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Funding, technicalities, others make marginal fields uneconomic – Egbogah

Clara Nwachukwu

Funding, reserves quantity and a host of other issues relating to productivity have been identified as major factors making the development of marginal fields unattractive in the country.

Other contributory factors include the type of crude oil produced; location of the fields; proximity to existing infrastructure; technology and as well as current market and fiscal conditions

Mr. Goni Musa Sheikh, Permanent Secretary, Ministry of Petroleum Resources and chairman of the occassion (3rd left), Mr. Adeyemi Akinlawon, Chairman, SPE Nigeria Council (3rd right) and others, at the 2011 SPE Oloibiri lecture series and Energy Forum in Lagos.

A former Special Adviser to the President on Petroleum Matters, Dr. Emmanuel Egbogah, stated these while delivering a lecture on: “Onshore/Marginal Field Developments: Challenges, Opportunities and Prospects for the Future,” recently in Lagos.

Besides, he argued, some of the technicalities or petro-physical properties of the fields are a mix-match, noting inaccurate reserves estimation can make such fields uneconomic.

Egbogah, who identified over 250 marginal fields in Nigeria, which cut across the onshore, offshore and deep offshore regions, said that such oil fields therefore, required “special field development planning and reservoir management strategies in order to yield acceptable returns on an operator’s investment.”

Despite these inhibitions, the former presidential aide argued that the marginal field area still held a lot of prospects for serious investors, adding that a new marginal fields bid round is expected to hold within the next two years to increase the number of operators.

About 211 fields are anticipated to be awarded that will boost the country’s daily production output and revenues, where current contribution to total output is below 10 percent.

Federal Government had set ambitious production and reserves targets of four million barrels daily production and 40million barrels reserves, which have continued to elude it, due to government’s inability to match political will with vision.

According to him, “Currently, about 31 marginal fields have been awarded to indigenous marginal field operators. Over 60 percent of these fields are onshore, while over 70 percent of these fields face funding challenges and will welcome investment via debt, equity or a combination thereof either domestic or foreign.”

Also, he said the onshore divestment by some multinational companies have increased opportunities in the marginal field area in terms of job creation, technology acquisition and gas development and utilization.

Egbogah further argued that with a little more support from government added to effective reservoir management; synergistic facilities utilization and access to funds, marginal fields will fair a lot better.

Specifically, he urged government to review some fiscal terms such as:

Revise fiscal terms to a flat rate<50%;

Suspend royalty payment for a minimum of three years from start of production to ensure profitability; and,

Allow for a tax holiday of three years by suspending vat, import fees, education tax to ensure the profitability of the marginal fields.

For enhanced success, he advised operators to pool resources and reserves, share facilities with existing operators; reduce operational expenditure, OPEX, and optimize production.


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