HYDROCARBON POTENTIAL

OF

ANAMBRA STATE

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TABLE OF CONTENT

1. INTRODUCTION 3.

2. REGIONAL GEOLOGY 3.

3. ANAMBRA BASIN 5.

4. ANAMBRA STATE’S GEOLOGY & MINERAL RESOURCES 7.

5. ANAMBRA’S BASIN HUGE OIL AND GAS DEPOSITS 8.

6. SUGGESTED ACCELERATED WORK PROGRAM (OIL & GAS) 12.

7. GAS COMMERCIALIZATION STRATEGY 12.

8. SUSTAINABLE DEVELOPMENT 13.

9. SOUTH EAST - ANAMBRA STATE: THE NEW FRONTIER FOR OIL AND GAS

EXPLORATION AS ACTIVE AND NEW DISCOVERIES ARE MADE. 17.

10. CONCLUSION 18.

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1. INTRODUCTION

August 30 2012, President Goodluck Jonathan formally inducted Anambra State

into the league of oil producing states in the country. With technological

development, and a consistent drive by the Government to increase our oil

reserves Anambra State has joined the league of oil producing states. President

Jonathan made the acknowledgement while inaugurating Orient Petroleum’s

Anambra River Production Facility at Aguleri-Otu in the Anambra East Local

Government Area of the state operated on the Oil Prospecting License (OPL) 915

and 916. With the pronouncement, Anambra joins Akwa Ibom, Rivers, Delta,

Bayelsa, Edo, Ondo, Imo, Abia and Cross River as the nation’s 10th oil producing

state.

Nigeria has nine (9) basins of which the most prospective is the Niger Delta.

Others such as Anambra and Chad basins are also known to be rich in

hydrocarbon. Presently, exploration has been stepped-up in the entire Inland

Basins of Chad, Anambra, Benue, and Bida/Sokoto/Dahomey.

2. REGIONAL GEOLOGY

Many major depositional episodes can be distinguished in Nigeria; these are

particularly not limited to the following:

Early to Late Cretaceous Pre-Santonian Transgressive and Regressive

Complexes when the rift -like Benue depression and Abakaliki trough was

formed as a result of the separation of the South American and African

Continents. There are igneous activity and mineralization accompanying

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this geological episode. The Bima complexes which developed at the end of

the Benue depression in North Eastern Nigeria gave rise to the Chad Basin.

Late Cretaceous – Palaeocene Post Santonian Anambra Basin situated on

the northwest flank of the Abakalilki fold belt which began to develop as a

regressive offlap sequence during Campanian Times.

Cenozoic Niger Delta complex which developed as a regressive offlap

sequence.

The Maastritchtian transgression when the sea moved northwards from the

Gulf of Guinea through the Mid-Niger Basin and southwards from the

Mediterranean through the Sahara etc.

A culmination of these depositional events resulted in the formation of about

seven sedimentary basins in Nigeria where active petroleum exploration activities

can be carried out (figure 1). These basins include the following:

Anambra Basin

Benue Trough

Benin Basin

Bida basin

Bornu Basin

Niger Delta basin and

Sokoto Basin.

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3. ANAMBRA BASIN

The Anambra Delta complex may be thought of as a late Cretaceous – Palaeocene

Proto Niger – Benue Delta Complex which was developed wholly upon the

Continental Crust.

In terms of trapping mechanisms, this is somewhat smaller than the Niger Delta

and does not seem to have developed large growth faults and shale diapirs as

much as the Cenozoic Delta.

The regressive offlap sequence began to develop in the Campanian times and

prograded into the Maestrichtrian and the delta development ended in the in the

Palaeocene when the Imo shale Palaeocene transgression phase occurred. This is

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Figure 1

a pointer to the fact that the main source, reservoir and cap rocks which are

related to the petroleum potentials of the basin are diagnostic in these sequences

particularly in the Coal Measure facies, the Awgu Shales and Agbani Sandstones.

Initial exploration activities conducted by Elf petroleum Nigeria Limited in this

basin found oil in Anambra River – 1 well and mainly gas in subsequent wells. The

company however relinquished the concessions and the exploration activities

terminated. It should be noted that over years investors’ quest for exploration

activities in this basins is on the increase based upon the petroleum geological

attributes associated with the Anambra Basin.

In readiness for the Year 2005 licensing round, sixty one (61) open concessions

were earmarked and made available for the open competitive bidding by

interested investors. Nine of these blocks were located in the Anambra Basin-

Onshore as shown in the table below.

