57 Marginal Fields: Lack of Corporate Governance, Finance Delay Firms’ Progression to Oil Production

57 Marginal Fields: Lack of Corporate Governance, Finance Delay Firms’ Progression to Oil Production

Peter Uzoho

Most of the firms that won the marginal oil fields auctioned during the 2020 marginal field bid round are currently struggling with how to translate their licences to field development and first oil production after more than one year of acquisition of assets.
THISDAY learnt that the oil firms are mainly handicapped by lack of corporate governance, which is a key requirement for them to be able to raise capital needed to progress to field development.
The 2020 marginal field bid round was originally superintended by the defunct Department of Petroleum Resources (DPR), which had in 2021 issued licenses to over 50 per cent of the winners.

However, its successor, the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), concluded the award process in June 2022, with the issuance of Petroleum Prospecting Licences (PPLs) to the winners in line with the Petroleum Industry Act (PIA) 2021.
Some of the fields and their awardees included: Egbolom – Oando Energy Resources and two others; Udibe – Folstaj; Omofejo – AsherDelta and two others; Ugbo – Energia; A.A Rano – Oloye; Nkuku –Vhelbherg E&P, NIPCO and four others; Mesan –Accord Petroleum; and Kuri – Shepherd Hill and Nord Oil.
Others were: Ekpat – Duport Midstream, Magnum Flo Ltd; Bita – Odu’a Investments; Atamba – Matrix Energy and Naptha Global; and Ruta – Faceato and seven others.

THISDAY learnt that most of the assets were currently in a state of inactivity, as their owners were still trying to set up proper corporate governance and move to rally funds needed to get to the next level.
Part of the constraints in making headway with the assets, according to THISDAY findings, is the issue of joint ownership, known as Special Purpose Vehicles (SPVs). This is where more than one company, in some extreme cases, about eight firms, jointly own a single asset, which delays decision taking and expected progress.

One of the awardees told THISDAY on condition of anonymity, “You know, the problem with marginal field is that each asset has several owners. So, a lot of people are going through the corporate governance now and it’s not easy when you are dealing with several people.
“It is after the corporate governance and, then, reviewing the field development plans before you can even start looking for money. So, much progress has not been made with all these marginal fields.”

The source added, “So, basically, most of the SPVs are focusing mostly on corporate governance, rules, how do we work together? How do we raise capital? How do we appropriate costs? How do we select people to manage the affairs?
“If a field is awarded to one individual, it’s very easy to progress. Like one of my assets, we are six companies. So, for you to get an agreement through, it will take like two or three months because each company will be going back to back with their principals and asking if the terms are good for the company and if it is something they can live with in the future. It’s difficult. But it’s a good thing and we will get there.”
However, THISDAY learnt that Udibe marginal field, awarded to Folstaj International, and Omofejo field, awarded jointly to AsherDelta, Zigma Limited and GlenPetro, are currently active.

Although, Folstaj is disputing the production capacity, claiming that the actual daily output capacity as shown by its analysis is far less than the 15,000bpd contained in the NUPRC data, an issue the company said it was presently trying to resolve with the commission.
THISDAY gathered that the discrepancy had negatively impacted work progress on the field, having stalled the first oil milestone Folstaj had been aggressively racing towards achieving before the end of 2022.

Managing Director of Folstaj International, Mr. Tajudeen Yahaya, told THISDAY, “We had some arrangements already which was pushing us ahead. If what we saw at the field eventually was what we expected, by now, we would have been able to hit first oil, because we had some financing arrangements on ground. Some people went to the US and other places to check out rigs, jack-up barges, that we were going to use for our drilling.
“We had gone very far with our planning until the reservoir evaluation by Baker Hughes showed that the actual quantity of oil in the field was far less than the 15000 barrels per day that was in the dataset of NUPRC. So, we had to slow down. And we have set up a team of experts to go and meet with the NUPRC to renegotiate the terms.

“You know, in deploying funds, you have to look at what you are doing and the returns on investment and all of that. So, that has slowed the activity.”
A former President of the Petroleum Technology Association of Nigeria (PETAN), Mr. Bank Anthony Okoroafor, whose firm, Vhelbherg Exploration and Production Limited, is a part owner in three marginal fields, said they were making progress.
Okoroafor said, “We are going to arrive hitting first oil, but we are following it step by step. A lot of work is going on. Boards have been set up; technical committees are working.”

Related Articles