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Problems that led to the plug being pulled
Shell pulled the plug on the last iteration of its Bonga South West project in early 2016, some time after receiving commercial bids from Hyundai Heavy Industries and Samsung Heavy Industries which it thought were too expensive, writes Iain Esau.
Like many operators, the oil company’s capital spending plans had to be slashed on account of low oil prices.
However, Upstream was told last year that issues related to the field’s licence and production sharing contract were also key factors in calling a halt to the development, citing strong disagreement between Nigeria’s government and Shell about the terms and conditions of the PSC covering Bonga SW.
At the time, there were also concerns within Shell that the government was in no rush to extend the oil mining licence — OML 118 — covering Bonga SW beyond 2022 when it currently expires.
A well-placed source in Lagos said last year that the Nigerian National Petroleum Corporation, with support from President Muhammadu Buhari, had given a very strong message to Shell that it will not talk about any next steps on Bonga SW before finalising discussions on the PSC and renewal of the licence.
The source said: “The current PSC structure is absolutely in favour of Shell, which does not want to alter the terms and conditions. There should be dramatic changes in the PSC in favour of government.”
While the current status of these key issues is unclear, the fact that Doris and IntecSea are set to carry out FEED studies is perhaps an indication that talks are progressing.
Shell was unhappy with the prices sent in by contractors wanting to supply Bonga SW’s subsea hardware and what was then planned as a 225,000-barrel-per-day floating production, storage and offloading vessel in 2015.
Last year, the supermajor’s chief executive Ben van Beurden recalled: “We saw a capital number that was sort of reminiscent of $100 oil” but added that Bonga SW is “fundamentally an attractive project.”
One project watcher said that, in order to lower costs on Bonga SW, Shell had discussed eliminating any local content requirement but the government was not at all comfortable with that idea.