BASIN/

TERRAIN

BLOCK OPL AREA (KM2) AVAILABLE DATA DATA LOCATION

ANAMBRA

ONSHORE

(9 Blocks)

901 2392.49

902 2589.58

903 2552.7

904 2506.47

905 2599.81

906 2550

907 2394.62

914 1674.75 2-D seismic and Well data based on Elf’s previous

ELF & DPR

917 1310.57

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activities.4. ANAMBRA STATE’S GEOLOGY & MINERAL RESOURCES

Anambra State lies in the Anambra Basin, the first region where intensive oil

exploration was carried out in Nigeria. The Anambra basin has about 6,000 m of

sedimentary rocks. The sedimentary rocks comprise ancient Cretaceous deltas,

somewhat similar to the Niger Delta, with the Nkporo Shale, the Mamu

Formation, the Ajali sandstone and the Nsukka Formation as the main deposits.

On the surface the dominant sedimentary rocks are the Imo Shale a sequence of

grey shales, occasional clay iron stones and Sandstone beds.

The Imo Shale underlies the eastern part of the state, particularly in Ayamelum,

Awka North, and Oruma North LGAs. Next in the geological sequence, is the

Ameke Formation, which includes Nanka Sands, laid down in the Eocene. Its rock

types are sandstone, calcareous shale, and shelly limestone in thin bands.

Outcrops of the sandstone occur at various places on the higher cuesta, such as at

Abagana and Nsugbe, where they are quarried for construction purposes. Nanka

sands outcrop mainly at Nanka and Oko in Orumba North LGA.

Lignite was deposited in the Oligocene to Miocene; and it alternates with

gritty clays in places. Outcrops of lignite occur in Onitsha and Nnewi. The

latest of the tour geological formations is the Benin Formation or the coastal

plain sands deposited from Miocene to Pleistocene. The Benin Formation

consists of yellow and white sands. The formation underlies much of lhiala LGA.

Thick deposits of alluvium were laid down in the western parts of the state, south

and north of Onitsha in the Niger and Anambra river floodplains.

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5. ANAMBRA’S BASIN HUGE OIL AND GAS DEPOSITS.

Background

The Anambra Basin, onshore Nigeria - the second most prospective basin in

Nigeria – has an estimated gas potential in excess of 5 trillion cubic feet

(tcf) of gas, though Orient Petroleum estimates from OPL 915 and 916 to

contain 1billion bbls Oil/Condensate and 30 TCF Gas. The basin remains

largely unexplored with only 30 wells drilled to date leading to six

discoveries. Geographically, the Anambra Basin literally sits on top (north)

of the Niger Delta and like the Niger Delta, cuts across several states,

including Anambra, Benue, Delta, Edo, Enugu and Kogi. The basin, also like

the Niger Delta, has been divided into blocks and awarded to various

companies with work commitments enshrined in the various agreements

signed.

In a licensing round held in March 2005, Nigeria offered a total of 77 Deepwater

and inland blocks. The following companies, among others, became equity

holders in Nigeria’s oil blocks located in the Anambra’s basin:

OIL BLOCKS

SUBSTANTIALLY

IN ANAMBRA

STATE

BLOCK

OPL

COMPANY

(OPERATORS)

DATE OF

AWARD

228 Sahara Energy 1st January 2005

907 Afren Global Energy Resources Limited (AGER)

1st January 2008

915 Orient Petroleum Resources Limited 1st January 2002

916 Orient Petroleum Resources Limited 1st January 2002

917 Afren Global Energy Resources 1st January 2008

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Limited (AGER) OPL 907

OPL 907 licence covers 1,462 km2 and contains

the Akukwa gas and condensate discovery, with estimated in place volumes of up

to 400 billion cubic feet (bcf). Four shallow coreholes were drilled by Shell prior to

the Akukwa-1 (1955) and Akukwa-2 (1956) wells that were drilled by Shell/BP. The

Akukwa-1 well encountered gas and condensate in Cretaceous sandstones but

was not fully evaluated. The Akukwa-2 appraisal well found approximately 500ft

net gas pay in several horizons and produced dry gas on test.

OPL 917

Working Interests

Afren 41.0%

Buston ER 25.0%

Allenne E & P 14.0%

Bepta O & G 10.0%

De Atai Oil 10.0%

Kaztec Eng 5.0%

VP Energy 3.0%

Working Interests

Afren 42.0%

Petrolog 18.0%

VP Energy 17.0%

Goland Pet. Dev. 13.0%

De Atai Oil 10.0%

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OPL 917 cover over 2,000km2 and contains the Igbariam gas and oil discovery,

with estimated in place gas volumes up to 300 bcf and oil in place up to 80

mmbbls. Two wells were previously drilled on the license by Shell/BP. Igbariam-1

(1971) encountered gas and condensate with a reported 196ft net gas column

and a 30ft condensate/oil column in Cretaceous sandstones; the well was not

tested. The subsequent Ajire-1 well (1972) was water wet. A number of prospects

and leads have been identified south of the discovery well.

