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“Marginal Field Development: Best Practices & Lessons Learned”
SOCIETY OF PETROLEUM ENGINEERS’ 37TH NIGERIA ANNUAL INTERNATIONAL CONFERENCE & EXHIBITION (NAICE 2013)
by
George Osahon Director, Petroleum Resources
Ministry of Petroleum Resources, Nigeria
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Outline
Introduction
Legal framework for marginal field
development programme
Major thrusts of decree 23 of 1996
Outcome of 2003 marginal field awards
Incentives
Current Status
Challenges and Remedies
Emerging Opportunity
Conclusion
Marginal Field Development: Best Practices & Lessons Learned
Introduction -
Marginal Field Development: Best Practices & Lessons Learned
Lease Administration was originally structured in favour of IOCs
Access to the assets by Indigenous/ Independent Operators was very difficult.
IOCs left significant Oil & Gas Resources un-appraised/unproduced many years
after discovery for several reasons including the industry creaming phenomenon
The Petroleum (Amendment) Decree No. 23 0f 1996 was enacted to award such
fields as “marginal” to Indigenous Companies.
Consequently, Guidelines for the Farm-out and Operation of Marginal Fields
were prepared in 2001
In 2003, twenty four fields were awarded to 31 Companies
These fields are presently at various stages of development with 9 already
producing
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Legal Framework For Marginal Field Development Programme
Petroleum (Amendment) Act, 1996
Marginal Field Development: Best Practices & Lessons Learned
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Promote indigenous participation and build indigenous capacity in the
upstream sector
Provide alternative sources of funding for exploitation of hydrocarbon
resources
Increase production capacity through accelerated development of
discovered reserves
Increase the oil and gas reserves base through aggressive exploration
Encourage capital inflow.
Gainfully engage the pool of the high-level competent Nigerians in the
petroleum industry.
Create employment opportunity for Nigerians.
Major Thrusts of Farmin Act No 23 of 1996
Marginal Field Development: Best Practices & Lessons Learned
S/N FIELD FARMOR OML FARMEE TERRAIN
1 Asuokpu/Umutu Shell 38 Platform Land
2 Asaramatoru Shell 11 Prime Energy (51%) / Sufolk
Petroleum (49%)
Swamp
3 Atala Shell 46 Bayelsa Oil (100%) Swamp
4 Eremor Shell 46 Excel E&P (100%) Swamp
5 Ibigwe Shell 16 Walter Smith (70%) / Morris
Petroleum (30%)
Land
6 Ofa Shell 30 Independent (100%) Land
7 Oza Shell 11 Millenium Oil (100%) Land
8 Qua Ibo Shell 13 Network Oil & Gas (100%) Land
9 Stubb Creek Shell 14 Universal Energy (100%) Swamp
10 Tom Shot Bank Shell 14 Associated (51%)/ Dansaki Pet
(49%)
Offshore
11 Tsekelewu Shell 40 Sahara (51%) & AOG (49%) Swamp
12 Uquo Shell 13 Frontier Oil (100%) Swamp
2003 Marginal Fields Award Structure
Marginal Field Development: Best Practices & Lessons Learned
13 Ororo Chevron 95 Guarantee Oil / Owena Oil Offshore
14 Akepo Chevron 90 Sogenal (100%) Offshore
15 Ogedeh Chevron 90 Bicta (100%) Offshore
16 Ajapa Chevron 90 Britania –U (100%) Offshore
17 Dawes Island Chevron 54 Eurafic (100%) Swamp
18 KE Chevron 54 Del-Sigma (100%) Swamp
19 Oriri Chevron 88 Goland (100%) Offshore
20 Ekeh Chevron 88 Movido Offshore
21 Umusadege Elf 56 Midwestern Oil & Gas (70%) /
Suntrust (30%)
Land
22 Obodugwa / Obodeti Elf 56 Pillar Oil (100%) Land
23 Umusati/Igbuku Elf 56 Energia (55%) / Oando (45%) Land
24 Amoji/Matsogo/Igbolo Elf 56 Chorus (100%) Land
2003 Marginal Fields Award Structure
S/N FIELD FARMOR OML FARMEE TERRAIN
Marginal Field Development: Best Practices & Lessons Learned
Other Marginal Field Awards
• Awards of Okwok field in 2006 and Ebok field in 2007 to Oriental Energy were made to compensate company for lost part of its OML 115 to Equatorial Guinea due to boundary adjustment
