“marginal field development: best practices & lessons · pdf file ·...

“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 -


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


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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


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


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


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


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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


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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


* 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


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


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


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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


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


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Thank you

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