The contribution of indigenous firms to oil and gas production and reserves in Nigeria through marginal fields awarded to them in the first licensing round has grown in recent times, adding pressure on the government to expedite action on the next bid round.
More indigenous oil firms are seen as positioned to boost Nigeria’s stagnant production and reserves, as the next marginal field bid round is eagerly anticipated to come on stream sooner than later.
“Without necessarily ranging them, I can count five indigenous oil companies that are poised to grow in the upstream sector. They include Energia, Platform, Seplat, Niger Delta Resources, Waltersmith, and Emerald,” Wumi Iledare, president, International Association for Energy Economics, told BusinessDay.
“These are capable people. If you will only give resources to these capable hands, oil and gas will be made available because these people have the skills,” he said.
Marginal fields are fields in which available reserves do not make them commercially viable for the holders of Oil Mining Leases (OMLs), typically the international oil companies (IOCs), to develop. Such fields are located within existing OMLs operated by IOCs and are left dormant for a considerable amount of time.
Just recently, a joint venture (JV) partnership between two Nigerian independent oil and gas companies, Frontier Oil Limited and Seven Energy, brought about a new gas facility in Akwa Ibom State, riding on the back of a marginal field awarded in 2013.
The gas processing facility, which is a boost to the gas-to-power aspiration of the Nigerian government, is capable of generating 1,000 megawatts (MW) of electricity.
In 2003, Frontier Oil was awarded the Uquo marginal field in OML 13 by the Department of Petroleum Resources (DPR) after a keenly contested marginal field round, with proved plus probable reserves of about 667 billion cubic feet of gas. The Uquo JV commenced commercial gas production in 2012 and aims at, among other things, producing in excess of 200 million standard cubic feet of gas per day (mmscfd), supplying gas to power plants and industries in the country.
Dolapo Oni, energy analyst at Ecobank, said the marginal field programme was the first programme that gave a lot of indigenous companies access to oil and gas resources in the country.
“It provided them with the industry experience and also financial backing to expand production such that they can now look into acquiring assets being divested by IOCs. The programme has also encouraged the growth of the local content,” Oni said.
“The easiest way to get more indigenous companies into exploration and production is through marginal field programme because the assets are cheaper with proven reserves and most of them have infrastructure in place,” he added.
Austin Avuru, managing director, Seplat Petroleum Development Company, said at a recent conference in Lagos that by 2018, 50 percent of domestic gas production to power the economy would come from Nigerian independents.
The marginal field programme by the Federal Government is aimed at increasing reserves, production, employment, local content and indigenous participation in the upstream oil and gas business.
Eight of the 24 fields awarded in 2013 are currently producing, with over 40 new wells drilled by the awardees representing a four-fold increase, according to DPR.
Reserves have increased by over 100 million barrels of new resource volumes to 326 million barrels, representing a three-fold increase in the nation’s resources, DPR said.
Diezani Alison-Madueke, minister of petroleum resources, had in November 2013 flagged off the next marginal field licensing round, with 31 fields on offer. Sixteen of the 31 marginal fields are located onshore, while the remaining 15 are located on the continental shelf.
The announcement and the road shows by DPR generated massive investor interest in the bid round, but since then not much has been heard about the progress on the impending bid round.
The selection of the fields to form part of the bid has been attributed as one major cause of the delay, even as the DPR is liaising with the various leaseholders regarding potential marginal fields.
“This licensing round has been highly anticipated, and upstream participation has been a key strategic point for most new entrants in the industry,” said CBO Capital in a recent report.
Noting that marginal field programme was gradually living up to expectation with production growth for oil and up to 100 mmscfd for gas, Osten Olorunsola, former DPR director, recently said, “Marginal fields are now also breaking new grounds, integrating the value through crude oil production, monetisation of gas and small scale refining. They are also deploying new technologies and are better able to handle local communities.”
Similarly, Alison-Madueke recently said, “In their operations, the companies’ development strategies are in line with the nation’s Gas Flare Policy and global environmental guidelines on Green House emissions, by ensuring full utilisation of their associated gas. Indeed, one of them has established a modular refinery for diesel production, which is the first of its kind in the country.”
The marginal field programme is an offshoot of the Federal Government’s policy to promote indigenous participation in the upstream sector of the petroleum industry.
FEMI ASU & JOSEPHINE OKOJIE
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