NIGERIA - The Geology Of Nigeria.

To oil explorers, Nigeria has good prospects. The complex nature of multi-reservoired fields suggests there can be ample scope for adding oil and gas reserves in the existing proven areas, either by detecting small undrilled structures or by adding new reservoirs to existing fields.

With a surface of 923,769 square kilometres, Nigeria lies in a rich part of West Africa. It borders on Benin to the west, Niger to the north, Chad to the north-east and Cameroon to the south and east. Its coast lies on the Gulf of Guinea in the Atlantic Ocean.

The country is divided into three sections and is defined by the Y-shaped formation of the River Niger and its tributary, the Benue. To the north of the Niger-Benue confluence lies a savannah country leading towards the Sahara.

On the south-western side of this Y lies an area in which there existed a number of clearly defined states in the country's history. The region stretches along the forest tracks of the West African coast, between the Atlantic to the south and the savannah states to the north.

About one half of Nigeria's land area is composed of three main basement complexes located in the west, the north-west and the south-east. Between these massifs, sedimentary basins are strung out along a north-east/south-west axis from Lake Chad to the Niger Delta, i.e. along the length of the Lower Niger-Benue river systems. The north-west/south-east trending Bida Basin follows the course of the Upper Niger River.

After more than 53 years of intensive exploration, it is considered that the main prospectivity of Nigeria is restricted to the Niger Delta province and its adjacent offshore. This part of West Africa's offshore is one of the most prospective petroleum provinces in the world.

The Nigerian offshore areas now being explored and considered highly prospective are at least 1,000 metres below sea level and then another 4,000 metres underground. There are only two other parts of the world where offshore oil is produced at such depth: the Gulf of Mexico and offshore Brazil. These areas have proved to be rich in oil and gas.

Most of the oil onshore lies at depths of 2,000-3,000 metres. Oil there is usually found associated with gas and water in the porespaces between the grains of sand which make up the reservoir. Oil is found in areas where columns of sedimentary formations are more than 2,000 metres thick: in sand, sandstones, limestones, evaporites and shales. They are mostly of marine origin, as in the Niger Delta, Anambra and Chad Delta Basins.

The Niger Delta has three major depositional prisms: (1) a Cretaceous deltaic complex developed 600 miles inland from the present mouth of the Niger Delta, (2) a Late Cretaceous to Palaeogene "proto Niger" delta complex which was formed seaward of the earlier delta, and (3) the younger Cenozoic Niger Delta complex which was built out over newly formed oceanic crust as the South Atlantic opened during the separation of the South American and African tectonic plates. Seaward of the latest delta system are deepwater sediments forming the pro delta slope.

The young Cenozoic Delta hosts most of the oil and gas fields of Nigeria. Total discoveries are estimated to be about 40 bn barrels of oil and more than 160 TCF of natural gas. Proven reserves are almost 32 bn barrels of oil and 159 TCF of gas.

Following the opening of the South Atlantic, vast quantities of clastic sediments were poured into the delta giving rise to three main rock units which are partially time equivalents and were deposited as prograded wedges. The lowest unit, the Akata Formation (Fm), 6,000 metres thick, comprises marine clays and shales together with deepwater sandstones.

The middle unit, the Agbada Fm, is up to 4,600 metres thick locally and consists of shallower water marine sands and lagoonal sands and shales. The Agbada is the main reservoir unit of the delta.

The top unit is the Benin Fm, up to 2,200 metres thick and comprising sands and gravels deposited mostly in very shallow seas or in the delta's top environment. As the delta built out to the south-west constantly, changes in water depth and migration of the distributary channels produced a very complex set of interdigitating point bar and channel sands with intervening shales and mudstones.

The younger Cenozoic Delta complex is notable for its development of "growth faults" which have produced the traps for its oil and gas fields. Growth faults are not present in the two earlier delta complexes, a factor which may partially explain their lack of prospectivity.

Growth faults are so called because they are active during the deposition of the sediments which they intersect. They are commonly cuspate in plan view, are steep-sided near the surface and flatten out to parallel bedding with depth. They frequently have a "roll-over" anticline with four-way closure on the downthrown side of the fault and antithetic faulting in the downthrown block. They are of limited length.

