Nigeria's foremost Online Energy News Platform

Marginal Fields: Opportunity for Indigenous Participation In Upstream Production

–By Gideon Osaka

ndigenous oil producers now have opportunities to make inroads into Nigeria’s upstream oil production, hitherto dominated by the International Oil Companies, IOCs, with their participation in the marginal oil fields.

Before the award of marginal fields to Nigerian companies, the IOCs held sway in the nation’s oil industry thereby shutting off Nigerians who have the capability and capacity to raise the nation’s oil production. The government in awarding these marginal fields to indigenous operators hoped to increase oil production by about 1 billion barrels. Some progress has been made in marginal fields’ development as 14 out of the 24 operators have taken their fields to first oil by 2018.

Presently, Valuechain learnt that the Indigenous companies plan to increase their oil production by 60 per cent at the end of 2019. This is expected to increase their collective output from the current 313, 602 barrels per day (bpd) to 500,000 bpd.  This will also enable them to increase their contribution to the nation’s daily output from 10 per cent to 20 per cent, leaving 80 per cent to the International Oil Companies, IOCs, that currently produce 90 per cent of Nigeria’s total output. Current output breakdown showed that Aiteo, Eroton, NPDC, Oriental, Seplat produce 77,000 barrels per day, bpd 54,000 bpd, 42,654 bpd, 24,000 bpd, and 21,881bpd respectively. Newcross, Midwestern, Belemaoil, Amni, Conoil, Niger Delta, Walter Smith and Erin Energy produce 20,000 bpd, 13,000 bpd, 12,000 bpd, 11, 000 bpd, 9, 130 bpd, 7,000 bpd, 5, 837 bpd and 5,000 bpd. Others – Energia, MoniPulo, Prime Energy, Platform and Pillar Oil – also produce 4,500 bpd, 3, 200 bpd, I, 200 bpd, 1, 100 bpd and 1, 100 bpd respectively.

The quest for oil production increase may have been informed by the target set by the Nigerian National Petroleum Corporation, NNPC, for all. Speaking at the 2018 Nigerian International Petroleum Summit, NIPS, Maikanti Baru, Group Managing Director, NNPC, said the Corporation had set a 10-year timeframe for indigenous oil and gas companies operating in the country to increase their production from 10 per cent to 50 per cent of national production. He explained that this became necessary following the need for the indigenous firms to increase their footprint in the upstream sub-sector as was the case in the downstream. He also stated that the NNPC was looking forward to a time when about 90 per cent of upstream operations in the country would be controlled by the indigenous producers. According to him, NNPC is passionate about collaborating with the indigenous producers in order to grow their capacity and participation in the exploration and production sub-sector in line with government’s local content policy.

Giving an insight into the marginal field production in Nigeria, Dr. Chijioke Nwozuzu, a petroleum economist said that a lot needs to be done to encourage marginal field operators in Nigeria. “More still needs to be done, and six factors have constrained the activities of marginal field operators. The main factors relate to the lack of funding and the marginality of the fields. Other factors are: inadequate technical expertise, government policies on royalties and petroleum taxes, board / partnership wrangling in some cases, and in other cases the presence of significant anti-entrepreneurial mentality among the operators.

Professor Anthony Adegbulugbe

“Funding constraint is the main reason cited by the growing number of Nigerian exploration and production companies for inability to progress on projects, as well as the necessity to invite foreign technical partners. The need to invite foreign partners has become inevitable given that most local banks have not co-operated with marginal field operators in putting these fields into production. However, such invitations run contrary to the core moral concept and principles of the marginal fields’ licensing exercise.

“The original principle behind this exercise whereby the government took undeveloped discoveries, which has proven oil, from the oil majors and awarded these to local companies, was to encourage indigenous capacity building in the upstream petroleum sector. The indigenous marginal field operators were expected to employ Nigerian geologists and petroleum engineers, acquire workstations for their use, utilize other local skills in field development (in the office and on operational site), put local talent on site to supervise well drilling and produce the oil, and in the event, increase the pool of technically capable oilfield personnel who can replicate the same exercise elsewhere in Nigeria and abroad. Therefore, to invite technical partners would mean that the country still has not ‘indigenized’ the development of these marginal oil assets,” he said.

Also speaking, the Chairman of Green Energy International Limited, Professor Anthony Adegbulugbe, stated that the uncertainties in the crude oil business environment have imposed serious sustainability challenges on the small oil producers, pointing out that this can only be addressed through integrated energy development approach. According to him, “Sustainable development strategies must include among others: increasing base production, reduction in operational cost per barrel, diversification of revenue base, and linkage of upstream and downstream opportunities and the broader economy.

“Sustainability of Africa’s one asset marginal field producers may depend on leveraging on their unique opportunities and eventual transformation into integrated energy companies.”

Social
Enable Notifications OK No thanks