The withdrawal of Total, Chevron and Addax has grounded exploration activities for over 500 million barrels of crude oil reserves stranded in the Nigeria – São Tomé and Príncipe Joint Development Zone (JDZ) project.
Over the years, the venture has proved to be a drainpipe, as it said to be running a hefty yearly budget of $12 million. While Total pulled out from Block 1 in August 2013, previously abandoned by Chevron in 2010, another oil company, after drilling two new wells in 2013, announced in July 2013 that the find was too limited to justify further investment.
Additionally, Sinopec and Addax were said to have also walked away from Blocks 2 and 4 for the same reasons. A source in one of the IOCs, who preferred anonymity, said: “If the IOCs pulled out of the deal, it means, the JDZ has no commercial value.”
This has made the commercial viability of over 500 million barrels of crude oil reserves stranded in the Nigeria – São Tomé and Príncipe Joint Development Zone (JDZ) to remain uncertain, as the region is yet to produce its first oil 15 years after discovery. Big explorers that once jostled for drilling rights in the Zone, report showed, have backed off after a slew of dry wells.
The JDZ is an area in the region of the Nigeria – São Tomé and Príncipe boundary that is speculated to be rich in oil and gas reserves. Already, a United States (U.S.)-based firm, ERHC Energy Inc., which has interest in blocks 2, 3, 4, 5, 6 and 9, has invested over $500 million into exploration activities without significant results.
In the same vein, as producers comprised of members of the Organization of Petroleum Exporting Countries and 11 allies meet in Kuwait to gauge how well they’ve implemented output cuts agreed on last year, talks will be overshadowed by the question of whether the persisting glut requires the curbs to be extended beyond the summer.
With U.S. crude stockpiles swelling to record levels and prices sinking below $50 a barrel, OPEC and its partners have little choice but to keep going, according to all 13 analysts surveyed by Bloomberg.
Oil jumped 20% in the weeks following the decision by OPEC and its 11 allies to curtail output to end a three-year surplus. Now even though OPEC has delivered almost all the promised cuts, prices have since slipped on concern the curbs aren’t clearing the oversupply quickly enough, and that U.S. shale producers are gearing up to fill any shortfall.
A five-nation committee established to monitor implementation of the accord, finalized on Dec. 10 last year, will meet in Kuwait City on March 26. OPEC achieved 91% of its pledged cuts last month, while Russia and other allies delivered about 44%, according to data from the International Energy Agency. OPEC ministers will meet May 25 in Vienna to decide whether to extend the deal.
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