NNPC upstream operations are in joint partnerships with the major oil companies. These multi-national E & P companies are operating predominantly in the on-shore Niger Delta, coastal offshore areas and lately in the deepwaters. As with many other developing countries, the multinationals in Nigeria had been operating under what is called a concession system, with NNPC being the concessionaire, while the companies are the operators. NNPC also is responsible for the management of the exploration bidding rounds for oil and gas.

The multinational oil companies operate in partnership with NNPC under Joint Operating Agreements (JOAs) or Production Sharing Contracts (PSCs). Others, especially the indigenous oil companies, operate in partnership with international companies under sole risk or as independents. Nigeria's petroleum industry is well grounded in successful exploration, beginning with the first commercially viable discovery at Oloibiri in the Niger Delta in 1956, with a modest production rate of 5,100 barrels per day. Reserves of crude oil stand at 28.2 billion barrels. Natural gas reserves total 165 trillion standard cubic feet (scf), including 75.4 trillion scf of nonassociated gas.

An important ingredient in NNPC's exploration success is the Integrated Data Services Ltd (IDSL), a subsidiary of NNPC. IDSL is one of the largest and most advanced earth science facilities in Africa. Field data is sent to IDSL for analysis using advanced computer systems, giving the company the critical edge in its upstream operations. IDSL processes and interprets in 3-D configurations data from the hydrocarbon reservoirs. This technological capability is instrumental in developing reservoir management strategies, which provide optimum recovery rates over the life of a field.

IDSL has been responsible for most of the country's major oil discoveries and is continuing an intensive exploration programme to increase the nation's hydrocarbon reserves.

PRODUCTION

With a maximum crude oil production capacity of 2.5 million barrels per day, Nigeria ranks has Africa's largest producer of oil and the sixth largest oil producing country in the world. Nigeria appears to have a greater potential for gas than oil. Nigeria's gas production in the year 2000 was approximately 1,681.66 billion scf, 1,3715 billion scf was associated gas and the rest 310.16 billion was nonassociated gas.

Nigeria produces only high value, low sulphur content, light crude oils - Antan Blend, Bonny Light, Bonny Medium, Brass Blend, Escravos Light, Forcados Blend, IMA, Odudu Blend, Pennington Light, Qua-Iboe Light and Ukpokiti.

NNPC through its subsidiary the Nigerian Petroleum Development Company (NPDC) is directly responsible for four oil and gas fields with a total production of 15,000 bpd.

NPDC is committed to expand its production capacity and has thus entered into strategic alliance with Agip Energy to develop the Okhono offshore field.

The Nigerian Gas Company, a subsidiary of NNPC transmits gas to major commercial centres in the country. The Escravos -Lagos pipeline feeds the commercial nerve-centre of the nation, as well as fuelling the main power station at Egbin, near Lagos.

Deep Water Exploration

From the very beginning of oil exploration in Nigeria in 1937, till early 1993, virtually all exploration and production activities were restricted to land and swamps. Where prospecting ventured offshore, it was in areas not greater than 200m water depth.

But then in 1993, the Federal Government opened up a new frontier in oil and Gas exploration, heralding the bright prospects of a promising future, by allocating some offshore blocks in water depths reaching 2500m. these deep water depth and plans for even greater depths than 2500m will undoubtedly impact positively the country’s production and reserve blueprint. Though these deep water operations are technically challenging and massively capital intensive, experience multinational companies have been awarded some deep offshore blocks and even ultra deep concessions. By the end of 1998, the deep water operators in Nigeria had achieved the following:

• Acquisition of21,000 km 2D Seismic Lines
• Acquisition of21,500 km 3D Seismic Lines
• Drillingof33 exploration/appraisal wells in depths ranging from 300-1460m.

Even better news is significant discoveries reported by most of the operators. Little wonder then, that against a commitment of $864 million USD for the first 6 (six) years of deep water prospecting under a PSC (production sharing contract) the industry has invested approximately $1.3 billion USD up to the end of 1998.

Operators have, indeed, continued aggressive exploration activities virtually in spite of the volatile global petroleum atmosphere of recent times, and long lead times from discovery, production and sales.

The technical challenges of deep and ultra-deep water depths has meant a number of less than 20 wells drilled worldwide in water depths greater than 1000m. Expectedly, since most of the deep water activity in Nigeria is in, so called, virgin territory, thereby lacking infrastructural support and services, the cost of prospecting is extremely high.

This is however ameliorated and set off against the PSC with the Federal Government of Nigeria under the aegis of the NNPC.