Lack of access to finance, high taxes, community issues, technical competence, fluctuating assistance from foreign equity partners and low funding capacity of indigenous players have been identified as reasons for the relatively low contribution of the 77 oil blocks and the 24 marginal field granted licenses by the Federal Government, to the nation’s crude oil production.
Nigeria’s marginal oil fields are mostly those relinquished by the International Oil Companies (IOCs), for their low oil reserve capacity, and taken over by some indigenous oil companies with the technical competence to produce an average of about 10,000 barrels per day, or less.
In 2003, 24 marginal fields were licensed as part of the government’s quest to ensure rapid involvement of Nigerian companies in the nation’s crude oil exploration and production business.
Similarly, the 77 oil blocks issued licenses between 2005 and 2007 are yet to begin active production.
To discuss the successes and challenges of marginal fields in Nigeria, the Department of Petroleum Resources (DPR) recently organized a one-day forum for Marginal Fields and Indigenous operators in Nigeria and for owners of the 77 oil blocks issued licenses by the Federal Government.
The forum which attracted all stakeholders and major indigenous players in the Nigerian oil and gas industry was focused on government expectations and potential resource volumes of oil and gas which awardees have failed to unlock; challenges of developing stranded marginal gas fields and the nature of assistance the operators may require; funding of exploration activities and the role of banks and other financial institutions; and gas commercialization and joint utilisation of facilities.
Speaking at one-day forum organized by the agency for marginal field and indigenous operators in Lagos, the Director of DPR, George Osahon, said that the government, in 2003, licensed 24 marginal fields as part of its quest to ensure rapid involvement of Nigerian companies in the nation’s crude oil exploration and production business.
According to him, only eight out of the 24 awarded licenses have been able to go into full scale production, which he said, has made it impossible for the Federal Government to grow its declining crude oil reserve base.
Osahon identified lack of access to finance, high taxes, community issues, technical competence, fluctuating assistance from foreign equity partners and low funding capacity of indigenous players as some of the challenges posing serious concerns to marginal field operators in the country.
Though he said that the eight marginal fields in operation have significantly increased production over the years, he believed that plans by the Federal Government to grow its crude oil reserves to 40 billion barrels would be an uphill task for the country.
He stated: “Of the 24 marginal fields awarded in 2003, only eight are into production, with additional four getting close to starting full production. Also, of the 77 oil blocks awarded between 2005 and 2007, it is only one that is producing and it is being operated by a foreign firm.
“In 2009, three blocks were divested to IOCs, which indigenous companies took up. The whole of the Niger Delta terrain is being taken up by indigenous firms? The question now is that how many of these indigenous firms have been able to go in full scale production and how many of them are going to do better than the IOCs?
He expressed concern over the country’s inability to meet industry target for reserves and production capacity as well as the limited operational activities in the oil and gas sector and implications for the industry”.
Speaking on the way forward, Osahon said: “Government and independent operators have different interest, but they must begin to see themselves as partners with a common goal to move the industry forward. There should be able increased reserve and production should be the prime objectives of all industry stakeholders”.
Managing Director/Chief Executive Officer of Del-Sigma Petroleum Nigeria Limited, Dr. S.M.O Amachree, dwelled on the challenges of meeting up with work program obligations some of which include delays in approval processes, fluctuating assistance from foreign and local investors, oil theft, unfavorable tax regime and multiple taxation, local content development policy amongst others.
He proposed the establishment of ‘Energy Bank’ to be funded by 20 per cent of Excess Crude Account; prompt statutory approvals by DPR and synergy amongst marginal field operators.
The Managing Director/Chief Executive Officer of SEPLAT, Austin Avuru, stated that the nation as well as participants must have measurable benefits in a win-win situation.
He believed that the marginal field program is a success based on the fact that Nigeria can build on the few successful ones if government is serious about the indigenization program.
He called for a program of national priority, not for reasons of sentiments, but by collaboration between independents and Nigerian National Petroleum Corporation/NPDC.
According to him, this is the time for the DPR to step in and supervise the program.
Yinka Folawiyo Petroleum, operator of OML 113, enumerated some of the challenges of meeting work program obligations, required assistance, and funding. He stated the company’s AJE field development strategy using an FPSO as the most economically viable option.
Other presentations were from Africa Finance Corporation, and Skye bank on investment opportunities and financing solutions for Marginal field and indigenous operators respectively.
Information from The Guardian was used in this report.