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Anambra State Hydrocarbon Potential
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HYDROCARBON POTENTIAL
OF
ANAMBRA STATE
1 of 18
TABLE OF CONTENT
1. INTRODUCTION 3.
2. REGIONAL GEOLOGY 3.
3. ANAMBRA BASIN 5.
4. ANAMBRA STATE’S GEOLOGY & MINERAL RESOURCES 7.
5. ANAMBRA’S BASIN HUGE OIL AND GAS DEPOSITS 8.
6. SUGGESTED ACCELERATED WORK PROGRAM (OIL & GAS) 12.
7. GAS COMMERCIALIZATION STRATEGY 12.
8. SUSTAINABLE DEVELOPMENT 13.
9. SOUTH EAST - ANAMBRA STATE: THE NEW FRONTIER FOR OIL AND GAS
EXPLORATION AS ACTIVE AND NEW DISCOVERIES ARE MADE. 17.
10. CONCLUSION 18.
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1. INTRODUCTION
August 30 2012, President Goodluck Jonathan formally inducted Anambra State
into the league of oil producing states in the country. With technological
development, and a consistent drive by the Government to increase our oil
reserves Anambra State has joined the league of oil producing states. President
Jonathan made the acknowledgement while inaugurating Orient Petroleum’s
Anambra River Production Facility at Aguleri-Otu in the Anambra East Local
Government Area of the state operated on the Oil Prospecting License (OPL) 915
and 916. With the pronouncement, Anambra joins Akwa Ibom, Rivers, Delta,
Bayelsa, Edo, Ondo, Imo, Abia and Cross River as the nation’s 10th oil producing
state.
Nigeria has nine (9) basins of which the most prospective is the Niger Delta.
Others such as Anambra and Chad basins are also known to be rich in
hydrocarbon. Presently, exploration has been stepped-up in the entire Inland
Basins of Chad, Anambra, Benue, and Bida/Sokoto/Dahomey.
2. REGIONAL GEOLOGY
Many major depositional episodes can be distinguished in Nigeria; these are
particularly not limited to the following:
Early to Late Cretaceous Pre-Santonian Transgressive and Regressive
Complexes when the rift -like Benue depression and Abakaliki trough was
formed as a result of the separation of the South American and African
Continents. There are igneous activity and mineralization accompanying
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this geological episode. The Bima complexes which developed at the end of
the Benue depression in North Eastern Nigeria gave rise to the Chad Basin.
Late Cretaceous – Palaeocene Post Santonian Anambra Basin situated on
the northwest flank of the Abakalilki fold belt which began to develop as a
regressive offlap sequence during Campanian Times.
Cenozoic Niger Delta complex which developed as a regressive offlap
sequence.
The Maastritchtian transgression when the sea moved northwards from the
Gulf of Guinea through the Mid-Niger Basin and southwards from the
Mediterranean through the Sahara etc.
A culmination of these depositional events resulted in the formation of about
seven sedimentary basins in Nigeria where active petroleum exploration activities
can be carried out (figure 1). These basins include the following:
Anambra Basin
Benue Trough
Benin Basin
Bida basin
Bornu Basin
Niger Delta basin and
Sokoto Basin.
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3. ANAMBRA BASIN
The Anambra Delta complex may be thought of as a late Cretaceous – Palaeocene
Proto Niger – Benue Delta Complex which was developed wholly upon the
Continental Crust.
In terms of trapping mechanisms, this is somewhat smaller than the Niger Delta
and does not seem to have developed large growth faults and shale diapirs as
much as the Cenozoic Delta.
The regressive offlap sequence began to develop in the Campanian times and
prograded into the Maestrichtrian and the delta development ended in the in the
Palaeocene when the Imo shale Palaeocene transgression phase occurred. This is
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Figure 1
a pointer to the fact that the main source, reservoir and cap rocks which are
related to the petroleum potentials of the basin are diagnostic in these sequences
particularly in the Coal Measure facies, the Awgu Shales and Agbani Sandstones.
Initial exploration activities conducted by Elf petroleum Nigeria Limited in this
basin found oil in Anambra River – 1 well and mainly gas in subsequent wells. The
company however relinquished the concessions and the exploration activities
terminated. It should be noted that over years investors’ quest for exploration
activities in this basins is on the increase based upon the petroleum geological
attributes associated with the Anambra Basin.
In readiness for the Year 2005 licensing round, sixty one (61) open concessions
were earmarked and made available for the open competitive bidding by
interested investors. Nine of these blocks were located in the Anambra Basin-
Onshore as shown in the table below.
