Integrated oil and gas company TOTAL S.A. (TOT - Free Report) expanded its operation in Nigeria. TOTAL’s subsidiary – Total Upstream Nigeria Limited (“TUPNI”) – received the necessary approvals from Nigerian National Petroleum Corporation (“NNPC) for the development of the offshore Egina field.
TOTAL has been exploring Nigerian oil reserves for the last five decades. The development of the Egina field will involve the drilling of 44 wells connected to a 330 meter-long floating production, storage and offloading vessel with a storage capacity of 2.3 million barrels. First oil production is expected at 2017 end, with production reaching 200,000 barrels of oil per day.
This field, discovered a decade earlier, is located in water depths of around 5,249 feet (1,600 meters), 124.74 miles (200 kilometers) offshore Port Harcourt and 12.42 miles (20 kilometers) southwest of the Akpo field, located on the same license.
The Egina field is the second development in the OML 130 license. Previously the company developed Akpo in the same license. Akpo started commercial operation in 2009. TOTAL will have a 24% interest in the Egina field. Other partners are NNPC, South Atlantic Petroleum of Nigeria (SAPETRO), CNOOC Limited of China (CEO - Free Report) and Petrobras (PBR - Free Report) of Brazil.
TOTAL produces oil and natural gas from its assets located worldwide. However, the majority of the volume comes from its exposure in Africa. In first quarter 2013, TOTAL produced 2,323 thousand barrels of oil equivalents per day (kboe/d) out of which 692 kboe/d or 29.8% of the total production came in from African operations.
Despite the exploration opportunities in Nigeria, its political condition is a cause of concern for overseas oil and gas operators like TOTAL. In the first quarter 2013, TOTAL’s oil and gas production declined 2.5% year over year due to the UK accident and political uncertainty and security issues in Nigeria.
In Nov 2012, TOTAL sold an offshore oil field near Nigeria for $2.5 billion to the Chinese state-run firm Sinopec Corp. The asset sale will provide funds for its future projects. The security uncertainty might have played a role in the decision making. Having said that, we believe TOTAL’s decision to expand operations in Nigeria speaks highly of the huge reserve potential of offshore Nigeria.
In addition to TOTAL, which currently has a Zacks Rank #3 (Hold), other oil and gas giants like Exxon Mobil (XOM - Free Report) and Chevron Corp (CVX - Free Report) have also ventured into Nigeria lured by an abundance of oil and gas resources.