Engr. Sarki Auwalu, MNSE

Director/CEO, Department of Petroleum Resources

DEPARTMENT OF PETROLEUM RESOURCES (DPR)

Guest Speaker at NAPE Webinar

Nigeria Marginal Fields Bid Round:Implications, Opportunities and Challenges

July 8, 2020

Concluding Thoughts

1

2 Marginal Field

Operatorship Program

DPR and NAPE

Implications &

Opportunities

Status and Outlook3

4

5

Outline

G&G Core to DPR

Regulatory Mandate

Conservation of Oil & Gas

resources

Ensure Sustainable

Development of Nigeria’s

Oil & Gas ResourcesDPR

Association of Petroleum

Geologists and related disciplines

Promote the study and practice

of petroleum geosciences

Ensure benefits for

members and other

stakeholders

NAPE

Our Ideas Find Oil & Gas and More…

DPR

DEPARTMENT OF PETROLEUM RESOURCES

National Aspirations for the Oil & Gas Sector- Drivers for Marginal Field Development

1 2 3UPSTREAM MIDSTREAM DOWNSTREAM

• Oil Reserves

– 40 Billion Barrels

• Grow Gas Reserves – 210 TCF by 2030

• Oil Production Capacity – 3 Million Barrels

• Increased Gas Monetization

• Elimination of Routine Flaring

• Domestic Gas Supply Sufficiency – Power. Commercial. GBIs

• Domestic Refining Capacity

– 50% of Production

• Price Freedom

• Optimum Petroleum Products

Distribution Networks

• Petroleum Products Supply

Sufficiency (Fuels, LPG, CNG)

Definitions

5

Marginal Fields Fundamentals

A Marginal field is any field

that has reserves booked

and reported annually to the

Department of Petroleum

Resources (DPR) and has

remained unproduced for a

period of over 10 years.

➢ President exercises powers under

Paragraph 17 of the First Schedule

of the Petroleum Act 1969 to cause

the farm-out of a Marginal Field

➢ Holder of an OML may farm-out

marginal field subject to terms and

conditions approved by the

President

➢ President reserves the rights to give

(or withhold) consent of a farm-out

of marginal fields

➢ Marginal field means any field that

the President may, from time to

time, identify as such.

➢ Government reserves the right to

withdraw award should an Awardee

fail to comply with applicable terms

G U I D I N G P R O V I S I O N S

ACT

REGULATIONS

GUIDELINES

Legal & Regulatory Framework

❖ Petroleum Act 1969

o Petroleum (Amendment ) Decree No. 23 of 1996

❖ Marginal Field Operations (Fiscal Regime)

Regulations 2005

❖ Guidelines for the Award and Operations of Marginal

Fields in Nigeria (2020), and Explanatory Notes

A ‘Win-Win’ Value Proposition

❖ Government

❖ Nigerians

❖ Nigerian Investors

❖ Foreign Investors

Generate

Employment

Increase

Oil & Gas Reserves

Increase

Production

Encourage Capital

Inflow

A multifarious range of

objectives are met by

Marginal Field Development

Objectives of Marginal Field Programme

Build Technical

Capacity

Promote Use of

Shared Facilities

Promote Indigenous Participation

Roadmap of Marginal Field Awards

1999

Twenty-Four (24) Fields

2003/2004

One (1) Field

2006

Fifty-Seven (57) Fields

2020

One (1) Field

2007

2020

Two (2) Fields

1999

2007

20062003/04

2010

Two (2) Fields

2010

Thirty (30) Marginal fields

- Land (13)

- Swamp (8)

- Offshore (9)

~ 2% contribution

to National Oil &

Gas Reserves

Increase of 75%

and 100% in Oil

& Gas Reserves

Oil Production

Potential (800 – 16,000bopd)

Gas Processing

Capacity (~400 MMScfd)

Domestic Refining

Capacity - 6kbopd(Additional 12kbopd by Q4 2020)

16 Producing

fields

Marginal Fields Performance- A Global View

10

Snapshot of Marginal Field Performance (1)

Oil Reserves1

2% Contribution

Gas Reserves2

1.6% Contribution

Oil Reserves3

75% Growth

Gas Reserves4

100% Increase

11

Snapshot of Marginal Field Performance (2)

