Reports says that #Nigeria Nigeria has approved a marginal field bid round. Ope ooo
Small thread about marginal fields. @Bimboh5
@Waziriadio @Dolarpo @OlufemiAwoyemi @quansimodo @ugodre @DoubleEph @VAdegite @tundeleye @Chxta @WoleOluyemiCo @seunonigbinde @bisiogunwale @damoche

S 16A of the 1ST Schedule to the Petroleum Amendment Act 1996 defines Marginal field as “such field as the President may, from time to time, identify as a marginal field."

The 2013 Guidelines on farm-out and operation of Marginal Fields defines marginal fields as "any Field that has reserves reported annually to the Department of Petroleum Resources (DPR) and has remained unproduced for a period of over 10 years”

Marginal fields can be farmed out by the holder of an OML with the consent of the President.
The President may farm-out a marginal field which has been left unattended for a period of not less than 10 years from the date of the first discovery of the marginal field.

Data shows that we have 200 fields classified as marginal ( as at 2017). In 2003/4, we awarded 24 marginal fields to 31 indigenous companies. Most have not achieved first oil. By 2014, only 9 marginal field operators were producing about 2.46% of Nigeria total oil production.

So why will Nigeria gain from the bid round?
Increase production, reserves, employment, & indigenous participation in oil and gas business
Discourage continuous holding of undeveloped fields
Utilize dormant assets
Increase government's take on undeveloped acreages.
More money

But why will an oil companies allow an asset to become dormant for 10 years...:
Size of the reserve
High cost of development
Remoteness of field including closeness to existing infrastructure & ancillary oil assets.
Price of oil
consideration for safety &the environment

In summary its more about the viability of the field and low-ranking of the asset in the investment portfolio to a large company. However, a smaller company with less overhead may make profit from the same field.
Smaller companies may also be faster & agile

Let’s talk about Nigeria’s first Marginal field- Ogbele which was between the Chevron JV and Niger Delta Petroleum Resources Limited (NDPRL). I think this has also been the most successful farmout too ( My opinion)

In the 1980s, Chevron made a relatively small oil discovery at the Ogbelle Field in OML 54. By 2000, Chevron signed a Marginal Field agreement( or Farm-Out Agreement) with NDPRL making Nigeria’s first-ever Marginal Field development pact

NDPRL has made a huge success from this farm out. They now produce oil, gas, have a diesel topping plant( mini– refinery), a flow station, & a gas plant (processing condensate).In 2012, NDPR became the first third party supplier to Nigeria LNG. They also market propane & LPG.

NDPR has also enabled the upgrading of the field reserves from the initial estimate of five million barrels to over 20 million barrels.

I think the success of the NDPRL is based on some conditions that we must replicate to make the next round to be successful. They include:

1. The capacity of the operator… Fatona is a veteran, Founding Chairman, Late Aret Adams was a former GMD of the NNPC .Dia head is there

2.The commitment of the IOC… Chevron really invested in it
3.The availability of capital that’s not hot money. NDPRL used shareholder funds & a loan from Intercontinental Bank Plc. This cant happen with Shase banking oooo. abi @DoubleEph
4. Closeness of the assets to facilities

Please note that oil field development is not yam. It takes skill, technology, capital, people and risks. And It takes time too. NDPRL signed in 2000 but commenced field development operations in 2004 and achieved first oil on August 28th, 2005. Patience is the name of the game

This NDPR guys didn’t come to play. They acquired a 100% stake and operatorship of the Omerelu Field ( OML 53) in 2014 from the NNPC/Chevron (JV) in another Farm Out Agreement 2014 becoming a Marginal Field Operator with two assets.1

These guys also entered OPL 227 with the exit of Addax Petroleum and were nominated as the Operator with 51% equity.
Note that Seplat also has a 40% non-operated working interest in OPL 283 Marginal Field Area (Pillar).

Our Marginal field Programme has not been very successful as most of the awardees have failed to commence production more than 10 years after acquiring the fields . Also, total contribution of all marginal operators is insignificant to Nigeria's total oil production. Failure

So, how can we succeed with next bid round? My 7 suggestions:

1.Ensuring bidders are not rent-seekers or briefcase contracts. They must have a track record in the business- people with management and technical capacity

2. Set up a team to ensure they succeed like an ease of doing business support team . This team should report to the Minister monthly performance.
3.DPR must clear the way for these guys
4. Long term and adequate funding. Not sure where this will come from sha.

5. Give fiscal incentives. In 2012, NDEP Plc was conferred Pioneer Tax Status by the @nipnigerian
6. Secure the commitment of the IOC
7. Enable community participation and support. Without security and a social license to operate, no one will develop the assets.

We need to accept that we are late to this game. We need to humility to accept this and the will to support those that win. They need a lot of support so they dont fail

To the winners, please have the patience to see this through. Oil business is not kalo-kalo. You need patience... that is a skill Geoscientist have sha. Fatona is a geoscientist.
You shareholders, financiers, employees, communities must have patience...

For the folks who will win in the bidding, you need prayers.
The road will be rough, there will be challenges but there is hope if you understand the terrain & willing to work with people. This is not a thing for learners!
This bid round must succeed. May God help us all..
End