See discussions, stats, and author profiles for this publication at: https://www.researchgate.net/publication/321586751
OVERVIEW ON THE EMERGENCE OF MARGINAL OIL FIELDS IN NIGERIA AND
THEIR CONTRIBUTION TO THE COUNTRY'S OIL PRODUCTION
Article · December 2017
CITATIONS
READS
2
5,728
2 authors, including:
Adava Godwin
Rivers State University of Science and Technology
3 PUBLICATIONS 6 CITATIONS
SEE PROFILE
All content following this page was uploaded by Adava Godwin on 06 December 2017.
The user has requested enhancement of the downloaded file.
OVERVIEW ON THE EMERGENCE OF MARGINAL OIL FIELDS
IN NIGERIA AND THEIR CONTRIBUTION TO THE COUNTRY'S
OIL PRODUCTION
EZE, C. L.,
GODWIN A. C.,
AND
DOMINIC E. U.
ABSTRACT
The Federal Government of Nigeria initiated the development program of the Marginal Oil Field to increase
production, reserves, employment, and indigenous participation in oil and gas business. Between 2000 and 2010,
30 marginal fields were farmed out to indigenous oil companies by the multinational oil companies. As at 2016,
only 10 of the fields have been put into production. The marginal fields began production in 2005 with an output of
141,028 barrels which represented less than 0.02% of the country's production. This increased to 0.09% in2006.
In 2007,the production significantly dropped to 0.054%. In the following years, there was increase in the number
of producing companies with a corresponding increase in production. By 2014, nine marginal field operators were
contributing about 2.46% of Nigeria total oil production. More than 66% of the marginal fields have not started
production more than 10 years after the fields were acquired.
Keywords: Marginal field, stripper wells, Oil production, Farmor, Farmee
1.
Introduction
The Petroleum Act of Nigeria 1996 paragraph 16A defines Oil Marginal Fields as "such fields as
the president may from time to time identify as marginal". This definition which does not place
much emphasis on the technical and economic factors that defines an oil field asa marginal field
gives the impression that the president can 'create' marginal fields. The Guidelines on farm-out
and operation of Marginal Fields (2013) defines marginal fields as "any Field that has reserves
reported annually to the Department of Petroleum Resources (DPR) and has remained unproduced for a period of over 10 years". Marginal field has been defined as a field which given
economic situation is unprofitable(Peter, 2001). However, with passage of time and change in
technical, local or economic situations, such fields can become economically viable.Marginal oil
wells also called stripper wells require unique field development and reservoir management
strategies in order to yield good returns on investment. This makes development costs very high
which is a typical characteristic of a marginal oil field.
The Conditions That Make Marginal Field
The conditions that could make an operator declare a field marginal at any given time are
multiple but often include size of reserve, remoteness of field, technological constraints,
environmental concerns and price instability.
Size of Reserves
Some oil fields are considered marginal fields based on the smallness of the reserve; they are
considered too small for production to be economically viable by large multinational oil
229
Nigerian Journal Of Oil And Gas Technology - Vol 2 No. 1
companies. Development of small fields is often challenging, as they need the same expensive
infrastructure as large fields, while the expected revenue streams are smaller due to the smaller
reserve sizes.What is considered small reserve by one oil company may not be considered small
by another company depending on the capacity of the company and also the availability or nonavailability of bigger reserves. In the U.S. basin 48, very small fields with an Estimated Ultimate
Recovery(EUR) of only 1 million barrels are defined by the American Association of Petroleum
Geologists as significant fields, but such discoveries would be abandoned as noncommercial or
left undrilled in many foreign countries (Ivanhoe and George, 1993).
Remote Location
Oil fields located in very remote areas often lack infrastructure such as roads, power,
communication and others in the immediate environment. Operators prefer the fields with some
level of existing infrastructures. Based on the huge financial and time investments required to put
the necessary infrastructures in place, owners of these fields often put them out as marginal
fields. The logistics problems of supporting exploration and exploratory drilling in remote
locations of the world have been well publicized recently. From the experience gained from the
development of Prudhoe Bay field,Heimer et al., (1978) noted that a problem being recognized
more frequently and requiring particular attention is that remote-location logistics do not end
with exploration and drilling. Installation of production facilities poses problems just as
production facilities poses problems that are intricate, potentially expensive, and difficult to
solve. The health of workers stationed in remote locations, where access to health care is
limitedis of special interest (Aalund, 1996., Shrimpton and Storey, 1996).
