By NJ Ayuk, Chairman, African Energy Chamber
Nigerian energy-industry leaders have been reminiscing lately about the country’s earliest efforts to develop marginal oil and gas fields. That’s because after nearly two decades, Nigeria recently stepped up its marginal-field development efforts, a wise move that I hope other countries will follow.
Marginal oil and gas fields are sites with reported reserves and production potential that have been left unattended for at least 10 years from the date of their discovery. In most cases, these fields are sites where international oil companies (IOCs) discovered oil or gas deposits and received the rights to move forward with production–but then, for any number of reasons, decided against further activity.
In the 1990s, Nigeria began wondering if the IOCs’ losses in these cases could be turned around to generate revenue for government coffers — and opportunities for local oil and gas companies. In 2003, after devoting significant time to relevant policy development, Nigeria launched bidding for the rights to develop 24 marginal fields. Marginal field licenses went to 31 indigenous companies.
Some will point to the fact that only 13 of the awarded fields are now producing and argue that the effort fell short of expectations. They’ll cite technological limitations that impeded indigenous companies’ effectiveness.
While those setbacks did occur, Nigeria’s decision to develop marginal fields produced plenty of benefits, too. As I wrote in my book, “Billions at Play: The Future of African Energy and Doing Deals,” the bidding round gave more than 30 local companies an opportunity to establish themselves and develop their capacities as upstream operators. And, it allowed them to do so without assuming the risks (or the costs) of exploration, since all of the fields designated as marginal were confirmed discoveries.
What’s more, the producing fields have been generating revenue, about 2% of total daily production in Nigeria. And as more marginal fields are developed, they will increase Nigeria’s domestic production capacity even more.
That’s why I was pleased to see Nigeria launch another marginal field bidding round in 2020. In some ways, this latest bidding round is even more important than the first. African oil- and gas-producing countries are still reeling from COVID-19 and dealing with mounting global pressure to transition away from fossil fuels. And they’re facing these obstacles at a time when they still need their oil and gas industries to generate revenue, to help ease energy poverty, and to help stimulate economic growth and diversification.