OPL 915

Working Interests

Orient Petroleum

Resources Ltd.100.0%

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OPL 915 lies across the states of Anambra, Edo, Enugu and Kogi, with about 50

percent of the block in Kogi, while the remaining states share the other 50

percent. There are four wells drilled on the block by Elf Petroleum – Anambra

River-1 in 1967, Anambra River-2 and 3 drilled later in 1984. The company in 1985

drilled Oda River-1. The three Anambra River wells are located in the Anambra

State part of the block, while Oda River-1 was drilled in Kogi State. No wells have

been drilled in the territories of Edo or Enugu States.

OPL 916

OPL 916, on the other hand, is located immediately south of OPL 915 and covers

Anambra, Edo, Delta and Kogi states, with about 80 percent of the block in

Anambra State. Like OPL 915, the block has four wells drilled – Nzam-1 (1954) and

Alo-1 (1976) both by Shell, while Elf drilled both Okpo-1 and Iji-1 in 1985.

According to reports, Alo-1 found gas, while others have ‘dry’ reported as their

current status. All wells except Iji-1 are located inside Anambra State. Iji-1 is in

Delta State.

Working Interests

Orient Petroleum

Resources Ltd.100.0%

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OPL 228

6. SUGGESTED ACCELERATED WORK PROGRAM (OIL & GAS)

a) Define geometry for 3D seismic data acquisition and secure necessary

approvals.

b) Synergy meetings with other operators in the Basin for focused field

development

c) Comprehensive Gas Utilization Planning

d) 3-D seismic acquisition over identified hydrocarbon bearing structures

e) Early well drilling campaign to prove up reserves and initiate early

production system

f) Preparation and approval of Full Field Development Plan

g) Early Production System

h) Field Surveys for Pipeline System and Downstream projects

i) "Book more Reserves"

j) Commence Full Field Development Program

Working Interests

Sahara

Energy41.0%

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k) Complete Gas Pipeline Infrastructure and a number of downstream

projects

7. GAS COMMERCIALIZATION STRATEGY

Target markets:

1) LPG: 20 million people in South East States. Potential expansion of the

market to 80 million people in Country & beyond.

2) Gas Sales: To major industries including Industrial Gas Manufacturing,

both Steel and Aluminum plants, Plastics, Car and Tyre manufacturing,

housing products, bottling plants & Fertilizer plants.

3) Power Plants: Either to National Grid or Independent Power Plants.

4) Export Markets: Export of LPG, GTL, CNG or LNG depending on size of

reserves.

Phase Approach:

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8. SUSTAINABLE DEVELOPMENT

In Anambra State, there is a need to move towards being a more balanced and

robust economy. This transformation needs to be managed carefully, and we

believe that the oil and gas industry can and must provide the foundations for the

journey and the endpoint both in terms of energy, the economy and the

environment. Following are a few opportunities that greet Anambra as an oil

producing State.

PETROLEUM FISCAL SYSTEMS IN NIGERIA

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The laws guiding oil petroleum taxes is the Petroleum Profit Tax (PPT) Act 1959,

and its amendments. While that of Gas are in the miscellaneous taxation

provisions Acts 18 & 19 of the 1998 and Act 39 of the 1999 constitution.

PPT RATE

• 85% for JV (Joint Venture) companies and 65.75% for companies operating for

less than 5 years

• 50% for PSC (Production Sharing Contract) companies in deep offshore (over

200 meters)

ROYALTY

Graduated into:

Land: 20%

Swamp/Shallow waters (0-100m): 18.5%

Shallow Offshore: 16.67%

Deep Offshore:

o 201-500m: 12%

o 501-800m: 8%

o 801-1000m: 4%

o >1000m: 0%

FISCAL INCENTIVES

OIL

As contained in the Memorandum of Understanding (MOU) for JV

companies

GAS

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Upstream Gas Utilization: Capital allowance: 20% per year (year 1 - 4) and

19% in year 5

Petroleum Investment Allowance (PIA): 10% as for oil.

Income tax is based on CITA (30%) where expenses are identified as

exclusively for gas.

Custom Duty: 2.5% (Government Circular of 2002)

Royalty: Zero %

To benefit from the foregoing incentives, a company must invest in natural gas

liquid extraction facility to supply gas in usable form to domestic gas utilization

projects, including aluminum smelter and Methanol, MTBE, and other associated

gas utilization projects.

All capital investment relating the gas-to-liquids facilities shall be treated as

chargeable capital allowance and recoverable against oil income.

Gas transferred from the natural gas liquid facility to the gas-to-liquid

facility shall be at zero percent tax and zero percent

Royalty.

All incentives granted in respect investment in associated gas shall be

applicable to non-associated gas.