Technological Constraints
Oil field that requires unconventional technological requirement for exploitation is considered
not economically viable. Such oil field may be termed marginal but new technological
innovations may alter the situation.The Buchan oil field in the central North Sea was considered
a very risky field operationally, and was expected to be abandoned after five years (Mieras,
1984). However the development of new technology made it possible for the field's recoverable
reserves to be explored for longer time. In India, 67 small oil field blocks were discovered, but
were not developed due to their technological and geological constraints.
High Environmental Concerns
Generally, oil fields attract some significant environmental concerns. However, oil fields that
have high level of environmental concerns may be termed marginal. These factors largely affect
the return on investment. Oil operation in offshore, extreme weather events and high security
areas require increased risk mitigation to address financial, human safety and environmental
threats.
In developing oil fields in high environmentally concerned areas, the oil and gas industry usually
prepares for the safety of the personnel and equipment to prevent losses. Drilling safely and
responsibly is sure to raise the cost of producing oil in these areas. Oftentimes, the threat of
230
Overview On The Emergence Of Marginal Oil Fields In Nigeria And Their Contribution To The Country's Oil Production
natural disasters forces the industry to evacuate drilling rigs and to cease production temporarily.
In the event of earthquakes, cyclones and hurricanes etc., losses are inevitable. Though,
production is not lost but temporarily delayed. However, the economic value of these disruptions
hinge on the lost revenue of delayed production discounted for the time value of money.
In 1992, Hurricane 'Andrew' destroyed 13 offshore oil and gas production platforms, 4 of which
disappeared without a trace. Besides, 40 more platforms were damaged, and 5% of the natural
gas supply in the United States was temporarily lost (McDonald, 1992).
In 2005, Hurricane 'Katrina' sustained a wind-speed of 175 mph which destroyed 50 offshore oil
platforms and drilling rigs, and damaged SPDC's 36,500-ton Mars platform, the top producer in
the Gulf of Mexico, which cost about $1 billion to build (Frank, 2010).
In 2013, EF-5 tornado struck an oil production site; four oil tanks were reported blown away, one
of which was not found. The others were thrown considerable distances, one of which was found
a mile away (Simmonset al., 2013).
Besides, in Alberta Wildfire of 2016, a quarter of Canada's oil production, equal to
approximately one million barrels of oil a day, was halted as a result of the fire. The fire destroyed
the oil production camp. The loss output is estimated to cost the Albertan economy $70 million
per day, and may have been a contributing factor to rises in global oil prices(Robinne et al.,
2016).
Loss of personnel, oil spills, and destruction of oil field structures coupled with the cost of
repairs, frequent evacuation and remobilization in cases of false alarm or actual event of natural
disaster make drilling and production activities in these environments less economically viable.
However, for a small oil field that is not worth the venture with respect to cost of operation in
these highly environmental concerned areas, the field could be abandoned and declared
marginal.
Price Instability
Low price and price instability of the produced oil make the cost of production from these small
fields expensive and economically less viable. A field that is not regarded as marginal at a given
oil price may become marginal at a lower oil price. No company will continue to produce
without profit. The only option left for the oil and gas industry in the event of price fall is to
increase production; where this is not possible, given the small size of oil reserves the industry
resort to shutting-down producing wells and the fields may be final classified as marginal. In the
1980s oil price collapse, many marginal wells were shut down especially in United State of
America, and when the price revived majority of these wells were again put to production. In
2015, low oil prices brought an abrupt halt to the wild pace of drilling globally. Most oil
companies came under pressure to stop production and consequently abandon their oil wells due
to fall in oil prices.
231
Nigerian Journal Of Oil And Gas Technology - Vol 2 No. 1
Insecurity
Security is another factor that determines the marginality of an oil well. The attack on oil
facility and crew members have increased by the day in Nigeria. Support vessels have been
severally attacked and crew members kidnapped for ransom.Shut-in of crude oil production is
a common feature due to insecurity. Production are lost, facilities damaged, workers
attacked(both offshore and onshore), oil companies shut down wells and economic viability of
the oil fields in this area is drastically ebbing away. Pirates and militants have attack drilling
rigs, such that some multinational oil companies operating in the country have suspended their
activities on land, swamp and shallow offshore and have moved deeper offshore where they
perceive that the risks are very minimal. This is made possible by the government's
introduction of deep offshore block allocation in 1993. If the abandoned oil fields remain
without development activities for ten years they would have technically become marginal
fields.