The delta is cut by a homogenous sequence of down-to-the-basin faults trending north-west and south-east, all similar in length and remarkably equidistant from each other. The coincidence of movement on the faults and the growth of the anticlines as the sediment was deposited resulted in ideal conditions for the subsequent entrapment of hydrocarbons.

Oil and gas are found on the upthrown side of the main fault and in the anticlinal structure on the downthrown side of the fault. Numerous subordinate traps are formed by the antithetic faults affecting the rollover anticline. In addition, the shales associated with the rollover faults are commonly over-pressured and diapiric, adding to structural development in the overburden and increasing the seal on faults.

Niger Delta fields contain multiple reservoirs. Oils are commonly gassy and have high-solution gas content. Reservoirs have primary and secondary gas caps. Free gas reservoirs are present in oilfields and in non-associated gas fields. The gas fields usually have high condensate yields.

The size and distribution of Niger Delta fields is remarkable. In most other oil provinces, there is a noticeable skewness in the distribution of field sizes, e.g., the bulk of reserves in the province is contained in a relatively small number of fields. In contrast, the distribution of field sizes in the Niger Delta is uniform.

Despite the discovery of about 40 bn barrels of oil, few - if any - fields contain more than 1 bn barrels. All the fields are located in similar types and sizes of structures. They are about 5 km long and 1 to 3 km wide. However, the smallness of the fields means that the channel sand reservoirs can usually be correlated, and thus likely to be in communication, across the whole field.

Analysis of potential source rocks in the Niger Delta has failed to identify any single rich source. Shales in the Akata and the Agbada formations, though generally poor in organic matter, are likely to be the sources of both the oil and gas. Only the vast quantities of dispersed organic material in the large bodies of shale in the Fms can explain the amounts of hydrocarbons that must have been generated.

Future potential for Nigeria lies in deep waters in front of the Niger Delta, as in the deep-water areas along the whole coast of West Africa. The prospects there are somewhat similar to those of the Gulf of Mexico and the Campos Basin off Brazil.

In late Jurassic times, the huge Gondwana land mass began to rift and slowly break apart. Some 50 million years later the South Atlantic ocean was in place, separating the two new continents of South America and Africa. In the early stages of the Gondwana breakup, an important development was the intermittent breaching by marine waters of a southern land barrier called Walvis Ridge, when Brazil and Nigeria were still joined at the top. These marine waters remained trapped when breaching ceased and evaporated to form thick layers of salt and salt formations.

The area where this happened is called Aptian Salt, or Angola Basin. Now the Angola Basin extends north from the underwater Walvis Ridge, which runs west into the South Atlantic from Namibia, up to a second underwater barrier, the Guinea Ridge, which runs out in a westerly direction from Cameroon.

The West African offshore is said to contain 15-20 bn barrels of oil yet to be explored. Shell, which produces about half of Nigeria's oil output and is a leading developer in the Gulf of Mexico, is exploring deep and ultra-deep areas off Angola, Congo and the Ivory Coast, as well as in the offshore sector of Nigeria. Total, ChevronTexaco and ExxonMobil, all big operators in Nigeria, are among majors targeting most of these areas as well, and have made important discoveries.

A Chad-to-Cameroon crude oil pipeline began flowing last month. The line is operated by ExxonMobil's Esso Exploration & Production Chad, which began filling the facility on July 24. Completed a year ahead of schedule, the line pumps the oil 1,070-km from the Doba basin oilfields in southern Chad to storage vessels located offshore Kribi, Cameroon, in the Gulf of Guinea. In hopes of alleviating poverty in both countries, the World Bank financed 3% of the line and will monitor its revenue.

The pipeline has been touted as a model for energy projects in developing countries to ensure citizens benefit from production of their natural resources. Chad's parliament has passed legislation calling for 80% of the oil revenue to go to the country's health, education and infrastructure. The World Bank says over the next 25 years the line could yield $2 bn in revenue for Chad, where the average income of its 7m people is less than $1 per day.

Development of one of three oilfields has been completed, with ExxonMobil being the operator, while work continues on the remaining two. When completed, output will rise from 50,000 b/d now to 225,000 b/d in 2004.

Consultation on the line, which began in 1993, has provided the opportunity for tens of thousands of citizens to have input into the planning. The pipeline's consortium consists of ExxonMobil (40%), Petronas (35%), and ChevronTexaco (25%).

