Nigeria is delaying plans for a major licensing exercise originally scheduled for the middle of this year, but is pressing ahead with a more modest round focused on re-allocating marginal oil and gas fields left dormant by majors.

The marginal field round will proceed despite a collapse in crude prices, Nigerian National Petroleum Corporation (NNPC) managing director Mele Kyari told delegates at a seminar organised this week with the Finance Ministry and the UK Department for International Development (DfID).

A comprehensive licensing round has not been held in Nigeria since 2007, while the last marginal field licensing round was conducted back in 2003.

“Current market realities would dampen foreign investors’ appetite for a major exercise but marginal field developments by their very nature require very small scale investment, usually funded by local borrowing,” Kyari said.

Marginal field licensing encourages local participation because of the smaller scale of investment required, so some countries can proceed with these even when oil prices are low because capital outlay and the costs of production are also lower, he said.

'Now's not the best time'

“Substantive, full-scale licensing exercises demand foreign investor participation and this is not the best time to call upon foreign partners as licences would be priced very low and you are unlikely to attract the big players."

Nigeria will now “accelerate the licensing of marginal fields and expedite renewal of expiring oil mining (development) licences, or OMLs, as part of ongoing measures to augment revenues," according to Federal Budget Office director general Ben Akabueze.

Projected oil and gas revenue will fall by more than 80% in the course of 2020, he said.

In a parallel address, Finance Minister Zainab Ahmed indicated that several upstream oil and gas projects “will be delivered much later than originally planned due to scaled back government investment".

Covid-19 impacts

Nigeria is in the process of revising down its benchmark oil price from $57 to $20 per barrel for the purpose of budgetary planning, following the economic impact of the Covid-19 pandemic, and plans to cut oil production from 2.1 million barrels per day to 1.7 million bpd, she said.

Financial planners had hoped for a $1.6 billion windfall from signature bonuses expected to flow from the full-scale licensing round planned this year, now officially delayed “until oil prices recover,” according to Kyari.

Former petroleum resources minister and incumbent chair of the Expert Panel advising the Nigeria Natural Resource Charter (NNRC), Odein Ajumogobia, last week warned the government to fast-track passage of a revised Petroleum Industry & Governance Bill (PIGB) before fresh licences are awarded.

The current version of the PIGB awaiting submission to the National Assembly, the first of four packages designed to overhaul Nigeria’s oil industry, concentrated too much power in the hands of the sectoral minister and required adjustment, said Ajumogobia.

Exploration

Nigeria delays major round amid dire market but smaller exercise gets go-ahead