Rig Activity In West African Coast

Rig Activity In West African Coast: Why Celebrate Failure And Fraud?

Ifeanyi Izeze

The Ibos of Nigeria would say that iberibe is the act of celebrating inability to place in proper contest what someone have achieved or is pushing ahead to achieve. There is no better way to describe the hyped celebration in the media of the rig activity hitting 19 in the offshore arena of the entire South –West African coast.

The iberibeism was even glorified the more when the reports went ahead to say that the current state of the region represents a booming activity level because it favourably compared to Brazilian offshore and the U.S Gulf of Mexico. What a shame! Brazil, a country, is used as a yardstick to compare the success or otherwise of the exploration and exploitation activities of the entire South- West African region. Shame and shame again and again.

All the efforts of major oil producing countries in this region which include, Nigeria, Sao Tome and Principe, Angola, Gabon and the Gulf of Guinea region, could only match up to the singular effort of Brazil, an OPEC country like Nigeria. Just look at it in this perspective and judge if we have anything to celebrate as achievement in that report. Nigeria as a country should weep rather than the celebration of mediocrity.

The report which was conducted by a serious minded western consultancy firm said “the current fleet of 18 rigs in the region places West Africa on par with Brazil as the second leading region in terms of deepwater fleet size, and West Africa is poised to move well ahead of Brazil in both total fleet size and number of rigs contracted, making it second only to the U.S. Gulf of Mexico with its fleet of 27 rigs.”

Either by design or omission, the report and its celebrants deliberately confused issues in their desperate attempt to ascribe success to the moribund oil industry in Nigeria and the entire West African Coast. Before we jump to a thanks- giving church service that our rig activity has matched that of Brazil and coming close to the Gulf of Mexico, let’s examine some critical issues:

First, what was the rig count in the region ten- fifteen year ago? Out of the 18 rigs celebrated, how many of them are involved in exploration or appraisal drilling? How many are work-over machines just servicing existing producing offshore fields? A breakdown of the activity in the area would give a proper perspective of what is actually going on in the entire region.

As a Nigerian, I feel very bad that my country being the biggest player in the arena is being ripped to its under-wears by a well packaged multinational conspiracy. This situation is even more pathetic against the background that the foreign operators are collaborating with corrupt and fraudulent-minded administrators of the nation’s oil industry especially administrators of the upstream sub-sector.

This is the conspiracy: Currently, deepwater rigs in Nigeria and other countries in the West African Coast cost an average day rate of $248,176 (N32 million), which represents over 7.5 per cent higher than the $230,828 (N29.7 million) worldwide average for all deepwater semis, and drill ships.

Compared to Brazil, the most comparable region in terms of fleet size, Nigerian and other West African deepwater rigs are earning 72 per cent more than their Brazilian counterparts, which are earning the lowest average day rates for any region at $144,469 (N18.6 million).

"The current average day rate for West African deepwater rigs is significantly higher than the average just one year ago (January 2006). At that time, these rigs were averaging day rates of $187,057 (N24.1 million), which amounts to a one-third or 33 per cent increase in day rates in one year's time." This is the real story.

While the rig operators will smile to the bank, “oil companies” operating in the region will pay more for the cost of engaging the oil rigs for their operations, going by the report.

The question: Who are the oil companies operating in the region? These are the foreign multinationals mainly from the western countries and the neophytes introduced from Asia and their Nigerian masters in the Obasanjo-led administration.

Another question: How are the upstream activities (rig engagement inclusive) funded? It is a well known fact that all the operating oil companies in Nigeria are funded the joint venture contributions either by physical cash calls or oil-for-money swap in some cases of production-sharing-arrangements.

Also, in Nigeria, who pays the highest in joint venture cash call contributions? It is the Nigerian National Petroleum Corporation (NNPC). The contract arrangements in other countries of the region may be different from the Nigerian case but I am more concerned about my country because this is where the bulk of the fraud are being perpetrated.

So the Nigerian Government pays 72 percent more than their Brazil counterpart in deep offshore drilling projects. And our Government blindly agreed to the strangulating increase in day rates of drilling rigs from $187,057 in January 2006 to $248,176 which amounts to a 33 per cent increase just within twelve months. Does this call for celebration?

Has the operating conditions in the area changed so drastically over the last one year? No. It should be pointed out blankly here that the arena we are talking about has nothing to do with the Niger Delta because it lies far offshore from the troubled Niger Delta. So what changed in the region to warrant the astronomical increase in the price of engaging drilling rigs to work in the area? I will tell you now.

The reason for such increase is very obvious. Most of the active arenas in the so called bubbling deep offshore West Africa can be rightly said to be within the Nigerian deepwaters and the areas within the Nigerian -Sao Tome and Principe Joint Development initiative.

The media has widely reported what the administrators of the nation’s oil industry have been doing with lucrative oil blocs in Nigerian ultra-deep arenas where lucrative acreages are given to traders and their partners from India, China amongst other Asian countries who qualified for such awards only on the account of their being closely associated to the present government.

So, the reason why the cost of engaging a drilling rig in the area is 72 percent more than what is obtainable in Brazilian deep offshore is because a crop of people are ripping-off Nigeria from such rates. Corruption and fraud at the highest level especially in NNPC, DPR and the entire Petroleum Ministry could rightly be said to be the only explanation for such difference.

More so, there is a clearly define pattern that rhymes with the massive fraud scandals that rocked the nation’s award of oil blocs since 2005. The assessment report revealed that in January 2005, day rates were averaging $153,297 (N19.7 million), that shows a 22 per cent growth in day rates over the course of 2005.

Remarkably, prior to 2005, average day rates for active rigs in the Nigerian deepwaters were generally on the downward path. The year 2006 was a record-setting year for the Nigerian deepwater rig market in terms of individual rig day rates as well as overall revenue generated by rigs working in the region. This followed the plethora of oil blocs award parties organized by DPR/NNPC for friends of government and their fronts. Abi no be so?

IFEANYI IZEZE: iizeze@yahoo.com