Marginal fields as classified in Nigeria prior to the PIA in 2021, are fields with one or two oil or gas wells discovered by International Oil Companies, (IOCs), but not commercially viable based on their portfolio ranking. These wells are usually discovered in the course of exploring larger acreages and, and because of the size, have been left undeveloped for more than 10 years or such field as the President may identify. The Marginal Fields programme was thus introduced to encourage indigenous participation in the oil industry, to maximize government’s take on undeveloped acreages, to reduce the rates of abandonment of depleting fields that have become unproductive, create new and diverse investments, and boost reserves. Under the repealed Petroleum Act of 1996, a marginal field was thus defined as any field identified by the President as a marginal field. The Guidelines for the Award and Operations of Marginal Fields in Nigeria, released by the defunct Department of Petroleum Resources (DPR) in 2020 has the following characteristics:
- Fields having at least one exploration well drilled and reported as a discovery for more than 10 years with no follow up appraisal or development effort; (ii) Fields with high gas and low oil reserves (iii) Fields that have been abandoned by the leaseholders for economic or operational reasons, among others.
Historically, the first allocation of marginal field was done in 1999 with the award of two fields, while the first bid round for marginal fields in Nigeria was in 2003, with a total of 24 fields awarded to 31 companies (sole operators and joint venture operators). Other allocations were done in subsequent years – one each in 2006 and 2007, and two in 2010, bringing total marginal fields to 30 marginal fields, prior to the 2020/2021 marginal fields bid rounds, that brought in an additional 57 marginal fields. Of the 57 marginal fields, six (6) are onshore, twenty-two (22) within swamp terrain, while twenty-nine (29) are in the shallow offshore. Figure 12 shows the map of the 2020/2021 marginal fields distribution. Appendix 6 is a compilation of the 2020/2021 marginal fields in their different terrains – onshore, swamp and shallow offshore
Figure 12: Shows the map of the 2020/2021 marginal fields distribution – Source (NUPRC)
However, the the passage of the Petroleum Industry Act, PIA, 2021, had brought an end to the era of marginal field awards, which is stated clearly in Section 94(9) of the Act that “No new marginal field shall be declared under this Act”. PIA also amended the scope of marginal field, which is now defined as a field or discovery which has been declared a marginal field prior to 1st January 2021 or which has been lying fallow without activity for seven years after its discovery prior the commencement of the PIA. The PIA recognizes existing producing marginal field to continue to operate under the original royalty rates and farm out agreements on the condition that the existing Oil Mining Lease (OML) shall be converted to a Petroleum Mining License (PML) within 18 months from the commencement of the PIA. In the case of non-producing marginal field, any discovery declared as a marginal field prior to 1st January 2021 which is non-producing shall be converted to a Petroleum Prospecting License (PPL). In the case of an asset that may fall within the PIA definition of marginal field, has not been surrendered to the Federal Government, the PIA provides for such to be surrendered, and for any discovery that is surrendered to the Government, the NUPRC has the right to offer a petroleum prospecting license, PPL, through a transparent and non-discriminatory bidding process. However, where a marginal field has remained with the license holder and not transferred to the Government, the OML holder must within 3 years from the commencement of the PIA present a field development plan to the NUPRC, or in the alternative farm out the discovery with the consent of the NUPRC. Where the license holder fails to fulfill these conditions, the field will be relinquished. (PIA Sec 94 (4-9)