According to NNPC 2014 report, pipeline vandalism increased by 4.54% during 2013
production year. In the report, a total of 3,700 lines were vandalized, resulting in a loss of about
355.69 thousand metric tons of petroleum products worth about 44.75 billion naira. Between
2014 and 2015 about 4,000 oil theft and vandalism attempts were reportedat the various
products pipelines across the country (Njoku, 2016).
2.
Nigerian Marginal Oil Fields
Niger Delta Petroleum Resources was the first company in Nigeria to be awarded a marginal
field in 2000. In 2001, the Nigerian government introduced the Marginal Field program with the
aim of increasing indigenous participation in the upstream sector of the industry. The
government provided a guideline that allows only indigenous oil and gas companies ("IOCs") to
apply for or operate Marginal Fields; these companies arealso permitted to have foreign
technical partners with fair participation of less than 40%.
The first major marginal field bid round was in 2003 where 24 marginal fields were awarded to
31indigenous oil companies. That same year Niger Delta Petroleum Limited acquired Omerelu
Field to which it was granted right of first refusal in 2000. Afterwards, other marginal fields
were awarded and they include among others Okwok in 2006, Ebok in 2007, Otakikpo and
Ubima in 2010. About 31 onshore and offshore fields were supposed to have been put up for
sale. This has however not taken place even as at 2016.
Table 1: List of Farmed Nigerian Oil Marginal Fields (DPR, 2016)
S/N
Field
OML
Farmor
Farmee
1
Egbaoma*
38
SPDC
2
Asaramatoru
11
SPDC
3
4
Atala
Eremor
46
46
SPDC
SPDC
5
Ibigwe*
16
SPDC
Platform Pet. Corp Ltd
Prime Energy
Sufolk Pet.
Bayelsa Oil & Gas
Excel E&P Services
Walter Smith
Petroman Oil Ltd.
Morris Petroleum Ltd.
232
Percentage
Ownership
100
51
49
100
100
70
30
Year of
Farming
2003
Terrain
Land
2003
Swamp
2003
2003
Swamp
Swamp
2003
Land
Overview On The Emergence Of Marginal Oil Fields In Nigeria And Their Contribution To The Country's Oil Production
6
7
8
Ofa
Oza
Qua Ibo
30
11
13
SPDC
SPDC
SPDC
9
Stubb Creek
14
SPDC
10
Tom Shot Bank
14
SPDC
11
Tsekelewu
40
SPDC
12
Uquo*
13
13
Ororo
95
14
Akepo
90
15
Ogedeh
90
16
Ajapa*
90
SPDC
Chevron Nigeria
Ltd
Chevron Nigeria
Ltd
Chevron Nigeria
Ltd
Chevron Nigeria
Ltd
Chevron Nigeria
Ltd
Chevron Nigeria
Ltd
Chevron Nigeria
Ltd
17
Dawes Island
54
18
Ke
54
19
Oriri
88
20
Ekeh
88
21
Umusadege*
56
Chevron Nigeria
Ltd
Elf Petroleum
Nigeria Ltd
22
Ebendo*/Obodeti
56
Elf Petroleum
Nigeria Ltd
23
Umusati*
56
24
Amoji
56
25
Omerelu++
54
26
27
Otakikpo
Ubima
11
17
28
Ogbelle*
54
29
Okwok
67
*Already Producing Fields
Elf Petroleum
Nigeria Ltd
Elf Petroleum
Nigeria Ltd
Chevron Nigeria
Ltd
SPDC
NNPC/ SPDC
Chevron Nigeria
Ltd
Exxon/NNPC
Independent Energy
Millennium Oil
Network E&P
Universal Energy
Resources Ltd
Associated Oil/ Gas
Services Ltd
Dansaki Petroleum
Sahara Energy Ltd
African Oil and Gas
Frontier Oil
Guarantee Petroleum
Owena Oil& Gas
100
100
100
2003
2003
2003
Land
Land
Land
100
2003
Swamp
2003
Offshore
Sogenal Ltd
Bicta Energy System
51
49
51
49
100
2003
Land/
Swamp
Swamp
2003
Offshore
100
2003
Offshore
100
2003
Offshore
100
2003
Offshore
100
2003
Swamp
100
2003
Swamp
100
2003
Offshore
Movido E&P
100
2003
Offshore
Midwestern Oil &Gas
Suntrust Oil Ltd
Energia Ltd.
