• Sunday, December 10, 2023
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Investors warm up for next marginal oil fields licensing round


Investors in the oil and gas industry are eargerly looking out for the next round of oil licencing. Even those whose marginal oil fields are producing, are still angling to have additional ones, in order to enlarge their asset bases, BusinessDay has learnt.

BusinessDay investigations revealed that the oil and gas sector investors are honing their strategies to ensure that they succeed in the bid round whenever the presidency gives the go ahead for it to take place. A lot of technical details are being put in place on the fields in which they are interested.

Of the 24 marginal fields that were awarded in 2003 only seven have started production, these include Umusadege being operated by Midwestern Oil & Gas Company, Asuokpu/Umutu, operated by Platform Petroleum Limited, Ibigwe by Waltersmith Petroman Oil Limited, Umusati/Igbuku, by Pillar Oil Limited, Obodugwa/Obodeti by Energia Petroleum/Oando, Ajapa by Britannia U and Uquo, by Frontier Oil.

Aside from these investors, others that were awarded licences under a different scheme, whose fields have been producing and are also interested in the bid round, are Oriental Energy (Okwot and Ebok) and Niger Delta Development (Ogbelle). Otakikpo and Ubima fields were awarded in 2010 to Green Energy Ltd and Allgrace Energy Ltd respectively.

They are among the several other business concerns that are now preparing to participate in the marginal field round.

Diezani Allison-Madueke, minister of petroleum resources, was

reported to have confirmed that the next marginal fields round would be announced within two months.

The first marginal fields licensing round, which was held in February 2003 and in which 24 licences were awarded, brought smaller indigenous players into the upstream sector of the industry.

Many of those marginal field operators who have achieved some level of success in the production of crude oil are angling to get more pies from the planned marginal oil field licensing round, and want government to hasten the process that will lead to the bid.

BusinessDay investigations revealed that some of the aspiring investors want to be specially considered for the bid round, considering the experience they have garnered in developing the fields awarded to them in 2003.

Emmanuel Usanga, controller, subsurface, Peak Petroleum Industries Nigeria, reckons that the proposed next licensing round would attract a wide community of interests from the usual business people, to professionals who have recently retired from the IOCs and are looking for something to keep them busy, adding that government should ensure that the fields are viable and bankable.

Marginal oil fields in Nigeria are mostly those fields abandoned by international oil companies (IOCs), for their low oil reserve capacity, which is about 10,000 barrels per day, or less.

The marginal fields development programme, which was introduced by the government to encourage indigenous participation and build local capacity in the upstream sector of the oil and gas industry, is apparently far from achieving its primary objective of reducing the rates of abandonment of depleting fields and increasing the country’s oil and gas production capacity and reserve base.

The country’s crude oil production average, currently hovers between 2.2 million barrels per day (bpd) and 2.5 million bpd, and the reserve base is about 37 billion barrels.

The programme was also aimed at encouraging capital flow, as well as creating employment for Nigerians.

“There has been a difficult period in the industry due to militancy in the Niger Delta, which prevented a lot of field holders from either being able to carry out work on their fields, or getting partners to work with,” said Usanga.

“Financing was also a challenge for some of them. They had hoped that after winning, they were going to attract investors for finance, but that did not happen,” he added.

According to Layi Fatona, managing director of Niger Delta Exploration and Production Limited, who spoke at a recent conference, to enhance indigenous participation in the industry, government would need to assist industry operators in terms of import duty waivers and tax breaks, improved local bank involvement and active engagement of host communities.

Fatona identified security issues, multiple taxation, fiscal regime, technology limitations, and inability to access funds and the right people, among others, as challenges faced by marginal field operators.

Carrie Lawrie, head of oil and gas advisory for Africa, Ernst & Young, said: “To develop marginal fields, the fiscal terms should be attractive, and the right expertise and technology are also required.”

Osten Olorunsola, director-general, DPR, recently stated that the marginal field programme has not evolved as intended; saying indigenous companies were yet to build reserves as expected. He however added that the challenges have been adequately analysed and that remedial legislation and actions are being proposed.

“Identified enablers will be applied in the next marginal fields bid round. Opportunities abound to unleash the potential of small operators; let us all join hands to make it happen now,” he said.