Financial Energy Review
A consortium led by Saipem and two Nigerian companies has clinched offshore contracts worth $1 billion for Shell’s Bonga North deepwater oil and gas project. The development is part of Shell Nigeria Exploration and Production Company Limited’s (SNEPCo) continued efforts to bolster Nigeria’s energy sector.
The contract entails the Engineering, Procurement, Construction, and Installation (EPCI) of risers, flowlines, subsea umbilicals, and associated subsea structures. Located 130 kilometers offshore Nigeria, the Bonga North project is a critical extension of Shell’s operations in the region.
Local Content Emphasized
Design and fabrication for the project will be carried out locally, with significant involvement from Nigerian suppliers and subcontractors. The consortium, which includes KOA Oil & Gas and AVEON Offshore, underscores Shell’s commitment to fostering local expertise and partnerships. Saipem’s share of the contract is approximately $900 million.
“This collaboration demonstrates the potential for Nigerian companies to execute large-scale, complex projects in the oil and gas industry,” said a spokesperson for Saipem. “The local content aspect is integral to the success of this project.”
TechnipFMC’s Contribution
In a related development, TechnipFMC has been awarded a contract to supply its Subsea 2.0 production systems for the Bonga North project. The systems include subsea tree designs, manifolds, jumpers, and controls. The contract, valued between $250 million and $500 million, aligns with Shell’s focus on deploying advanced technologies.
Jonathan Landes, President of Subsea at TechnipFMC, noted: “Shell was the first to adopt our Subsea 2.0 configure-to-order solution and continues to deploy it globally. This award further strengthens our position for future deepwater opportunities in the region.”
The Bonga North project will integrate TechnipFMC’s systems with Shell’s existing Floating Production Storage and Offloading (FPSO) facility, enhancing operational efficiency.
Bonga Field Milestones
The Bonga field, located in Oil Mining Lease (OML) 118, has been operational since 2005 and can produce up to 225,000 barrels of oil per day. It reached a significant milestone in 2023, producing its one-billionth barrel of crude oil. Bonga North is expected to sustain production at the facility, leveraging recoverable resources estimated at over 300 million barrels of oil equivalent.
The project involves drilling and completing 16 wells, including eight production wells and eight water injection wells. It also includes modifications to the existing FPSO Bonga Main and the installation of new subsea hardware.
Economic Impact and Future Prospects
Shell anticipates the project will generate an Internal Rate of Return (IRR) above the hurdle rate for its upstream business. The investment aligns with Shell’s strategy to boost cash flow through near-field opportunities, leveraging technical expertise and strong partnerships.
Zoë Yujnovich, Shell’s Integrated Gas and Upstream Director, emphasized the project’s significance: “This is another significant investment, which will help us to maintain stable liquids production from our advantaged upstream portfolio.”
Shell expects peak production from Bonga North to reach 110,000 barrels of oil per day, with first oil anticipated by the end of the decade.
“This project exemplifies Shell’s commitment to driving innovation and sustainability in Nigeria’s oil and gas sector,” Yujnovich added.
Broader Strategic Moves
The Bonga North development follows Shell’s decision in January 2024 to divest its onshore assets in Nigeria through the sale of its stake in the Shell Petroleum Development Company of Nigeria Limited (SPDC). With a net book value of $2.8 billion, this move allows Shell to focus exclusively on deepwater and integrated gas projects in the country.
The project’s operator, SNEPCo, holds a 55% stake in the Bonga field, with partners including Esso Exploration and Production Nigeria (20%), Nigerian Agip Exploration (12.5%), and TotalEnergies Exploration and Production Nigeria (12.5%), operating on behalf of the Nigerian National Petroleum Company Limited (NNPC).