Unipetrol Petroleum
Ltd.
70
30
55
2003
Land
2003
Land
Pillar Oil Ltd
100
2003
Land
Chorus Energy Ltd
100
2003
Land
Niger Delta Pet. Ltd
100
2003
Land
Green Energy Int’l
All Grace Energy
100
100
2010
2010
Land
Land
Niger Delta Pet. Ltd
100
2000
Swamp
Oriental Energy
100
2006
Offshore
Britania
–
U Nigeria
2003
Ltd
Eurafric Energy Ltd
Del-Sigma Petroleum
Nig. Ltd
Goland Petroleum
Development Corp
Ltd.
45
++ Not part of 2003 farm out programme.
SPDC – Shell Petroleum Development Company of Nigeria
NNPC – Nigerian National Petroleum Corporation
Exxon – Exxonmobil
3.
The Contribution of Marginal Fields to Total Oil Production in Nigeria (20032014)
Twenty four marginal oil fields were awarded to 31 companies in 2003 and presently the fields
are at various stages of development, with only nine of the fields currently producing. (Table 1).
The marginal fields began production in 2005 by Niger Delta Petroleum Resources Ltd. In that
year the production was 141,028 barrels which represented 0.02% of the country's production.
233
Nigerian Journal Of Oil And Gas Technology - Vol 2 No. 1
This increased to 784,278 barrels (0.09% of total production) the following year. In 2007,
although the number of producing companies in marginal fields increased by one, the
production significantly dropped to 0.05%. In the following years there was increase in the
number of producing companies with a corresponding increase in production. However, in
2010, there was a slight drop in production.By 2014, nine marginal field operators were
contributing about 2.46% of Nigeria total oil production (Table 2).This contribution is expected
to increase as more marginal fields go into operation. More than 66% of the marginal fields have
not started production more than 10 years after the fields were acquired. It is expected that if the
existing 30 marginal fields are developed, their combined contribution to Nigeria's oil
production will increase up to 10%. This will increase further when more marginal fields are
farmed out and put into production.
COMPAN
Y
Niger Delta
Pet. Res.
Platform
Petroleum
Midwestern
Oil
Walter
Smith
Pillar Oil
Movido
E&P Nig.
Ltd.
Energia
Limited
Britani U
Rime
Exploration
Oriental
Energy
200
3
200
4
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
-
-
141,02
8
784,27
8
383,79
5
1,346,66
6
1,580,28
4
1,134,50
8
712,547
407,871
328,968
918,907
-
-
-
-
47,813
898,575
563,263
324,700
423,418
748,627
602,463
759,658
-
-
-
-
-
467,811
1,171,89
1
1,165,12
9
2,529,67
3
3,700,14
4
2,978,99
2
-
-
-
-
-
134,942
378,461
600,147
633,462
672,309
901,640
-
-
-
-
-
-
158,445
73,286
-
410,526
534,290
3,481,69
1
1,210,53
9
604,793
-
-
81,881
-
Total
-
-
-
-
-
-
26,095
279,286
528,334
536,104
719,429
-
-
-
-
-
-
-
226,391
293,904
471,783
250,447
1,400,29
2
448, 891
-
-
-
-
-
-
-
-
-
-
-
462, 199
-
-
-
-
-
-
-
-
2,
959,422
11,
113,915
12,
948,763
10, 394,
902
-
-
141,028
784,278
431,608
2, 847, 994
3, 878, 439
3, 803, 447
8, 080,760
18,
061,279
19,
346,873
19, 681,
872
Source: Calculated from NNPC Annual Statistical Bulletin/Report for 2012 and 2014
Table 3: The Contribution (in barrels) of Marginal Fields to Total Oil Production in Nigeria,
2003-2014
Company
Joint
Venture
CompaniesJVs
Joint
Venture
Companies(Alternative
Funding)
Prod.
