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The notion to develop marginal oilfields as a means of increasing oil and perhaps marginal natural gas reserves in Nigeria has not been well defined since inception. Many have argued that oilfields regarded as marginal have often times been allocated discretionally because the Federal Government of Nigeria has the sole prerogative to classify fields as marginal. In Egypt for instance, fields with recoverable reserves of less than five million barrels of oil are regarded as marginal. To this end, this paper seeks to redefine the concept of marginal oilfields in terms of concrete and measurable terms, keeping in perspective the recoverable reserves, prevailing fiscal terms and available technology and economic conditions. Considering the nature of marginal oilfields, a review of the contractual agreement for operators was examined with new fiscal terms recommended. This was necessitated to determine at what point these fields become unattractive to investors with existing technology. A comprehensive economic analysis was carried out showing that these fields are actually a worthwhile investment if adequate incentives are granted by the government. A downward review of signature bonus by 50% had little or no impact on rate on return of investment. A reduction in royalties and petroleum taxes as proposed in the yet to be approved Petroleum Industry Bill 2012, will make the investment in marginal field more rewarding for investors than ly established fiscal terms. Further reduction of oil price below the proposed benchmark of $50 in this work also has adverse effect on the development of marginal oil fields. Financing projects of a high degree of uncertainty poses a challenge to the development of marginal oilfields and various options were suggested including equity financing, technical partnerships, sourcing of loans from local and foreign banks. |