BASIN/
TERRAIN
BLOCK OPL AREA (KM2) AVAILABLE DATA DATA LOCATION
ANAMBRA
ONSHORE
(9 Blocks)
901 2392.49
902 2589.58
903 2552.7
904 2506.47
905 2599.81
906 2550
907 2394.62
914 1674.75 2-D seismic and Well data based on Elf’s previous
ELF & DPR
917 1310.57
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activities.4. ANAMBRA STATE’S GEOLOGY & MINERAL RESOURCES
Anambra State lies in the Anambra Basin, the first region where intensive oil
exploration was carried out in Nigeria. The Anambra basin has about 6,000 m of
sedimentary rocks. The sedimentary rocks comprise ancient Cretaceous deltas,
somewhat similar to the Niger Delta, with the Nkporo Shale, the Mamu
Formation, the Ajali sandstone and the Nsukka Formation as the main deposits.
On the surface the dominant sedimentary rocks are the Imo Shale a sequence of
grey shales, occasional clay iron stones and Sandstone beds.
The Imo Shale underlies the eastern part of the state, particularly in Ayamelum,
Awka North, and Oruma North LGAs. Next in the geological sequence, is the
Ameke Formation, which includes Nanka Sands, laid down in the Eocene. Its rock
types are sandstone, calcareous shale, and shelly limestone in thin bands.
Outcrops of the sandstone occur at various places on the higher cuesta, such as at
Abagana and Nsugbe, where they are quarried for construction purposes. Nanka
sands outcrop mainly at Nanka and Oko in Orumba North LGA.
Lignite was deposited in the Oligocene to Miocene; and it alternates with
gritty clays in places. Outcrops of lignite occur in Onitsha and Nnewi. The
latest of the tour geological formations is the Benin Formation or the coastal
plain sands deposited from Miocene to Pleistocene. The Benin Formation
consists of yellow and white sands. The formation underlies much of lhiala LGA.
Thick deposits of alluvium were laid down in the western parts of the state, south
and north of Onitsha in the Niger and Anambra river floodplains.
7 of 18
5. ANAMBRA’S BASIN HUGE OIL AND GAS DEPOSITS.
Background
The Anambra Basin, onshore Nigeria - the second most prospective basin in
Nigeria – has an estimated gas potential in excess of 5 trillion cubic feet
(tcf) of gas, though Orient Petroleum estimates from OPL 915 and 916 to
contain 1billion bbls Oil/Condensate and 30 TCF Gas. The basin remains
largely unexplored with only 30 wells drilled to date leading to six
discoveries. Geographically, the Anambra Basin literally sits on top (north)
of the Niger Delta and like the Niger Delta, cuts across several states,
including Anambra, Benue, Delta, Edo, Enugu and Kogi. The basin, also like
the Niger Delta, has been divided into blocks and awarded to various
companies with work commitments enshrined in the various agreements
signed.
In a licensing round held in March 2005, Nigeria offered a total of 77 Deepwater
and inland blocks. The following companies, among others, became equity
holders in Nigeria’s oil blocks located in the Anambra’s basin:
OIL BLOCKS
SUBSTANTIALLY
IN ANAMBRA
STATE
BLOCK
OPL
COMPANY
(OPERATORS)
DATE OF
AWARD
228 Sahara Energy 1st January 2005
907 Afren Global Energy Resources Limited (AGER)
1st January 2008
915 Orient Petroleum Resources Limited 1st January 2002
916 Orient Petroleum Resources Limited 1st January 2002
917 Afren Global Energy Resources 1st January 2008
8 of 18
Limited (AGER) OPL 907
OPL 907 licence covers 1,462 km2 and contains
the Akukwa gas and condensate discovery, with estimated in place volumes of up
to 400 billion cubic feet (bcf). Four shallow coreholes were drilled by Shell prior to
the Akukwa-1 (1955) and Akukwa-2 (1956) wells that were drilled by Shell/BP. The
Akukwa-1 well encountered gas and condensate in Cretaceous sandstones but
was not fully evaluated. The Akukwa-2 appraisal well found approximately 500ft
net gas pay in several horizons and produced dry gas on test.
OPL 917
Working Interests
Afren 41.0%
Buston ER 25.0%
Allenne E & P 14.0%
Bepta O & G 10.0%
De Atai Oil 10.0%
Kaztec Eng 5.0%
VP Energy 3.0%
Working Interests
Afren 42.0%
Petrolog 18.0%
VP Energy 17.0%
Goland Pet. Dev. 13.0%
De Atai Oil 10.0%
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OPL 917 cover over 2,000km2 and contains the Igbariam gas and oil discovery,
with estimated in place gas volumes up to 300 bcf and oil in place up to 80
mmbbls. Two wells were previously drilled on the license by Shell/BP. Igbariam-1
(1971) encountered gas and condensate with a reported 196ft net gas column
and a 30ft condensate/oil column in Cretaceous sandstones; the well was not
tested. The subsequent Ajire-1 well (1972) was water wet. A number of prospects
and leads have been identified south of the discovery well.
