Are Nigeria’s new oil fields another waste of time?

Jul 08, 2022|Noelle Okwedy

Our article last week questioned Nigeria’s status as Africa’s oil giant, and the last sentence was particularly scathing. It essentially said, “Nigeria is in the depths of the trenches, competing against Angola and Libya for the weightless title of “Africa’s oil giant”.” I wince every time I read it, but it had to be said.

Key takeaways:

The NUPRC awarded petroleum prospecting licences for 57 marginal fields to 161 successful companies after a bidding process that started in 2020. The aim is to increase Nigerian oil production which has declined.
However, only 1 in 3 operators from the 2003 marginal field round had started producing as of 2014 due to financing issues. So will the 2022 round produce the intended results?
To answer the question, we must assess the dynamics of marginal oil fields in the context of the global and local finance market as well as the Nigerian oil operating environment.

However, the government and the country’s national oil company, the Nigerian National Petroleum Corporation (NNPC), still have a few tricks up their sleeve to revive the oil sector. On the 28th of June, the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) announced that petroleum prospecting licences for 57 marginal fields would be awarded to 161 successful companies after a bidding process that started in 2020. These licences will allow indigenous oil companies to explore (search for) and produce crude oil from these fields.

For context, marginal fields are smaller onshore or shallow water oil blocks left undeveloped and abandoned by international oil companies (IOCs) because of their relatively low production potential. Marginal fields, which produce 2,000 to 10,000 barrels per day, are too small to make economic sense for IOCs that produce millions of barrels from blocks across the world. However, they’re just right for local Nigerian companies that want to enter the oil market. Indigenous oil companies like Seplat and Nestoil, now household names in Nigeria, began their foray into the Nigerian oil industry with marginal oil fields.

When the news broke, I was in the middle of writing last week’s article and our deputy editor, Adesola, asked if the marginal oil field licences were a game-changer for Nigeria’s bleak oil and gas industry. Given that the issuance aims to increase Nigeria’s dwindling oil production, it’s a question worth answering.

To give a comprehensive answer, we’ll need to take a step back to understand the dynamics of marginal oil fields by looking at how successful past licence awards have