Fate of Nigeria’s Marginal Fields

In the spirit of the Local Content and Indigenous Participation Policy, the Department of Petroleum Resources (DPR), at the behest of the Federal Government, had in 2003 awarded marginal fields to 24 indigenous E&P companies after a keenly contested bid process.

These fields are discoveries located in the acreages operated by International Oil Companies (IOCs) and had remained undeveloped for alleged limited profitability of the discoveries due to the size and the difficult terrain encountered in the course of exploitation.

Available records indicate that there are 116 of such fields identified to be lying idle and unproductive in the Niger Delta region of the country, with oil reserves totaling approximately 13 billion barrels.

So, in 2003 when the Federal Government handed over the operations of these fields to local hands, many had welcomed the development with the hope that the confidence of local experts would be bolstered in oil exploration and production activities. However, five years after the deal was finally formalized with the oil majors in 2004, it is disheartening to know that the status of the majority of these fields has not changed from the undeveloped state. A despicable number of five out of the 24 marginal fields that were awarded have been brought into stream by these indigenous oil companies.

If this is placed against the Farm-Out Agreement upon which the fields were awarded it would not be out of place to say that the awardees whose fields have remained undeveloped have fallen short of the expectation of the agreement. It must be said that the Farm-Out Agreement provides that awardees of marginal fields literally called ‘Farminees’ must be Indigenous E&P companies wholly owned by Nigerian nationals.

Though technical assistance may come from foreign partners provided the technical partner only hold 40per cent of equity in the business. Both of them are required to develop and produce the marginal fields within a five- year agreement plan while showing verifiable efforts towards meeting the minimum work programme obligations within 12 months of granting the fields. Upon the completion of at least 70per cent of work programme on the field the renewal of the agreement is then assured.

Among other things the agreement also spelt it out that failure of meeting up with the work programme on the field would invoke the withdrawal/termination of the approvals from indifferent awardees.

So, judging by the current situation one wonders what position the government would be taking in the face of the reactions which the provisions of the agreement had thrown up.

There are reactions calling for the extension of the agreement plan beyond five years by those whose fields have remained undeveloped till now. The argument being advanced by them is that as a result of the technical service arrangement which fell apart with the technical partners they became incapable to bring their fields to produce at full capacity. The issue of finance is yet another problem. Some of them have also touted the instability in the Niger Delta as the reason for the inactivity in production.

On the other hand, some reactions are clamoring for a recompense for those that have shown considerable efforts in bringing their fields to stream. The incentive could come in the way of exempting them from the next bid process. The exemption would mean that fields would be awarded to them on a platter of gold. They argue that by doing so it would encourage them to do more and not rest on their oars.

So far some of the fields that have witnessed considerable work progress include: Umusadege, Asuokpu/Umutu, Obdogwa/Obodeti and Umusati/Igbuku.

Take the Asuokpu/Umutu field for instance, the operator, Platform Petroleum has shown enormous zeal and character in ensuring that the field turns out maximum output. Its partnership with Newcross has yielded much gain as exploitation activities which commenced full throttle at inception had reached a climax.

The Technical Manager of the company, Mr. Osariemen Owieadolor while responding confirmed that the partnership has actually provided a major boost. Owieadolor, who though refused to get into the technical details of operations of the fields said that the company had expedited all effort with the support of the partner to ensure that it fulfills all the requirement of the farm out agreement.

Said he:” as a result of the agreement we entered into, we left no stone unturned in making sure we get our field into stream. We felt with such achievement it would place us in a vantage position to secure other fields that we might want to bid for. Now we are more confident of acquiring more fields for production”.

The certified engineer also stated that he expects the government to put in place a more proactive measure to ensure that whoever is awarded a field gets it into stream. This, according to him, would prevent the incidence of companies acquiring fields and not doing anything on it. Stressing further he said: “If we have to consider the reason for releasing these fields to indigenous oil companies in the first place it would be unthinkable to still have these fields undeveloped. It amounts to nothing but double jeopardy”.

Owieadolor hinted that exploiting these marginal fields with oil reserves that run into millions of barrels would boost our daily production of oil. “If all the fields that were awarded were developed what it means is that the production of crude oil would have increased by a certain percentage. Such increase invariably would account for an increase in our foreign exchange earning. At the same time the availability of oil for consumption would also be increased,” the manager stated.

Another of such awardees that have made significant progress is Pillar Oil operating the Umusati/Igboku field. This indigenous oil company which entered into a technical and financial support arrangement with CPI Oil has been able to live up to the requirement of the farm out agreement. The company credited with the involvement of Pillar’s Nigerian technical staff with the basic seismic interpretation and drill site operations has left no one in doubt about its commitment to manpower development.

A statement from the source from the company, who craved anonymity, reads: “We at Pillar Oil are poised to do everything not only to develop our field but also to use the platform to develop manpower. By involving nationals in the operation of the field we would have succeeded in transferring technology from our technical partner to our local technical staff.”

Midwestern Oil & Gas is another company that has displayed flashes of seriousness by following the footsteps of the previous two. Its partnership with Mart Resources a company listed on the TSX Venture exchange has ensured that oil production at the Umusadege field had reached 1780BOPD by September 2008.Mart Resources, official of Midwestern Oil & Gas claim was chosen because it is well equipped as it owns two land rigs with which it works over fields.

“As you are well aware, our economy is almost totally dependent on the production and sale of oil and gas products and anyone who is contributing to that is obviously contributing to the economy of the country. And so with the support of our technical partner, Mart Resources who is coming to town with state of the art drilling facilities we are in the process of developing our field in Kwale (Delta State) to boost production of oil while providing the opportunity for the community to participate in the development of their local economy.

As part of the plans we have a 4-year developmental programme for these communities that would make possible to create and maintain a symbiotic relationship with them.

The sincerity we have shown to our communities has created a positive image concerning us and this has helped us in so many ways. Our main strengths and competitive advantage over other operators is that we are known to deliver efficient and quality service because of our unflinching commitment to high-level oil production, in line with good HSE requirements”, the Managing Director, Mr Adams Okoene, is quoted to have said, If all of these reactions are considered against the second bid which now around the corner it remains to be seen what fate lies ahead for the marginal fields from those who hold the stakes- Federal Government through her agency, DPR, Oil majors and the indigenous E & P companies, the awardees of these fields.


Culled from The Nations


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