NIGERIA - The Oso Field.

It was not until 1988 that Mobil decided to develop Oso, on the basis of a 1986 MoU guaranteeing a minimum profit margin of $2/b and confirmation that condensates were excluded from OPEC's production quotas. The World Bank and its IFC funded the Oso JV.

About 89 km south-west of Mobil's Qua Iboe terminal and 67 km from the Bonny island gas processing system, Oso is a giant gas field by African standards now producing 110,000 b/d. The field has had enough reserves to recover at least 500m barrels of condensate in a 20-year production period and to still have a deposit of about 3,500 BCF of gas. From the remaining gas, Mobil can recover liquids, including butane and propane. As the gas is forced to the surface, it cools and takes the form of condensate, having the qualities of a very light, almost sulphur-free crude oil. Gas associated with condensates is then re-injected into Oso for an important NGL recovery system, Phase-II, which came on stream in November 1998.

Phase-I of the field's development cost $900m. When the go ahead was given, it was agreed that the field's commercial production was to be for 20 years. It was estimated this would yield a revenue of $12 bn to NNPC and Mobil and that the partners should recoup their investment within two years of production. On that basis, 65% of the financing was provided on concessionary terms by the World Bank, IFC, the US Export-Import Bank and the Export-Import Bank of Japan. The remaining 35% was paid as equity by NNPC (60%) and Mobil (40%). In June 1990, contracts for a range of facilities were awarded to a group of McDermott of the US, Bouygues Offshore of France and JGC of Japan. The field and related facilities came on stream in December 1992, with production reaching 50,000 b/d in late March 1993 and 110,000 b/d from 1995. Installations consist of 21 wells, eight platforms, a single point mooring and 215 km of marine pipelines, plus three dedicated tanks and loading facilities at Qua Iboe terminal.

Mobil has a 51% majority in Oso's Phase-II for NGLs, with NNPC holding 49%. This has resulted from NNPC's failure to fund its share of Phase-II costs and Western financiers' poor perception of country-risk associated with Nigeria. (NNPC and Mobil could no longer get funding from commercial banks and development agencies. Instead, Mobil in 1996 raised $300m in US commercial bonds secured by future gas sales commitments. Mobil has since proposed that NNPC also reduce its stake in favour of the US major in its main JV, because of NNPC's cash problems. But Abuja has turned it down).

Phase-II came on stream in November 1998 at 30,000 b/d of NGLs and cost $860m. Its capacity of 50,000 b/d was reached in March 1999. The NGLs are stripped out of 600 MCF/day of gas coming in equal volumes from Oso and the new Usari field nearby. Dry gas is re-injected. The liquids are pumped to a fractionator on Bonny island through a 67 km pipeline. They are separated into 27,000 b/d

of propane, 14,000 b/d of butane and 9,000 b/d of pentane-plus. In Phase-II, 350m barrels of NGLs will be extracted over 25 years - without affecting Oso's condensate production. The NGLs are mostly exported, with some sold locally.

Engineering work on Phase-II had begun in March 1993. In late January 1995, Mobil awarded a $648m EPC contract to a group led by ABB Lummus Crest and including Bouygues Offshore, JGC Corp and a JV of Spie-Batignolles and Eiffage's Fougerolle. This covered the offshore platform with facilities to strip the liquids from gas, the gas re-injection system, the pipeline to Bonny, refrigerated storage for propane and butane (with 700,000 barrels each) and for the pentane-plus (300,000 barrels), and loading facilities. In July 1997, Mobil awarded a FF740m ($121.3m) turnkey contract to Saibos CML (50% Bouygues Offshore & 50% Saipem) and Nissco (Bouygues' Nigerian unit) for the gas fractionating platform with a capacity of 300 MCF/day from the Usari field, two wellhead platforms and six pipelines.

Mobil intends to eliminate gas flaring by 2001. Already flaring has been cut by 50%, with four gas injection systems installed at Edop, Asaba, Oso and Ekpe. The Ekpe system, cutting flares by 10%, was commissioned in August 1997. Despite Nigeria's financial difficulties, Mobil is still planning to build a 360 MW power plant on Bonny island, as an IPP, to use associated gas from Oso's Phase-II and from Usari, and is negotiating a power supply deal with the National Electric Power Authority.

Apart from the JV, Mobil has a PSA for two offshore tracts, where water depths range from 200 to more than 1,000 metres. It signed this PSA in late May 1993, shortly after Shell, Elf, Exxon, and a BP/Statoil JV signed PSAs for other deep-water blocks. The blocks are not far from Mobil's Qua Iboe production system. The company has since brought in Amoco as a partner in one block, OPL 221. Mobil also operates a block in Equatorial Guinea's offshore area disputed by Nigeria, where it has the Zafiro oilfield in a Qua Iboe formation. This was brought on stream in September 1996 after 18 months of rapid development work begun immediately as the field was found. Zafiro is less than 30 km from Qua Iboe. Its output in August 1997 was doubled to 80,000 b/d, a level which prompted the Nigerian government to press its claim over this area. The Abuja government has granted rights to Elf to develop the Ofon oilfield in the same disputed area, said to contain 158m barrels and to cost $350m to develop.

In addition, Mobil and Elf have settled a dispute over a joint reservoir straddling their blocks, Mobil's OML 70 and Elf's OML 99, with the field containing 500-700m barrels and having a potential of 90,000 b/d. Elf is the operator.

Nigeria has a dispute with Cameroon over the oil-rich, 600-square mile Bakassi Peninsula which separates the two countries. After heightened border tensions led to a number a clashes between the two countries in early 1996, the UN sent a mediation team to the region in September 1996. The International Court of Justice in the Hague has since reviewed the case as well. Nigeria claims that an 1858 treaty places the Peninsula in its territory. Cameroon contends that Nigeria offered it the region after Cameroon refused to help Biafran rebels during Nigeria's 1967 civil war.