New deepwater projects, expected to come online between 2025 and 2030, will have the capacity to add at least 2.3 billion barrels of crude oil to Nigeria’s existing reserves.

S&P; Global Commodity Insights, a market intelligence agency, in a new report said deepwater projects hold the key to Nigeria’s output growth and ultimately stability, explaining that if properly implemented, the Petroleum Industry Act (PIA) could transform the fiscal side of the Nigerian petroleum industry.

“Deepwater projects scheduled to start between 2025 and 2030 are estimated to contain recoverable resources of 2.3 barrels. Without the approval and commissioning of currently unauthorized projects, Nigeria’s overall production will likely decline from the end of the decade.

“It is the deepwater projects that can provide this additional production needed to offset the expected production decline. Therefore, unauthorized deepwater projects are seen as the primary target area for tax and regulatory improvement that would have occurred if the assets were converted to the new tax terms of the PIA,” he said.

A number of oil companies have recently begun to leave Nigeria’s shallow waters and cede their onshore assets for deep waters following frequent attacks on their facilities in the Niger Delta.

According to the report, some of the deepwater projects with legacy conditions upon conversion will see their combined net present value (NPV) increase by up to 89%.

The company said this is positive news for the projects and their operators, as it has prompted some of them and other joint venture (JV) partners to release reports that the changes in public finances have boosted progress towards an eventual final investment decision (FID). .

“An example is Preowei, where operator TotalEnergies has announced that it will accelerate development with possible early conversion to PIA terms due to the new tax structure which contains tax benefits,” S&P; said.

He listed one of the benefits of the document as the new incremental royalty based on production which went from 10% for water depths greater than 200m to 5% for less than 50,000 BPD or 7.5% when they are superior.

“These projects must remain an area of ​​special interest to the government. Indeed, they could find themselves blocked if the available conditions are not acceptable to the licensees.

“However, as demonstrated by the May 2021 renegotiation of the Bonga Southwest PSC terms and the subsequent August 2022 renegotiation of six other blocks, including OMLs 125 and 130, if the government and international oil companies (IOCs) are able to find common ground on such projects, this could lift Nigeria’s production prospects towards the end of the decade, which would also likely help to secure the country’s production in the longer term, “said the report.

According to the company, other important large projects that are essential for Nigeria’s production to remain stable are the Agbami deepwater producing field, which has also benefited from the new conditions.

If implemented, he said it will lead to an increase in NPV of around 50%, as well as the Erha deepwater production field, which would see an increase in NPV of more than 400% .

The report, titled “A Deep Dive: Has the PIA Unlocked the Key to Nigeria’s Long-Term Production Stability?”, highlighted that the PIA seeks to provide a regulatory, legal, fiscal and governance for the Nigerian oil industry as well as fund the development of host communities.

According to S&P;, the new PIA has attempted to improve the country’s fiscal attractiveness by changing many facets of the regimes that apply to oil and gas assets, including the royalty as well as the Petroleum Profits Tax (PPT).

“An area of ​​particular concern and which is crucial to preventing Nigerian production from declining is the sanctioning and timely construction of new deepwater projects such as Bonga Southwest and Owowo.

“These increases are significant and illustrate the government’s intentions, going forward, as they design the PIA, they have put project partners and fiscal attractiveness front and center.

“The trajectory of Nigeria’s future oil and gas production largely depends on the PIA and whether it is deemed sufficiently favorable to investors. This is largely unknown as operators and partners have generally remained silent apart from announcements made by development joint ventures Preowei and Bonga,” he added.