The Petroleum Act defines a Marginal Field as “such fields as the President may from time to time identify as Marginal Fields”. This definition though ambiguous, vests the President with wide powers to designate any area as a Marginal Field. This also seems to imply that Marginal Fields are created from the President’s discretion.

 

But in reality, marginal fields are fields that have available reserves though the reserves may not be commercially viable for Oil Mining Leases (OMLs) holders. Such fields are located within existing OMLs operated by International Oil Companies and are left dormant for a considerable amount of time.

 

The first Marginal fields to be mined in Nigeria produced 141,028 million barrels of crude oil in 2005; the operation was carried out by the Niger- Delta Petroleum Resources.

 

As of today, marginal field oil output has grown by 88 percent. The Nigerian government introduced the Marginal Field program in 2001 with the objective of opening up the upstream sector of the industry to wider indigenous participation, with a view to creating a robust industry that will positively impact the capacity of indigenous exploration and production companies to contribute to Nigeria’s oil production reserves.

 

Nine of the 24 fields awarded in 2013 are currently producing, with over 40 new wells drilled by the awardees representing a four-fold increase, according to Department of Petroleum Resources (DPR).

 

The aforementioned companies started 2014 with the production of 1.71 million barrels in the month of January. A fall in production in February was reflected in the companies’ production except Niger Delta Petroleum Resources which increased production from 32,982 barrels in January to 67,895 barrels in February 2014.

 

In the month of April, marginal field experienced another shortfall in production of about 15 percent between the month of March and April 2014 which followed the same scenario as February. In the month of March, marginal fields produced 1.65 million barrels of crude oil compared to 1.39 million barrels produced in April.

 

In the month of May, marginal field recorded a remarkable production of 1.75 million barrels. This represents an increase of 26 percent in production when compared with the production of 1.39 recorded in the month of April and the month of May production represents peak production for the period under review.

 

The remarkable production recorded in the month of May can be attributed to more than 100 percent increase in production recorded by Prime Exploration, Platform Petroleum and increase in production recorded by companies like Midwestern Oil; Waltersmith; Pillar Oil; Energia Limited and Oriental Energy.

 

After the peak production of 1.75 million recorded in the month of May, production took a U-turn with production figure of 1.48 million barrels and 1.47 million barrels respectively. However, in the month of August, marginal field’s crude oil production experienced a marginal increase of 9 percent.

 

Looking at the marginal field crude oil production from the angle of companies’ performance, Oriental Energy with the production of 6.99 million barrels during the first eight months of year 2014 emerged the leading company in terms of volume of output. Its production represents 56 percent of the total marginal fields’ production for the period under review.

 

Next in magnitude to Oriental Energy was Midwestern Oil, the company produced 2.07 million barrels in the first eight months of year 2014 representing  17 percent of the total marginal field’s production.

 

Waltersmith occupied the third place with production of 863,524 barrels, represents 7 percent of total production while Niger Delta Petroleum Resources came forth with the production of 625,932 barrels during the period under review.

 

The contribution of indigenous firms to oil and gas production and reserves in Nigeria through marginal fields has grown in recent times. Today, indigenous oil companies are responsible for more than 10 percent of Nigeria’s oil and gas industry crude oil production compared to just share of 4 percent in 2004.

 

By 2015, marginal fields have the potential of increasing country crude oil production and to raise the contribution of indigenous oil firms to total industry production to more than 15 percent if the challenges confronting their existence can be tackled.

 

But the indigenous companies have pointed to some challenges they face in operations. They pointed to poor access to funds as a major challenge in the 38th Nigerian Annual International Conference and Exhibition (NAICE 2014), organised by the Society of Petroleum Engineers (SPE), in Lagos. Particularly, they decried the role of Nigerian’s banks in the saga.

 

The funding challenges were the major factor that led to abandonment of several oil blocks awarded to marginal field operators since 2003. However, few successful indigenous operators in the upstream sector believe that more companies would have sprung up if a proper funding mechanism was in place.

 

Source : energy mix report