Gulf Of Guinea Hit By Dutch Disease: The oil-rich Gulf of Guinea, shaken by a coup attempt on the island state of Sao Tom, is one part of the world most affected by the "Dutch disease", political and economic instability resulting from over-dependence on a single resource. A Netherlands trend after North Sea natural gas was found, Dutch disease refers to widespread economic decline following rapid development because of an exported natural resource. Oil income tends to make other economic activities, agricultural or industrial, uncompetitive and makes them disappear. Consequently, people ruling such countries lose motivation to develop diversified economic activities. Oil brings in immense income in an almost automatic way. The nine oil-rich West African countries produce 4.85m b/d, up from 4.3m b/d in 2002. They will raise output to 5.55m b/d in 2004 and 7.5m b/d by 2010.

The west African exporters next to Nigeria are Angola (producing 1.05m b/d now, 1.3m b/d in 2004 and 1.8m b/d in 2006); Equatorial Guinea (producing 300,000 b/d, up from 220,000 b/d in 2002); Congo Brazzaville (250,000 b/d, down from 255,000 b/d in 2002); Gabon (250,000 b/d); Chad (225,000 b/d in 2004); Cameroon (95,000 b/d, down from 100,000 b/d in 2002, and will fall to about 90,000 b/d in 2004); the Democratic Republic of Congo (26,000 b/d and to rise to 30,000 b/d in 2004); and the Ivory Coast (31,000 b/d, up from 21,000 b/d in 2002, and will average 30,000 b/d in 2004).

Sao Tom and Principe, where mediation helped end a coup last month, is preparing with Nigeria to auction nine potentially lucrative offshore E&P blocks amid popular frustration with poverty and empty promises. But the situation there is not better than in other West African countries, where poverty is combined with corruption and violence. The territorial waters of Sao Tom cover at least 6 bn barrels of oil reserves.

In October 2002, the International Court of Justice (ICJ) awarded the Bakassi peninsula to Cameroon. Both Cameroon and Nigeria had claimed the peninsula, a 1,000-sq-km area located in the Gulf of Guinea believed to contain significant reserves of oil. In February 1994, Cameroon submitted the dispute to the ICJ for settlement, and Nigeria later followed with its own suit. In March 1998, the ICJ began formal hearings on the case, and in June 1999, Equatorial Guinea applied for permission to enter the proceedings. The ICJ authorised Equatorial Guinea to intervene in the case in October 1999 on the basis of the country's arguments to protect its legal rights in the Gulf of Guinea as the maritime boundary between Nigeria and Cameroon is determined.

The Nigerian government had questioned Equatorial Guinea's sole ownership of the Zafiro field (Block B). At issue was whether Zafiro was a separate field, or part of an oil structure that straddled the territorial waters of both countries. In late September 2000, the two countries' presidents signed a pact delineating their maritime boundaries. One of the agreement's key provisions was Nigerian recognition of Equatorial Guinea's sovereignty over the Zafiro field.

The governments of Sao Tome and Principe (STP) and Nigeria have agreed to exploit petroleum reserves jointly in a once-disputed offshore region. The Joint Development Zone (JDZ) now is overseen by the Joint Development Authority (JDA), based in Nigeria. Oil income from the JDZ will be shared 60% by Nigeria and 40% by STP. This is based on an agreement signed on Feb. 21, 2001.

On March 17, 2003, Environmental Remediation Holding Corp. (ERHC), announced the signing of a memorandum of understanding (MoU) with STP settling all outstanding disputes. Thus ERHC increased its rights to participate in the JDZ from a 30% working interest in two blocks to a total of 125% working interest spread over six blocks. Additionally, ERHC was not required to pay signature bonuses on four of the blocks. In exchange, ERHC relinquished its rights to an overriding royalty interest, share of signature bonus and share of profit oil in the JDZ.

US Interest: West Africa has come under the spotlight since the US, the nation that consumes most oil in the world, decided to diversify its sources of foreign crude oil away from the Middle East in the wake of the Sept. 11, 2001 terrorist attacks. The aim is raise sub-Saharan Africa's share of the US oil supply to 25% by 2015 from 15% now.

Although African oil costs more to produce than the Middle East's, it is geographically well placed for export to US East Coast refineries. Also, because much African oil is offshore, production is not disturbed by frequent conflicts. But regional oil booms have often turned to bust for local populations. Weak governments and corruption have made the region one where oil's impact has been the worst.