• Ogbelle field was awarded to the Niger Delta Petroleum Resources Limited in 1999. The company was the first beneficiary of marginal field in the country
• In 2010, Otakikpo and Ubima fields were awarded to Green Energy Ltd and Allgrace Energy Ltd respectively as part of a lingering award process that commenced in 2004
Marginal Field Development: Best Practices & Lessons Learned
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Application Form –– NN 50,000:00
Processing Fee - NN 100,000:00
Signature Bonus – 150,000 USD
Data Purchasing – 2,000 USD
Applicable Fees in the 2003 Award Exercise
Marginal Field Development: Best Practices & Lessons Learned
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s/n Incentive Marginal Fields Non-Marginal Fields
1 PPT* 55% 65.75%
2 ITA 20% 5% (Onshore)
3 Production Commingling Allowed Not Allowed
4 Fiscal Terms (Royalty) 2.5-18.5% > 18.5%
5 Royalty ≤ 5,000 5,000 - 10,000
10,000 – 15,000 15,000 – 25,000
2.5 7.5 12.5 18.5
2003 Marginal Fields Incentives
Marginal Field Development: Best Practices & Lessons Learned
* PPT is disallowed by FIRS as it was not amended by the Act of Parliament
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Scorecard of Marginal Field Initiative
• Out of the 24 + 5 marginal fields, nine have started production
• The nine producing fields are:
-Umusadege (Midwestern Oil & Gas)
-Umusati (Pillar Oil)
-Ibigwe (Waltersmith)
-Egboma (Platform Petroleum)
-Obodugwa / Obodeti (Energia Petroleum / Oando)
-Ajapa (Britania-u)
-Ogbelle (Niger Delta)
-Ebok (Oriental Energy)
-Uquo (Frontier) 1st Marginal Gas Operator
Marginal Field Development: Best Practices & Lessons Learned
Summary of Achievements (2004 – 2013)
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ITEM REMARKS
Number of
Producing Fields 9
Initial Reserves as at
2004 141.01 MMbbl
New Reserves as at
2013 302.62 MMbbl
Oil Production Rate 60,000 bopd
Gas Processing 150 MMscf/d
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Contributions to the Nation’s Reserves
The Marginal Field Program has shown a lot of promise and would be expected to play a bigger role going forward
77.73%
14.52%
6.25%
1.50%
JV
PSC
SR
MF
TOTAL GAS (AG + NAG) RESERVES DISTRIBUTION
TOTAL GAS RESERVES = 182.753 T scf
70.86%
22.67%
4.86% 1.61%
JV PSC SR MF
TOTAL CRUDE (OIL + CONDENSATE) RESERVES DISTRIBUTION
TOTAL CRUDE RESERVES = 36.248 Billion BBLs
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PRODUCTION DISTRIBUTION BY CONTRACT TYPE
58.8%
32.8%
2.1%6.3%
JV PSC MF SR
Skewed Production Distribution
Marginal Field Development: Best Practices & Lessons Learned
Integrating value Producing crude oil
Monetizing gas
Small scale refining
Unlocking stranded molecules
through deployment of new
technologies
Creating opportunity for
employment and empowerment
Better handle of local communities
Other Salient Benefits of the Marginal Field Program
Marginal Field Development: Best Practices & Lessons Learned
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Assets are sub-economic and
hardly bankable
Timely agreement with lease
holders
Funding
Capabilities
Costs
Community problems
Clusters of contiguous fields
to aid materiality
DPR facilitation and update
of guidelines
Good assets attract
investors
More jobs; competitive EVPs
Sharing; collaborating
Amnesty programme
Marginal Field Development: Best Practices & Lessons Learned
Emerging Opportunities in the Marginal Field Initiative
The Marginal Field Programme may not have evolved as
intended but it has made its mark on the industry landscape
Substantial volumes added to the nation’s oil and gas
reserves and production mix
Challenges inherent in Marginal Field operation will be
continually analyzed and intervention carried out as
necessary
Suitable enablers will be introduced in future Marginal Fields
Bid Round
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Conclusion
Marginal Field Development: Best Practices & Lessons Learned
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Thank you