OPL 915
Working Interests
Orient Petroleum
Resources Ltd.100.0%
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OPL 915 lies across the states of Anambra, Edo, Enugu and Kogi, with about 50
percent of the block in Kogi, while the remaining states share the other 50
percent. There are four wells drilled on the block by Elf Petroleum – Anambra
River-1 in 1967, Anambra River-2 and 3 drilled later in 1984. The company in 1985
drilled Oda River-1. The three Anambra River wells are located in the Anambra
State part of the block, while Oda River-1 was drilled in Kogi State. No wells have
been drilled in the territories of Edo or Enugu States.
OPL 916
OPL 916, on the other hand, is located immediately south of OPL 915 and covers
Anambra, Edo, Delta and Kogi states, with about 80 percent of the block in
Anambra State. Like OPL 915, the block has four wells drilled – Nzam-1 (1954) and
Alo-1 (1976) both by Shell, while Elf drilled both Okpo-1 and Iji-1 in 1985.
According to reports, Alo-1 found gas, while others have ‘dry’ reported as their
current status. All wells except Iji-1 are located inside Anambra State. Iji-1 is in
Delta State.
Working Interests
Orient Petroleum
Resources Ltd.100.0%
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OPL 228
6. SUGGESTED ACCELERATED WORK PROGRAM (OIL & GAS)
a) Define geometry for 3D seismic data acquisition and secure necessary
approvals.
b) Synergy meetings with other operators in the Basin for focused field
development
c) Comprehensive Gas Utilization Planning
d) 3-D seismic acquisition over identified hydrocarbon bearing structures
e) Early well drilling campaign to prove up reserves and initiate early
production system
f) Preparation and approval of Full Field Development Plan
g) Early Production System
h) Field Surveys for Pipeline System and Downstream projects
i) "Book more Reserves"
j) Commence Full Field Development Program
Working Interests
Sahara
Energy41.0%
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k) Complete Gas Pipeline Infrastructure and a number of downstream
projects
7. GAS COMMERCIALIZATION STRATEGY
Target markets:
1) LPG: 20 million people in South East States. Potential expansion of the
market to 80 million people in Country & beyond.
2) Gas Sales: To major industries including Industrial Gas Manufacturing,
both Steel and Aluminum plants, Plastics, Car and Tyre manufacturing,
housing products, bottling plants & Fertilizer plants.
3) Power Plants: Either to National Grid or Independent Power Plants.
4) Export Markets: Export of LPG, GTL, CNG or LNG depending on size of
reserves.
Phase Approach:
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8. SUSTAINABLE DEVELOPMENT
In Anambra State, there is a need to move towards being a more balanced and
robust economy. This transformation needs to be managed carefully, and we
believe that the oil and gas industry can and must provide the foundations for the
journey and the endpoint both in terms of energy, the economy and the
environment. Following are a few opportunities that greet Anambra as an oil
producing State.
PETROLEUM FISCAL SYSTEMS IN NIGERIA
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The laws guiding oil petroleum taxes is the Petroleum Profit Tax (PPT) Act 1959,
and its amendments. While that of Gas are in the miscellaneous taxation
provisions Acts 18 & 19 of the 1998 and Act 39 of the 1999 constitution.
PPT RATE
• 85% for JV (Joint Venture) companies and 65.75% for companies operating for
less than 5 years
• 50% for PSC (Production Sharing Contract) companies in deep offshore (over
200 meters)
ROYALTY
Graduated into:
Land: 20%
Swamp/Shallow waters (0-100m): 18.5%
Shallow Offshore: 16.67%
Deep Offshore:
o 201-500m: 12%
o 501-800m: 8%
o 801-1000m: 4%
o >1000m: 0%
FISCAL INCENTIVES
OIL
As contained in the Memorandum of Understanding (MOU) for JV
companies
GAS
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Upstream Gas Utilization: Capital allowance: 20% per year (year 1 - 4) and
19% in year 5
Petroleum Investment Allowance (PIA): 10% as for oil.
Income tax is based on CITA (30%) where expenses are identified as
exclusively for gas.
Custom Duty: 2.5% (Government Circular of 2002)
Royalty: Zero %
To benefit from the foregoing incentives, a company must invest in natural gas
liquid extraction facility to supply gas in usable form to domestic gas utilization
projects, including aluminum smelter and Methanol, MTBE, and other associated
gas utilization projects.
All capital investment relating the gas-to-liquids facilities shall be treated as
chargeable capital allowance and recoverable against oil income.
Gas transferred from the natural gas liquid facility to the gas-to-liquid
facility shall be at zero percent tax and zero percent
Royalty.
All incentives granted in respect investment in associated gas shall be
applicable to non-associated gas.
