Marginal fields are oil fields that have been discovered by major international oil companies (IOCs) in Nigeria in the course of exploring larger acreages and which fields have not been developed for more than 10 years. When identified, the IOCs may decide to farm out this field to another company to exploit it as a sole risk venture. This means the contractor would bear all the costs and risks of exploitation and also to earn the entire rewards from exploitation.
The President, by the provisions of the Petroleum (Amendment) Act of 1996 also has the power to declare a field as a marginal field where a discovery has been made in such a field but it has been left unattended for 10 years. The major reasons for awarding marginal fields are to create new and diverse investment and boost reserves.
Marginal fields in Nigeria are located onshore and in the shallow waters.There are about 178 marginal oil fields. In 2003, the government awarded 24 out of these. Currently statistics show that 9 out of these 24 are productive while the others are under- utilized Consequently reports show that the marginal fields only contribute a minimal 2.1% to the total crude oil production and 67% of marginal fields allocated in the 2003 licensing round have not produced a single barrel of oil 10 years later2
The following major issues contribute to the under-utilization of the marginal fields and its consequent minimal contribution to Nigeria’s oil revenue:
- a. Discretionary decision-making, political interference and lack of transparency are the bane of the process of awarding marginal oil fields. The Department for Petroleum Resources (DPR), the institution in charge of managing the exploration licenses, does not publicly provide the criteria for prequalification of awardees. This makes the entire process opaque. Reports show that in the past many of the winning companies were closely associated to government officials This factor alone significantly affects the field performance, as most of the awardees do not have the technical skills to exploit the skills. This is also the reason why most of the marginal fields are dormant.
- b. More so, there is no consistency or reliability in the bid process The sudden suspension of the 2013/2014 bid rounds is an evidence of this. This again deters investment. Again, because the marginal fields are onshore, the production growth is greatly affected by infrastructure constraints resulting from attacks on the pipelines and oil theft in the Niger Delta.