Record of Achievements of Marginal Fields

12

Reserves and Production

Growth

Nigerian Content Impact

Domestic Energy Security

Increased Government

Revenue

CSR and Community Engagement

13

Synopsis of the 2020 Marginal Field Bid Round

• Deepen participation of Nigerian Indigenous Companies in the Upstream

segment of the Industry

• Provide Opportunities for Technical and Financial partnerships for Investors

Objective01

• Indigenous Participation

• Grow Reserves and Optimise the potentials of Assets

• Wealth Creation & Revenue Growth

Key principles02

• Attract Credible Investors with Technical and Financial capability

• Early Asset Development and attainment of production within a short timeframe

Resources03

• Electronic-based bidding process

Structure04

DEPARTMENT OF PETROLEUM RESOURCES

2020 Marginal Field Bid Round

-Basis for Sustainability

General Post-Award Conditions

✓ Transfer of Interest Post Award - Awardee can not assign more than 49% interest to another party post-award.

✓ Termination of Rights of Interest Holder - In case of Joint Award, the Minister reserves the right to cancel/withdraw the interest of a party

or parties whose failure in meeting their obligations result in the Awardee(s) being unable to progress work on the field.

✓ Protection of Partnerships - The Minister reserves the right to void an award if the activities of the parties post-award are aimed at

frustrating the basis of the award as evidenced in the technical /commercial services agreement submitted in support of the bid.

✓ Dispute Resolution - All operational and commercial disagreements arising among Awardees or between Awardees and their partner(s)

post-award, shall first be referred to the Nigerian Oil and Gas Alternative Dispute Resolution (ADR) Center

15

Award Process and Evaluation Criteria

❖ Evidence of Company’s

Existence

❖ Evidence of Capability to

Pay Applicable Premium

❖ Nigerian Content Plan

❖ Participation of Host

Community/State

❖ Nature of Company – E&P,

Federal Character

Representation

❖ Evidence of Technical and

Managerial Capability

❖ Eligibility to Participate – e.g.

Records of Indebtedness to

Government

16

01

02

03

04

•Lower Risk of Development: Marginal

Fields are usually discovered fields

which significantly reduce risk of

development.

•Early Time to Production:

Typically, 18-24 months

timeframe possible.

•Low Investment Cost: Lower

cost of investment (US$ 50-100

Million) as compared to major

capital projects.

•Ownership of Asset:

Marginal fields are owned by

operators as sole risk,

independent of the host

government. This provides for

maximum returns to investor.

Implications of Marginal Fields Development (1)

17

06

07

05

•Regulatory Support: DPR enforces

regulatory practices of general application, but

Marginal Field operators will continue to enjoy

significant support to enable their growth in line

with Government aspirations.

•.

•Start Small; Grow Big:•Potential for Scalable Development

•Shared Infrastructure:Common usage of facilities to

ensure optimum utilization for

crude transportation and export.

Implications of Marginal Fields Development (2)

DEPARTMENT OF PETROLEUM RESOURCES

Meeting the Challenges…

18

DEPARTMENT OF PETROLEUM RESOURCES 19

Vertical Integration &

Diversification

• Upstream, Midstream and Downstream

• Power Generation

• Gas Industrial Hubs

Collaboration and Synergy

• Clusters of contiguous fields to aid synergy and collaboration among operators.

Aggressive Work Programme

Implementation

• Appraisal opportunities

• Field Studies

Community Relationship

• Corporate Social Responsibility (CSR)

Compliance • Regulatory

• Operational Excellence

Cost Control and Optimization

• Global Best Practices & Benchmarks

Opportunities

- Winning Strategies and Models

Concluding thoughts…

20

Employment

opportunities and local

content capacity with

positive impact on the

economy

Government will remain

focused on the gains of

marginal fields program

and continuously put

measures to sustain the

initiative

Challenges are being

addressed to ensure

sustainable

development

Great Opportunities

exist Investments &

Foreign Direct

Investment (FDI)

01

0203

04

DEPARTMENT OF PETROLEUM RESOURCES

‘Nigeria is Open for Business’

www.dpr.gov.ng