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Lessons for New Marginal Oilfield Awardees

July 8, 2021

As the marginal oilfields awardees strategise to develop and bring their allocated oil blocks to production, Peter Uzoho writes on the need for them to draw lessons from one of the previous marginal fields’ awardees and current operator of Egbaoma field

The development of oilfields into first oil or gas production poses a lot of challenges to the operators. Companies that lack the needed fund to deploy to field, the right technical competence, efficient cost management and unable to collaborate with the right partners often see themselves chickening out of the venture, leaving the fields fallow..
The challenges are quite diverse, ranging from funding, fiscal terms, partnership issues, availability of enabling facility, issue of pricing and off-taker, for gas, as well as political, governance and environmental hurdles. These challenges are partly responsible for the inability of the 11 of the 24 marginal oilfields awarded to oil companies during the 2003/2004 marginal fields bid round to be developed till date, leading to their revocation and now in litigation.

Another bid round –the 2020 marginal fields bid round, in which 57 marginal oilfields were on offer, had just been concluded this month, with 80 winners, representing 50 per cent of the successful bidders handed their award certificates.
However, developing the assets does not end in presenting or receiving the award certificates, as a number of post award issues have to be looked into and addressed for the fields to be brought to first oil and gas production, among which is the farm-out agreement between the original owners of the assets and the marginal field operators. Apart from that, the elephant in the room, as observed by industry experts and experienced operators, is the funding challenge. This is because the ability of the new awardees to raise the needed fund as quickly as possible would determine whether they will be able to operate the fields or leave them stranded again.
However, for the 2020 marginal fields awardees, the lessons from previous awardees, who have successfully operated their own marginal fields and are now contributing significantly to the Nigerian oil and gas production volumes, comes handy. One of such marginal fields operators, is Platform Petroleum Limited, a Nigerian company that emerged from the 2003/2004 marginal fields bid round.
Platform Petroleum currently operates the Egbaoma field farm-out area covering approximately 136 square kilometres, which is situated in the Oil Mining Lease (OML) 38, onshore in Delta State. OML 38 is located in the Northern section of the Niger Delta sedimentary basin. Platform Petroleum won the field in the 2003/2004 marginal field bid rounds and commenced field development activities in 2005 with workover and completion of 2 Wells with 3 completions in three of the eight reservoirs in the major structure cutting across the field in Joint Venture Partnership with Newcross Petroleum.
The asset comprises 10,000-bopd and 30mmscfd capacity flowstation, 10,000 bbls storage tank, 32 Km 6-inches export line from the Flowstation to the Group Gathering Facility (GGF) and 16Km export line from the GGF to NAOC Kwale tie-in point to the Brass Terminal was completed and commissioned in the fourth quarter of 2007 to achieve first Oil.

Field Development Activities
Since first oil in 2007, Platform Petroleum has carried out over nine work over operations, drilled 3 Wells and executed 2 side tracks in the field till date. Following the changing characteristics of the crude from the initial black oil to predominantly condensate, the Flow Station was upgraded in 2013/2014 to include XHP Production and Test Separators to optimise recovery from the gas condensate Wells and to be able to handle 40mmscfd gas production.
The company’s philosophy of field development also changed to include building a 40 mmscfd of Gas Plant to commercialize the gas resources in the field which was later divested to PNG in 2014. The process optimisation and upgrade is ongoing to include a second bank of XHP and HP Separators with a condensate stabiliser package as upgrade 2.0 to handle expected increase production from planned drilling in 2018/2019.

Gas Commercialisation
In its gas commercialisation strategy, the marginal field operator has three streams consisting of XHP, HP and LP deliver 30mmscfd of gas to the Gas Plant operated by PNG which strips the NGLs, LPG and Excess Propane. The Lean gas is returned to a gathering manifold and metering for the various offtakers. The lean gas and the excess gas from the XHP stream of WAGP specification have been committed to various offtakers. Though the plant construction/installation commenced in 2009, the inauguration proper was in 2016. The company is positioning the Egbaoma Field to be a hub for the various offtakers (Powergas, UDIPPCO and Ssafen/Isomer) CNG projects that are currently being designed and fabricated.

Overcoming the Challenges

Sharing the company’s field development trajectory at a panel session on “Plotting the Roadmap for a Gas-powered Economy 2030,” one of the incisive sessions at the 2021 Nigerian International Petroleum Summit (NIPS) in Abuja, the Acting Managing Director, Platform Petroleum Limited, Mr. John Anim, confirmed that the challenges of developing oilfields to production “are not new, they are very obvious.”

According to Anim, “there are key challenges that are faced by the marginal field operators which have to do with funding, and why is that a major challenge? It’s a major challenge for you to finance a development project, it has to be profitable. And most of the fields that we are given as marginal fields, why they are marginal are in two terms: probably, the volumes are very small or the cost of development is very high and made those assets to be left fallow.”
He pointed out that developing an asset from the marginal field perspective demanded doing an analysis to ensure that the project was viable and presentable for funding.
He noted that for those coming as new players and didn’t have the fund but want to source for the financing, the economic model must show profitability before the credit facility would be given, adding that Platform Petroleum faced similar funding challenge but surmounted it through collaboration with an existing player that brought the fund for the field development.
Anim narrated: “So, from the Platform Petroleum as a company, which is one of the companies that came into being with the 2003/2004 marginal field round. Platform met those challenges real –funding, and how did they overcome that? The first thing they did was to collaborate. They collaborated with an existing player and formed a joint venture that brought in fund for development to first oil.
“Platform was the first company that started production in 2007 in a very quick manner. Now, coming to the field as a marginal field, the volumes you have there, while the previous operator could not develop it was due to the fact that the field was far away from existing facility. The nearest facility was as far as 48kms away. So, that field was considered as a stranded field. But with the reality on ground and as a company that really wanted to come into being, we went further to ensure that we formed a collaboration or a relationship with the existing IOC, NAOC as a company.

“We were able to provide the pipeline to evacuate our crude through the Brass Terminal. That was a major challenge. But one of thing that helped us was collaboration and that is what the 2020 marginal field round has identified, by bringing in companies that have similar view to develop the assets that are on the table now.”