Mentioning fiscal burden as the third major challenge confronting the company and other industry players, Olujimi called for urgent intervention on signature bonus and cash-backed security constraints.

He said if the goal of the government in allocating assets to local companies was to bring oil to the surface and deliver prosperity, government must revisit the fusxsl regime.

He recalled that under President Olusegun Obasanjo in 2003/2004, companies paid about $500,000 as signature bonus.

He argued signature bonus should not be more than $2 million at most, disclosing that Emadeb paid almost $60 million as signature bonus in 2021 to get its oil asset.

“Please, this signature bonus and cash-backed security constraints are things that the government needs to look into. I think if the positioning around this is about bringing oil to the surface and getting prosperity, the government needs to look down inwards,” he said.

He also faulted the practice of deducting NPV from companies on the basis that they have a certain number of barrels, saying government is taking money ahead of production.

“It’s not a way to encourage local investment. So that is one key area where I would really like the regulator to look very critically into,” he said.

The fourth concern he raised was execution capacity and financing, explaining that Pre-first oil financing for his company was a major hurdle, and the cost of building to international best practice remains very high.

For its next phase, Olujimi said Emadeb has had to partner with ACOTERRA to build a new facility and engage SBM Offshore for evacuation infrastructure, both expensive but necessary.

Despite these concerns, Olujimi said there were milestones and positive steps that show indigenous operators can deliver if the bottlenecks were removed.

He said Emadeb came from a humble beginning and was now trying to do greater things.

He said the company’s first barrel went into the Dangote Refinery, a milestone he described as proof that prosperity for Nigeria and prosperity for the oil and gas industry starts with local production.

“We came from a very humble beginning, and now we’re trying to do greater things. At the end of the day, we’re trying to build, even to do far more what Dangote is doing. The greatest priority for us here is the fact that our first barrel actually went into Dangote Refinery,” he said.

He said regulators were helping, but a lot more still needs to be done.

He commended SLB for its partnership with Emadeb and other Nigerian companies, and commended the Petroleum Technology Association of Nigeria (PETAN) and local companies for their work in supporting operations and collaboration.

He said more than 50 per cent of oil production now comes from Nigerian independents, a development he described as deserving a standing ovation for Seplat, First E&P, Pan Ocean and other indigenous companies.

Emadeb, he said, was trying to grow to become one of them.

He revealed that the company invested over $120 million from what it built over 17 to 18 years of operations to reach first oil, and was now targeting 15,000 barrels per day within six months and 20,000 barrels in its next phase.

Noting that the time for prosperity was here, Olujimi said though Nigeria’s $1 trillion economy by 2030 remains a tall order, but he believes Nigeria can reach $600-$700 billion in the next four years with what government was doing and the trust being built through partnership with local entities.

“We want to be more professional in all our operations. Ours has been the fact that we want to deliver in best practices and we’re trying our best to make sure that we do that,” he said.

He expressed hope that by the next NAPE Conference, Emadeb will be producing 15,000 to 20,000 barrels, with full collaboration and support for other companies awarded marginal fields.