Condensate extracted and re-injected into the crude oil stream shall be
treated as oil but those not re-injected shall be treated as gas.
Downstream Gas Utilization.
Capital Allowance: 90% in the first year of production and 10% retained in
the books.
Petroleum Investment Allowance (PIA): 35% (if no tax holiday is exercised
or 15% (if tax holiday is exercised).
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Tax Free Period: 3 years in the first instance, and renewable for additional
two (2) years subject to satisfactory performance. The tax-free period shall
start on the day the Company commences production as certified by the
Ministry of Petroleum Resources.
Tax free dividend during the tax-free period.
Zero % VAT for plants, machinery and equipment
Custom duty: 2.5% (Government circular of 2002)
State Production
(x1000
Bbls/day)
% of Nigeria’s
Total Daily
Production
(less Anambra)
% share of 13%
Derivation Fund
(less Anambra)
% of Nigeria’s
Total Daily
Production (+
Anambra)
% share of 13%
Derivation
Fund (+
Anambra)
Rivers 803.52 33.48 4.35 32.88 4.27
Bayelsa 526.56 21.94 2.85 21.55 2.80
Delta 483.36 20.14 2.62 19.78 2.57
Akwa-Ibom 420.96 17.54 2.28 17.22 2.24
Imo 55.2 2.30 0.30 2.26 0.29
Abia 50.4 2.10 0.27 2.06 0.27
Cross River 33.6 1.40 0.18 1.37 0.18
Ondo 31.2 1.30 0.17 1.28 0.17
Edo 19.2 0.80 0.1 0.79 0.10
Anambra 20.0
(Projected)
0.82 0.11
TOTAL 2400 100 13 100 13
How does this impart on Anambra State?
Anambra State will become a beneficiary of the 13% Derivation Revenue as soon
as the boundary delineation is completed. Below is an analysis of the distribution
of the 13% derivation fund among the oil producing states.
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Table 3: contributed production by the oil producing statesSource: NNPC, MINISTRY OF FINANCE AND CENRAL BANK RECORDS 2010
From the analysis above it is seen that the 13% derivation fund is shared
according to the percentage contribution from each of the oil producing states
with Akwa-Ibom State getting the highest cut and Anambra state getting very little
if little quantity of crude oil is produced. This raises the issue of increasing proven
reserves in the state. This will in turn increase the oil production from the state
and give the state higher stakes in terms of revenue.
9. SOUTH EAST - ANAMBRA STATE: THE NEW FRONTIER FOR OIL AND GAS
EXPLORATION AS ACTIVE AND NEW DISCOVERIES ARE MADE.
1. Incentives to Exploration & Production Companies
Provide infrastructure around production area to boost further investment
and production output in the sector.
Encourage SME growth in the sector to take advantage of activities for the
participation under NOGIC act 2010. (Nig. Oil and Gas Industry Content
Development Act)
2. Harnessing of Human Resources
Enlighten the inhabitants of the State on the level of cooperation required
to make the exploration process seamless
3. Endless Opportunities
a. Downstream sector
b. Gas Utilization: Discourage gas flaring and encourage investments in
gas handling facilities to trap gas for use in power plants and
industrial clusters
c. Independent Power Plants: The pace of exploration of the gas
concentrated in the Anambra basin, needs to be sped up as the
multi-billion naira investments in the country's Integrated Power
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Plants could be safeguarded if gas supply to them is guaranteed
through exploration activities in the basin.
10.CONCLUSION
Nigeria has huge abundant gas resources with about 5TCF of gas present in
the Anambra basin.
Current fiscal terms should be very generous to encourage investment in
the gas sector.
Domestic consumption of gas will increase particularly in the electricity
generation sector.
Gas is the energy of the future and Anambra state has all it take to play a
lead role in this sector.
REFERENCE
“Electricity production from natural gas sources (% of total) in Nigeria.”, Trading
Economics. 2010. <http://www.tradingeconomics.com/nigeria/electricity-
production-from-natural-gas-sources-percent-of-total-wb-data.html>, (visited 24,
April, 2009)
19 of 18
“International tourism; number of arrivals in Nigeria.” Trading Economics. 2010.
<http://www.tradingeconomics.com/nigeria/international-tourism-number-of-
arrivals-wb-data.html>, (visited 24, April, 2009)
“Oil and Gas Deposit/Production and Revenue Level by States in Nigeria.” USA
African Dialogue series, 2010. <https://groups.google.com/forum/?
fromgroups=#!topic/usaafricadialogue/cn4ir7UjZ08>, (visited 22, April, 2009)
Onyemaechi, O. “Economic Implications of Petroleum Policies in Nigeria: An
Overview.” American International Journal of Contemporary Research, Vol 2, No
5, (May 2012).
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