Nigeria could leverage widespread investor interests in its marginal fields to boost efforts at meeting the production quota set by the Organization of Petroleum Exporting Countries (OPEC) and meet local refining needs, experts have said.
The OPEC quota for March 2022 is 1.753 million barrels per day (bpd) but Nigeria’s production has hovered around 1.3 million bpd in recent months. According to OPEC data, Nigeria’s latest production is 1.354 million bpd.
Analysts say the 57 marginal fields currently awarded to investors could help cut the deficit by half, if they are fully developed.
“We can do 200,000 bpd only if all the 57 fields in the 2020 award exercise, each produce 3,500 bpd within the next year,” said Toyin Akinosho, managing partner at Update-Energy Intelligence Consulting.
According to him, none of them has a licence yet and even if the licences are granted today, only the exceptional five Special Purpose Vehicles can reach first oil by May 2023.
Marginal fields, which are oil blocks that have not developed for a period of over 10 years, according to the guidelines published by the Department of Petroleum Resources, could help to bridge production gaps estimated at 400,000 bpd, according to BusinessDay findings.
Akinosho said reaching the OPEC quota as a short-term goal could not be achieved with this class of marginal fields but at the very least would put the country on a path for improved production with a clear strategy.
Analysts propose a three-year plan with consistent regulatory engagements coupled with the right incentives that make the oilfield operator the centrepiece of a regulator’s work, and can improve the overall health of oilfield activity in the country.
The current reality in Nigeria’s oil production indicates that reaching first oil is no longer a guarantee of consistent seamless production.
Production challenges in the form of rampant crude theft and sabotage of oil infrastructure, which have forced local producers to begin barging their oil, have compounded crude evacuation challenges.
Between 2010 and 2020, marginal fields contributed 2.31 percent of Nigeria’s total crude oil production, according to a report by the Nigerian National Petroleum Company.
Last year, the Nigerian government announced new marginal field bid rounds where over 600 companies applied for 57 marginal fields that span across land, swamp, and offshore areas. Unlike previous rounds, gas was the priority rather than oil.
However, the process was fraught with challenges as some bidders were unable to raise the financing to pay the signature bonus, which ranges from $5 million to $20 million.
Also, the erstwhile regulator, the Department of Petroleum Resources revoked and re-awarded some undeveloped fields previously awarded leading to legal suits.
It also carried out forced mergers of bidders to enhance their ability to develop the fields but that soon caused friction among bidders.
Emmanuel Afimia, managing consultant/CEO of Enermics Consulting Limited, identified access to finance as the most important factor for building the capacity of marginal field operators to increase production.
He said that after granting licenses to bidders, the regulator should facilitate access to financing from lenders to develop the marginal fields.
He said: “This can be done by putting in place a level playing field for operators and investors alike and instituting suitable governance structures.
“The conventional equity and debt financing may not be appropriate for marginal fields because of the high risk, less experience and low credit score of Independents in the international community, thus, exploring third-party financing arrangements and other suitable commercial arrangements would be best for them.”