The Federal Government has revealed it plans to offer marginal oil fields for auction this year despite the crash in crude oil prices. This is disclosed recently through the Group Managing Director of the Nigerian National Petroleum Corporation, Mele Kyari.
The country has not conducted any licensing round since 2007, while a marginal fields round was last held in 2003.
Kyari said the government would not be able to conduct any major licensing round as the current market realities would dampen foreign investors’ appetite.
He spoke on Tuesday during a virtual dialogue session on government fiscal policy decisions in response to the current challenges organized by the Ministry of Finance and the UK Department for International Development Partnership to Engage, Reform and Learn.
He said, “Marginal fields by their very nature require very small-scale investment. Countries normally do this (licensing round) to encourage local participation and this local participation is usually funded by local borrowings because the scale of investment is not huge.
“So, you can typically do a marginal fields bid round even when oil prices are low because their costs of production are usually lower; they don’t need huge capital outlay. It is possible to do a marginal fields bid round this period.”
Kyari ruled out the possibility of conducting “a substantive, full-scale licensing round, where you require foreign investments”.
He said, “This is not the best time to call foreign investors to participate in any bid round. The licences will be priced very low, and even the appetite will be very low.
“You are not likely to end up with the big players when you start a bid round under very low crude oil prices.
“I know we will go ahead with the marginal fields bid round, but will have to delay the substantive bid round to a later date.”
The Director General, Budget Office of the Federation, Ben Akabueze, in his presentation at the event, said the government would accelerate marginal fields licensing and renewal of expiring oil mining licences as part of measures to augment revenues.
In a related development, the international oil benchmark, Brent crude, rose by $4.23 to $31.43 per barrel on Tuesday.