Nigeria has given approval for a licensing round aimed at re-allocating acreage left dormant by concessionaires for 10 years, hoping local suitors can develop fields deemed non-commercial by majors.

The Marginal Field Bid Round could launch within a fortnight, with awards to local operators announced before the end of the year in tandem with a parallel initiative by the Nigerian Gas Flare Commercialisation Programme to grant third-party access to stranded gas across the Niger Delta.

The exercise includes 22 fields wrested from concessions held by Shell Petroleum Development Company (SPDC), 12 fields left dormant by Chevron, 11 fields held by ExxonMobil, five fields held by Total and two fields under concession by Agip.

In addition to the 52 marginal fields hived off by the Department of Petroleum Resources (DPR) from major concessionaires, reports have emerged that a total of 56 fields will be on offer.

If an extra four assets are to be included, these will likely be drawn from fields earmarked for revocation in April 2019 and another 11 licences supposedly revoked last month, held by indigenous players, which the DPR alleged had defaulted on work commitments, surface rentals and royalties.

Having canvassed a number of local operators affected by the move, Upstream learned that the DPR has since restored title to several indigenous players, but not to all.

Nigeria-focused international companies already active in the Niger Delta, canvassed by Upstream, indicated a willingness to participate in the Marginal Field programme but only where oil reserves are proven higher than 10,000 barrels.

"That's the magic number, but we will wait to see who wins before partnering up for additional acreage," one chief executive told Upstream.

The last significant licensing exercise was conducted in 2007, while the last marginal field bid round was held in 2002, re-allocating 24 fields, of which 14 are collectively producing up to 40,000 barrels per day, representing just 2% of national output before the downturn.

Indigenous players developing smaller deposits are less affected by oil price declines than larger operators, while gas-focused developments can benefit from tapping local markets, according to Nigerian National Petroleum Corporation (NNPC) managing director Mele Kyari.

The government hopes to reap $520 million from signature bonuses, data-prying fees and the mandatory purchase of competent persons reports, and another $2.6 million in non-refundable application and processing fees.

Access for bid registration and submission will be granted during a four-week window, with a list of prequalified bidders published 12 weeks after the launch, following which companies will be invited to submit commercial bids for same-day opening and selection.

Nigeria's National Data Repository (NDR), maintained by the DPR, has completed economic evaluation and reserves analysis for the fields on offer and will determine the signature bonus demanded for each, according to the Request for Approval submitted to Minister of State for Petroleum Resources, Timipre Sylva.

The 2020 Guidelines for Farmout and Operation defines marginal fields as those with at least one well drilled, reported as an oil or gas discovery but not followed by any appraisal or development effort.

Also included in the definition are fields with high gas but low oil reserves, especially where that oil is of high viscosity or low API gravity; fields earmarked by incumbent leaseholders for portfolio rationalisation; and fields simply abandoned by leaseholders for three years for economic or operational reasons.

Lack of track record is no impediment for prequalification as long as an interested company “can demonstrate ability to manage or develop in that direction”, while excluded are companies “that are indebted to the government or which are not operating their assets in a business-like manner”.

No more than five suitors may prequalify for any one field, while no company may prequalify for more than three fields.

Once a farm-out is approved, the marginal field operator must within 60 months of the award demonstrate to the DPR "verifiable efforts to progress work according to an approved plan" in order to secure renewal.

Farm-in companies will pay an over-riding royalty to the major concessionnaire, which shall also receive a negotiated tariff for transportation and processing, although payment in kind as a percentage of net production might be considered.

One clause likely to cause consternation provides that, if hydrocarbons are encountered following the drilled appraisal of deeper horizons, then new terms and conditions must be agreed with the concessionaire for that deeper pool.

Farm-in companies will have full control and responsibility for the utililsation of all gas produced from the marginal field structure.

Nigeria has made strong gains in indigenous content over recent years, with officials keen to salvage what they can for local participation in an increasingly pressured industry, its skills base fast eroding in the wake of layoffs, empty orderbooks and major projects put on hold.

Sylva’s stated policy is to encourage local players to mobilise limited finance to develop neglected oil and gas fields, far from production infrastructure, with comparatively low reserves or with flow control issues.

Exploration

Nigeria to target local players with fresh round