Operators can earn N4.37 billion from marginal oilfields
The operators of the new marginal oil fields are expected to derive significant revenues from these fields, OPEOLUWANI AKINTAYO reports
Proposed exploration for crude oil from 57 marginal oil fields is expected to boost Nigeria’s oil production by at least 8.835 million barrels per month, according to analysis by The punch showed.
With the newly issued marginal field licenses, the country’s oil production is expected to increase by 285,000 barrels per day, rising from the estimated production of 5,000 bpd projected for each field.
As a result, it is estimated that the operators of the new marginal oilfield licenses will reap at least 364 billion naira ($883,500,000) per month if the price of oil remains stable above $100 a barrel for an extended period. Already, experts have predicted that oil prices could stay above $100 a barrel for the next year.
According to the analysis, the operators of the fields could harvest about 4.368 billion naira in a year in the absence of external factors such as the activities of oil vandals and production stoppage, among others.
However, the additional 8.835 million barrels per month is expected to go a long way in boosting the country’s oil production.
A marginal oil field is described as any field with reserves of oil and gas, reserved and reported annually to the Nigerian Midstream and Downstream Petroleum Regulatory Authority, but remains explored for a period of more than 10 years.
The Marginal Oilfield Scheme was introduced to encourage greater indigenous participation in the Nigerian petroleum sector and to increase the country’s crude oil and gas reserves.
Each field is expected to produce at least 5,000 barrels of oil per day at the initial stage of exploration.
However, production is expected to reach 10,000 bpd and 25,000 bpd, depending on the viability of the field and the willingness of investors to inject more funds.
The federal government aspires to see the country’s oil reserves and daily production reach 40 billion and 3 million barrels respectively.
The government estimates that the 57 marginal oil fields won last year by 161 companies will increase the country’s reserves and production.
The tender for the 2020 marginal oil fields began in June of the same year. In May 2021, 161 companies were shortlisted as winners of the 57 proposed fringe fields.
The offers covered coastal, marshy and shallow waters. Marginal oilfield licenses were awarded to auction winners last month by the Nigerian Upstream Petroleum Regulatory Commission.
Some of the companies that emerged winners from the exercise included: Matrix Energy, AA Rano, Andova Plc, Duport Midstream, Genesis Technical, Twin Summit, Bono Energy, Deep Offshore Integrated, Oodua Oil, MRS and Petrogas.
The others were: North Oils and Gas, Pierport, Metropole, Pioneer Global, Shepherd Hill, Akata, NIPCO, Aida, YY Connect, Accord Oil, Pathway Oil, Tempo Oil and Virgin Forest, among others.
However, despite efforts to encourage local players, marginal oil fields have yet to have a significant impact on the Nigerian oil and gas industry and currently account for less than 4% of the country’s crude oil production.
Experts said Nigeria’s low crude oil production weighs on its revenue and ultimately on the country’s overall economy, which is heavily dependent on oil revenue.
In 2003, twenty-four marginal fields were awarded to 31 indigenous companies, however, as of 2016; only seven were producing, contributing about one percent of Nigeria’s daily oil production.
Exactly a decade after the first program was awarded, another round of licensing was announced in 2013 with 31 domains on offer.
The country has also consistently missed its OPEC quota due to low crude oil production.
Economic and financial experts, however, reacted to the development.
“Beyond OPEC, Nigeria’s economy will continue to face local pressures due to the Russian-Ukrainian war. Although oil prices are high, we are unable to produce enough oil to increase our revenues, which puts great pressure on our external reserves and our exchange rate,” said Johnson Chukwu, Managing Director of Cowry Asset Management Limited. The punch in an interview.
According to an oil and gas expert, Bala Zaka, issuing the licenses may not boost the country’s economy significantly.
“The issuance of the licenses has already been delayed for over a year, so there is no way it can benefit the country, because if the licenses had been issued earlier, the winners would have started working. They would have contributed to the decline in the country’s oil and gas production.
Some of these fellows are also said to have borrowed loans. Remember that the Nigerian currency has seen a severe devaluation, and most of them might not be able to pay, many of them would even have repaid the loans, while some would have moved on to others companies.
Zaka, however, advised the winners not to delay exploration any further if they hope to profit from soaring oil prices.
If the holders of the 57 newly issued marginal oil fields take action immediately, oil production is expected to begin in 2023.
Brent International hit $104 a barrel at 8 p.m. Sunday
Former Group Chief Executive Officer, International Energy Services Limited, Dr Diran Fawibel, advised the NUPRC to ensure that all processes were properly streamlined to enable licensees to begin operations immediately.
He said, “The Upstream Petroleum Commission needs to deepen its engagement with the authority and ensure that all processes are streamlined and operators will have no issues. Once they’ve been licensed, we expect them to come into operation quickly. The government wants to improve oil production through marginal fields, because you know that our production figure is lagging and we are not meeting the OPEC quota. The government is now looking to independent and marginal field operators to improve their operations and increase the level of production. If the oil companies do not invest, we expect the operators of marginal fields to organize themselves and finance the development of the fields. We hope they will not just take the permits and sit down because it will be a great tragedy for the country. It is better late than never. These operators are expected to operate at full capacity and within a short period of time, around 12 to 18 months, some of the flows are expected to kick in and add to crude oil production.
According to an economics professor at Olabisi Onabanjo University, Tella Sheriffdeen, there is no short-term solution to the country’s low crude oil production.
“There is no short-term solution to low crude oil production as we cannot do anything at this time to increase it. We will just have to continue to bear the loss of income. The only thing is the federal government needs to plan for the long term looking for ways to increase production,” he said.