KEYFACT Energy
A new report by Redcliff Energy Advisors provides guidance ahead of the upcoming Nigerian Marginal Field Bid Round.
The Department of Petroleum Resources (“DPR”) have embarked on a Marginal Field Bid Round against a backdrop of the collapse in oil prices and the COVID-19 pandemic. At a time when oil companies are significantly cutting CAPEX budgets, delaying or shelving development projects and the availability of funding is severely curtailed, one has to question the DPR’s logic. That said, there is a high degree of confidence in Abuja that there will be significant interest from indigenous E&P companies and that several international E&P companies will participate.
Background
The first Marginal Field Bid Round was held in 2003, with ~40 indigenous E&P companies participating, although many of them were merely shell companies with no assets, limited technical expertise or capital. With few exceptions (e.g. Niger Delta E&P, Oando, WalterSmith) indigenous companies who were awarded Marginal Fields, entered into technical and financial services agreements with international E&P companies (e.g. Afren, Mart Resources, Seven Energy). The outcome was that 24 Marginal Fields were awarded to 32 indigenous E&P companies.
Since 2003 there have been several attempts to conduct additional Marginal Field licencing rounds without success. In 2013, a licencing round was formally launched but subsequently withdrawn due to political interference and the 2014 presidential elections.
Since 2010 there has been a concerted effort by the DPR to increase local ownership of oil & gas assets. In all of the 2010 – 2015 IOC asset divestments, indigenous E&P companies were the winning bidders, either on a stand-alone basis (e.g. Seplat, Neconde, FIRST E&P, Aiteo, Eroton E&P) or in partnership with an international E&P company (e.g. Shoreline – Heritage, Elcrest – Eland Oil & Gas).
There are currently ~50 indigenous E&P companies operating ~30% of daily production. Most of these companies comprise of management teams that have built their careers in the IOCs, operate fields and have the requisite technical, commercial, financial management and corporate governance structures to enable them to attract foreign capital – debt and equity and/or international partners.