Condensate extracted and re-injected into the crude oil stream shall be

treated as oil but those not re-injected shall be treated as gas.

Downstream Gas Utilization.

Capital Allowance: 90% in the first year of production and 10% retained in

the books.

Petroleum Investment Allowance (PIA): 35% (if no tax holiday is exercised

or 15% (if tax holiday is exercised).

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Tax Free Period: 3 years in the first instance, and renewable for additional

two (2) years subject to satisfactory performance. The tax-free period shall

start on the day the Company commences production as certified by the

Ministry of Petroleum Resources.

Tax free dividend during the tax-free period.

Zero % VAT for plants, machinery and equipment

Custom duty: 2.5% (Government circular of 2002)

State Production

(x1000

Bbls/day)

% of Nigeria’s

Total Daily

Production

(less Anambra)

% share of 13%

Derivation Fund

(less Anambra)

% of Nigeria’s

Total Daily

Production (+

Anambra)

% share of 13%

Derivation

Fund (+

Anambra)

Rivers 803.52 33.48 4.35 32.88 4.27

Bayelsa 526.56 21.94 2.85 21.55 2.80

Delta 483.36 20.14 2.62 19.78 2.57

Akwa-Ibom 420.96 17.54 2.28 17.22 2.24

Imo 55.2 2.30 0.30 2.26 0.29

Abia 50.4 2.10 0.27 2.06 0.27

Cross River 33.6 1.40 0.18 1.37 0.18

Ondo 31.2 1.30 0.17 1.28 0.17

Edo 19.2 0.80 0.1 0.79 0.10

Anambra 20.0

(Projected)

0.82 0.11

TOTAL 2400 100 13 100 13

How does this impart on Anambra State?

Anambra State will become a beneficiary of the 13% Derivation Revenue as soon

as the boundary delineation is completed. Below is an analysis of the distribution

of the 13% derivation fund among the oil producing states.

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Table 3: contributed production by the oil producing statesSource: NNPC, MINISTRY OF FINANCE AND CENRAL BANK RECORDS 2010

From the analysis above it is seen that the 13% derivation fund is shared

according to the percentage contribution from each of the oil producing states

with Akwa-Ibom State getting the highest cut and Anambra state getting very little

if little quantity of crude oil is produced. This raises the issue of increasing proven

reserves in the state. This will in turn increase the oil production from the state

and give the state higher stakes in terms of revenue.

9. SOUTH EAST - ANAMBRA STATE: THE NEW FRONTIER FOR OIL AND GAS

EXPLORATION AS ACTIVE AND NEW DISCOVERIES ARE MADE.

1. Incentives to Exploration & Production Companies

Provide infrastructure around production area to boost further investment

and production output in the sector.

Encourage SME growth in the sector to take advantage of activities for the

participation under NOGIC act 2010. (Nig. Oil and Gas Industry Content

Development Act)

2. Harnessing of Human Resources

Enlighten the inhabitants of the State on the level of cooperation required

to make the exploration process seamless

3. Endless Opportunities

a. Downstream sector

b. Gas Utilization: Discourage gas flaring and encourage investments in

gas handling facilities to trap gas for use in power plants and

industrial clusters

c. Independent Power Plants: The pace of exploration of the gas

concentrated in the Anambra basin, needs to be sped up as the

multi-billion naira investments in the country's Integrated Power

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Plants could be safeguarded if gas supply to them is guaranteed

through exploration activities in the basin.

10.CONCLUSION

Nigeria has huge abundant gas resources with about 5TCF of gas present in

the Anambra basin.

Current fiscal terms should be very generous to encourage investment in

the gas sector.

Domestic consumption of gas will increase particularly in the electricity

generation sector.

Gas is the energy of the future and Anambra state has all it take to play a

lead role in this sector.

REFERENCE

“Electricity production from natural gas sources (% of total) in Nigeria.”, Trading

Economics. 2010. <http://www.tradingeconomics.com/nigeria/electricity-

production-from-natural-gas-sources-percent-of-total-wb-data.html>, (visited 24,

April, 2009)

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“International tourism; number of arrivals in Nigeria.” Trading Economics. 2010.

<http://www.tradingeconomics.com/nigeria/international-tourism-number-of-

arrivals-wb-data.html>, (visited 24, April, 2009)

“Oil and Gas Deposit/Production and Revenue Level by States in Nigeria.” USA

African Dialogue series, 2010. <https://groups.google.com/forum/?

fromgroups=#!topic/usaafricadialogue/cn4ir7UjZ08>, (visited 22, April, 2009)

Onyemaechi, O. “Economic Implications of Petroleum Policies in Nigeria: An

Overview.” American International Journal of Contemporary Research, Vol 2, No

5, (May 2012).

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