Marginal Field Round: No Place for ‘One Man Business’ - Africa’s premier report on the oil, gas and energy landscape.

Marginal Field Round: No Place for ‘One Man Business’

Any company which harbours a director with more than 25% equity, is barred from competing in Nigeria’s marginal field round. It is official.

“There’s no place for firms like Osahon and Sons”, joked George Osahon, Director of the Department of Petroleum Resources (DPR), the country’s regulatory agency. He was responding to questions at the first leg of the three- city Roadshow for the round in Lagos, the country’s commercial hub, on December 4.

The second Marginal Field Bid Round throws up 31 oil and gas fields, 15 of which are in shallow water, (and 16 onshore), all in the Niger Delta basin. The round is open only to Nigerian Exploration and Production Companies. Guidelines for Farm Out and Operations of Marginal Fields 2013, published on the DPR website declares that “The indigenous company shall be substantially Nigerian and shall be registered solely for exploration and production business.  At the pre-qualification stage, attention shall be paid to the following regarding the promoting team:

  • Background and experience with exploration and production at sufficiently high level.
  • Niger Delta representation.
  • Federal Character representativeness.

The application form (for bidding) shall attract non-refundable chargeable fees as follows:

  • Application fee: =N=200,000.00 (Two Hundred Thousand Naira) per field.
  • Data prying fee: $3,000.00 (Three Thousand US Dollars) per field. Data prying shall be on appointment.
  • Bid Processing Fee: Naira) =N=300,000.00 (Three Hundred Thousand Naira) per field.

Part of the criteria for evaluation is that a company shall confirm willingness to pay a Signature Bonus of $300,000 (Three Hundred Thousand US Dollars) if successful. Such monies will be paid into the CBN/Accountant –General FGN Account by Telegraphic Transfer.

The Nigerian government’s definition of a marginal field “is any field that has (oil and gas) reserves booked and reported annually to the Department of Petroleum Resources (DPR) and has remained un-produced for a period of over 10 years.

“Specifically, marginal fields shall have some or all of the following characteristics:

  1. Fields not considered by license holders for development because of assumed marginal economics under prevailing fiscal and market terms.
  2. Fields with at least one exploration well drilled and have been reported as oil and or gas discovery for more than 10 years with no follow up appraisal or development effort.
  3. Fields with crude oil characteristics different from current streams (such as crude with very high viscosity and low API gravity), which cannot be produced through conventional methods or current technology.
  4. Fields with high gas and low oil reserves.
  5. Fields that have been abandoned by the leaseholders for upwards of three years for economic or operational reasons.
  6. Fields that the present leaseholders may consider for farm-out as part of portfolio rationalization programmes.

The DPR notes that un-produced discoveries in open leases (blocks) do not qualify for farm-out as they would constitute part of the whole acreage that would be awarded in new license rounds to further encourage exploration activities on the blocks.

The Lagos Roadshow attracted over 200 participants, packed into the Convention Centre of the Eko Hotel and Suites. Most of the discussions centred around the Guidelines, already published on the DPR website and which can also be found here.

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