Nigeria's state-owned NNPC Ltd on Tuesday started drilling for oil and gas at a field in northern Nigeria that has reserves of 1 billion barrels, as the country seeks to produce crude outside the Niger Delta for the first time.

NNPC said in a statement that phase one of the Kolmani project in the northeast would have an oil refinery, gas processing unit, 300-megawatt power plant and fertilizer plant producing 2,500 tonnes a day.

NNPC Ltd first announced in 2019 the discovery of crude oil, gas and condensate in commercial quantity in the Kolmani area between Bauchi and Gombe states in northeastern Nigeria, a region that is battling an Islamist insurgency.

President Muhammadu Buhari said Kolmani had 1 billion barrels of oil reserves and 500 billion cubic feet of gas.

No oil major is involved in the project being developed by NNPC, local firm Sterling Global Oil and New Nigeria Development Commission, a conglomerate owned by 19 northern states.

"It is therefore to the credit of this administration that at a time when there is near zero appetite for investment in fossil energy, coupled with the location challenges, we are able to attract investment of over $3 billion to this project," Buhari said at a ceremony to start the oil project.

Nigeria has for years been searching for oil in frontier basins in the largely poor north of the country, including the Lake Chad Basin, the heartland of the Islamist insurgency.

Buhari urged NNPC and its partners to work with local communities and draw lessons from the restive Niger Delta, where militants have in the past blown up pipelines, accusing oil companies of neglecting locals.

Oil was first discovered in the Niger Delta more than six decades ago.

Oil majors in Nigeria are divesting from onshore to focus on offshore drilling due to increasing insecurity and oil theft, which have led to a decline in production and caused Nigeria to lose its status as Africa's top oil producer.

Reuters