Deepwater projects may represent the future of Nigerian petroleum by allowing multinational operators to avoid security risks inherent to the unstable Niger Delta region. In March 2005, a new licensing round began that offered a total of 77 deepwater and inland blocks.

 

As of January 2006, 44 of the 77 blocks were awarded, but only 18 companies had paid their signature bonuses in full. In the past, the Nigerian government has taken underdeveloped blocks from multinational companies due to delays in their development.

 

However, in one case, the Nigerian government returned four of 13 blocks taken from Royal Dutch Shell, while several of the remaining blocks were included in the March 2005 round. Nigeria’s Department of Petroleum Resources (DPR), a licensing regulator agency, has promised that a new licensing round will be held in the third quarter of 2006.

In October 2004, Chevron announced that it would invest $2.5 billion to develop the Agbami field, which is scheduled to come online in late 2007. In December 2004, NNPC concluded negotiations on a $4 billion contract for development of the Agbami field.

 

The field contains 1 billion barrels of recoverable hydrocarbons, and is located 70 miles from Nigeria's coast. The majority of Agbami lies in OPL 216, while one-third of it lies in the adjacent Block OPL 217. In February 2005, NNPC awarded Chevron a $1.1 billion contract for the construction of a FPSO for the field, which will be undertaken by Daewoo Shipping and Maritime Engineering (South Korea). The FPSO is expected to export up to 250,000 bbl/d of oil and 450 million cubic feet per day (Mmcf/d) of natural gas.

In October 2004, Total announced the discovery of a major oil deposit in deepwater block OPL 222, followed by a January 2005 discovery at the deepwater Usan field. The fifth successful appraisal well drilled in the field, Usan-6, had an initial flow rate of 5,800 bbl/d. Commercial production on the field is scheduled to begin in 2010, with initial output of 150,000 bbl/d. Block 222 is operated by Total (20 percent), in partnership with Chevron (30 percent), ExxonMobil (30 percent), and Nexen Petroleum (20 percent).

Chinese firms are also becoming increasingly involved in the Nigerian oil sector. In December 2004, Sinopec and NNPC signed an agreement to develop the Niger Delta's OML 64 and 66. Since the signing of the agreement, five exploration wells have been drilled in OML 64, with one discovery of hydrocarbons. In Block OML 66, twelve wells have encountered hydrocarbons. In July 2005, China and Nigeria reached a trade agreement in which Nigeria will supply China with 30,000 bbl/d of crude oil over the next five years.

Along with the increased foreign investment in Nigeria’s oil sector, the Nigerian government has been working to promote local investment in the oil industry. Nigeria's Marginal Field Development Program (MFDP) provides tax breaks and government incentives to encourage local involvement in the oil sector. In November 2004, 16 local companies acquired marginal oil fields from SPDC under the MFDP. The fields are estimated to hold 150-200 million barrels of oil. First oil from the fields has yet to come online. Nigeria also has plans to increase local ownership in deep offshore projects during 2006. The Nigerian government has called for the current 15 percent local ownership to be increased to 45 percent during 2006 and to 70 percent by 2010.