2020 Nigeria Marginal Field Bid Round Asset Selection Criteria

The economic impact of hydrocarbon resources is everywhere around us in our world today. Besides being utilized as fuel, various forms of plastics, material polymers, electrical insulators are derived from crude oil and natural gas.

In Nigeria, the 2020 bidding round to acquire Marginal Fields is underway. In our initial conversations across bidders, producers, and regulators across the industry-focused consideration on the methodology of asset identification and valuation is a key success factor.

Selecting the right asset for capital intensive upstream development sets the foundation for acquiring, developing, and optimally operating a self-sustaining profitable upstream asset.

Source: DPR

Asset Selection Criteria

Previous Operator of the Asset

Considering that the first movers in the Oil & Gas industry in Nigeria were the International Oil Companies (IOCs), assets previously owned and operated by IOCs. This round includes numerous assets from Exxon Mobil, Chevron, and Total who have previously not been as active in divestments as SPDC.

  • Good operational performance record
  • Large datasets available from historical data across functions
  • Accessible Maintenance records & field development history
  • Available installed technology base

Existing Infrastructure & Facilities

It will be advantageous to acquire assets that already have a key infrastructure in place. This will save hundreds of millions of dollars in upfront development costs before getting to first oil. Having existing offtake infrastructure to already identified off-takers for crude oil, natural gas and condensates increase the bankability of any Investigate the existence and status of the following facilities:

  • Transportation & Evacuation – pipelines, vessels, trucks, barges, etc.
  • Production & Storage – wells, metering, custody transfer
  • Gas– metering, processing, flaring, evacuation

Asset Terrain – Onshore vs. Offshore

Offshore assets are typically more expensive and complex to acquire, develop, and operate profitably than their Onshore counterparts. Offshore assets may also require offshore off-takers or evacuation facilities to onshore off-takers. Less experienced operators tend to lean towards dry land, swamp, or shallow water assets. However, since most bidders will go after onshore assets, offshore assets are less competitive for bidders with the technical and operational finesse to pull it off.

Host Community Management

Community engagement is of paramount importance to operating any asset safely and peacefully. Unlike years past, there has been a standard template for community engagement for the mutual benefit of the operator and its host community. It would be helpful to include community engagement in your due diligence and information gathering on the asset of your interest. With an understanding of the community engagement history of the asset of interest, a bidder can develop an engagement strategy to ensure smooth operations and harmonious relations with the host community.

Government & Regulator Due Diligence

Before committing significant investment into any marginal field, it would be wise to obtain as much information as you can from all the concerned government entities and regulators to get a public sector view of the history of the asset.

  • DPR The previous operators of every asset are required to report all operational and regulatory data to the Department of Petroleum Resources monthly. They can also give end-to-end guidance on the bidding round process, submission, and scoring
  • Host State Government – Can provide access to licenses, land, and other factors of production key to development. Synergy can be achieved when incoming investment can key into the State Government’s development agenda.
  • NNPC – If the asset was part of a Joint Venture, they can provide support on all due diligence inquiries on that asset. Obtaining investment support from the NAPIMS counterparts that oversaw the JV asset in question can go a long way.

At Fundery Africa, we develop strategies to profitably “following the molecule” at every point in the value chain to the final consumer. Consequently, we have developed commercial relationships with the following players in the gas value chain:

  • Upstream Wet Gas Producers – NAG & AG Flare Sites with stranded gas (all terrains)
  • Gas Plant EPCI Services – midstream infrastructure such as pipelines & processing plants
  • Midstream/ Virtual Pipeline Transporters – CNG & LPG transporters who can compress as low as 0.3 MMscfd
  • Gas Project Financiers – Private Equity Gas/Midstream Infrastructure funding up t $100m
  • Industrial Offtake Network – Network of local manufacturers whose operations are powered by natural gas.

Would you like to discuss in detail our recommended fields?

Contact us via email at connect@funderyafrica.com

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