An expert in the Oil and Gas industry has identified low reserve, high viscosity and lack of funding both locally and internationally as major challenges facing marginal oil field auction in the country.
Speaking during virtual lecture on “Post Covid Economic Series- marginal Oil field Auction” organised by Faculty for oil Sector Transformation (ROSTER), Mr Joe Nwakwue said that low productivity, absence of nearby facility or infrastructure, high interest rate in the financial system as well as stringent conditions prior to funding approval affect oil field auction programme in the country.
He said that high CAPEX: cost of laying pipelines and other facilities could obliterate profit margin.
He stated that apart from technical and financial problems, the programme still faced the issue of governance, adding that politics, fiscal uncertainty and regulatory policy among others could make it difficult to function effectively.
He explained that there was a time the Nigeria government promised a reduction in tax rate by about 65 per cent but it was implemented.
Expressing the need for the government to go back and look at the incentive acts, he said DPR the regulatory body of the oil and gas sector still has a problem of capacity building.
Nwakwue further said that the size of the field and reserve, type of crude oil produced, location of the field, proximity to existing infrastructure, technology required for development, capital expenditure requirement, and current market and fiscal conditions were factors influencing the marginality.
For the sector to yield the expected result he said “we need to streamline federal government, farmor and Farmer relationship, update fiscal terms, separate oil and gas bids rounds,” insisting that farm out terms need to be standardized and specify it clearly in the regulatory terms.
He pointed out that despite the challenges marginal oil field programme has been a huge success with scope for further expansion and growth, adding that it has contributed to the growth of our reserve and production, increased employment and enhancement of technical and commercial capabilities as marginal field operators scaled up with operatorship of divested assets.
Speaking further he said “a marginal field bid round is long overdue but future, sustained success dependent on programme overhaul,” noting that “a more aggressive assets supply to the market is key to realisation of programme overhaul objective and the future of the industry is tied to the future of the marginal field programme.”
