London-listed independent Savannah Energy has secured a 10-year extension to four production sharing contracts in Niger, where the company is set to bring on stream an early production system next year.
Savannah’s other assets are in Nigeria, where it continues to benefit from rising demand for gas and expects the market to grow further, stimulated by the recently approved Petroleum Industry Act (PIA).
The company, meanwhile, continues talks with ExxonMobil to buy the supermajor’s oil assets in Chad plus a stake in the Chad-Cameroon pipeline.
In southeast Niger’s Agadem basin, Savannah has made five oil discoveries and has identified 146 exploration prospects.
These fields were originally located in four separate PSCs — R1, R2, R3 and R4.
Initially, a decision was made to amalgamate them into two PSCs, but Savannah said today that they are now covered by a single PSC.
During the first half of 2021 the company said it had “agreed in principle” with the capital Niamey’s Ministry of Petroleum, to pool the four licence areas into one PSC, valid for up to 10 years, subject to ratification early next month by the Council of Ministers and payment of a fee.
“This lays the foundation for an anticipated new investment programme in our R3 East development in 2022,” said Savannah.
Drilled in 2018, the five discoveries — Amdigh, Eridal, Kunama, Zomo and Bishiya — found 35 million barrels of contingent oil, while just 11 of the remaining 146 prospects could house 360 million barrels of oil.
The phased R3 East scheme would initially produce about 1000 bpd from rented processing equipment, with the oil trucked 120 kilometres to an export station at Goumeri-Jaouro for onward transport, via pipeline, to the Zinder refinery which is currently handling production from fields operated by China National Petroleum Corporation (CNPC) in the basin.
A proposed second stage would see a 5000 bpd processing facility constructed at Amdigh, with output piped via a new 90-kilometre pipeline to the export station.
A new $5 billion pipeline that will run from Niger to Benin and is being constructed by CNPC, could provide another export outlet after coming online in 2022.
In addition, if Savannah’s ExxonMobil deal goes through, the company could see its oil evacuated via a new link to the Chad-Cameroon pipeline.
Despite a recent focus on its Nigerian gas assets, Savannah chief executive Andrew Knott — speaking to Upstream from Chad, having just flown in from Niger — stressed that: "We still view Niger as a very important asset for us and the fact we got a 10-year PSC extension through the exploration phase this morning clearly emphasises that."
Nigeria gas growth
In Nigeria, the company operates the Uquo and Stubb Creek oil and gas fields as well as the Accugas midstream business.
Gas production from Uquo in the first six months of 2021 averaged 120.2 million cubic feet per day, up 6%.
However, Uquo’s oil and condensate output slumped by 23% to just over 110,000 bpd, while crude production from Stubb Creek held steady at 2500 bpd.
Also, in the first half of this year, Savannah’s 80% subsidiary, Accugas, supplied gas to the Calabar and Ibom power stations, generating an average of 340 megawatts per day of electricity, which represented 11% of the total grid-based thermal power generated in Nigeria during the period.
Knott said both its Nigerian fields and infrastructure are operating below capacity, leaving significant potential to grow, pointing out that any Nigerian National Petroleum Corporation (NNPC)-controlled gas developed in the region around Uquo and Stubb Creek “would have to go through us so we have significant leverage”.
In 2022, Accugas is due to begin supplying compressed natural gas to an industrial company called Mulak under an initial two-year interruptible contract followed by a five-year firm contract.
To help meet the terms of this and other contracts, Savannah has spudded the Uquo 11 development well and is ordering compression equipment.
As for developing the 500 billion cubic feet of gas in Stubb Creek, Knott said this will not happen until Uquo production is in decline, which is some way off yet.
Abuja's gas drive
Commenting on key factors that will affect Nigeria's burgeoning gas market, Knott expects the PIA to “stimulate investment by reducing royalties for gas.”
He expects that ongoing privatisation of gas-fired power plants will boost gas demand due to rising plant efficiencies, while Abuja’s 2019 deal with Siemens to revive and improve the performance of the country’s gas and electricity grid will see demand boosted even more.
Knott added that the government has also identified certain core gas projects which will be developed by NNPC, the state oil company.
He also highlighted that rising global gas prices will incentivise the supermajors to export Nigerian gas, which will put pressure on domestic gas prices.