Sharing
Companies
Service
Contract
Independents/
Sole Risk
Marginal
Fields
Grand Total
Marginal
Field
contribution
(%)
Year
2003
719,153,258 72,074,662
16,718,964
3,483,966 32,720,079
-
844,150,929
0
2004
722,797,515 121,973,001 24,399,567
3,886,392 37,100,014
-
910,156,489
0
2005
689,111,525
4,317,081 47,171,464
918,966,736
0.02
141,514,419 36,711,219
234
141,028
Overview On The Emergence Of Marginal Oil Fields In Nigeria And Their Contribution To The Country's Oil Production
2006
518,184,570 144,307,081 162,532,458 4,013,954 39,374,165
784,278
869,196,506
0.09
2007
462,888,989 118,579,072
192,621,306 3,932,714 24,547,019
431,608
803,000,708
0.05
2008
471,900,351 70,235,646
195,127,693 3,361,078 25,273,170
2,847,994
768,745,932
0.37
2009
331,554,144 131,497,197 268,792,256 3,237,284 41,388,620
3,878,439
780,347,940
0.50
2010
364,717,172 165,986,773 316,887,117
41,937,495
3,803,447
896,043,406
0.42
2011
348,509,885 173,007,467 289,333,720 2,802,031 44,511,369
8,080,760
866,245,232
0.93
2012
314,740,436 150,238,893 320,434,163 3,056,412 46,245,470
18,061,279 852,776,653
2.12
2013
293,397,551 105,983,982 313,965,407 3,204,453 64,589,836
19,346,873 800,488,102
2.42
2014
256,364,312 140,491,170 320,200,461 3,004,571 58,799,203
19,681,872 798,541,589
2.46
2,711,402
Source: Calculated from NNPC Annual Statistical Bulletin/Report for 2012 and 2014
Conclusions
Nigerian marginal field programme has brought indigenous oil companies into the oil business
in Nigeria. However, the number of these companies that have failed to commence production
more than ten years after acquiring the fields does not give a strong indication that some of the
companies have the capability to develop the fields. Currently the marginal fields cannot be said
to have made a very significant contribution to Nigeria's oil production. There has also been a
slow pace of farming out more fields to interested operators. It is however expected that when
more marginal fields are developed, the marginal fields can play a significant role in Nigeria's oil
production.
REFERENCE
Aalund, L. R., (1996). Oil Companies Focus on Emergency Care for Expats in Russia. Oil and
Gas Journal, (94)18: 33-36.
Department of Petroleum Resource – DPR (2013). Guidelines for the Farm-out and Operations
of Marginal Fields. 28p
The Department of Petroleum Resources Concessions and Leases Report, 2016,12p
Frank, A. (2010). Offshore Oil Drilling and Hurricane Risks: Triple Crisis, 1p
Heimer, J. A., Bryan, L. A. and Weeks, J. D. (1978). Logistics Problems in Developing Remote Oil
Fields - A Case History from Prudhoe Bay. Journal of Petroleum Technology, 30(06):851
– 859.
Ivanhoe, L.F. and George, G. L., (1993); Global Oil, Gas Fields, Sizes Tallied, Analyzed.
GeoArabia, 91(7): 87-91.
McDonald, J. (1992). Hurricanes Andrew and Iniki 1992:Environmental Quality Engineering
International Summary Report, 3 pp.
Mieras, A.A. (1984); Operational Performance of the Buchan Field Floating Production and
235
Nigerian Journal Of Oil And Gas Technology - Vol 2 No. 1
Offshore Loading System. In the Proceedings of Southeast Asia Show held at Singapore,
21-24 February 1984, Society of Petroleum Engineers publishers.
Nigerian National Petroleum Corporation Annual Statistical Bulletin, (2012), 72p
Nigerian National Petroleum Corporation Annual Statistical Bulletin, (2014), 52p
Njoku,A. O. (2016); Oil Pipelines Vandalism and Its Effects on the Socio – Economic
Development in Nigerian Society. International Journal of Multidisciplinary
Academic Research, 4(4): 47-60
Peter, R. O. (2013). Oil and Gas: Global issues: Multi-Science Publishing, 72p
Robinne, F. N., Parisien, M. A. and Flannigan, M. D. (2016). Anthropogenic influence on
wildfire activity in Alberta, Canada. International Journal of Wildland Fire, 25(9): 911916.
Shrimpton, M. and Storey, K. (1996). Health and Safety Issues Related to Remote Operations. In
the Proceedings of Third International Conference on Health, Safety, & Environment
held at New Orleans, 9-12 June, 1996, Society of Petroleum Engineers publishers.
Simmons, T. M., Sutter, D., Pielke, R. (2013). Normalize tornado damage in the United States.
Environmental Hazards, 12(2): 132-147.
236
View publication stats