Breaking down Nigeria's licensing round for marginal oilfields

Nigeria has launched its first licensing round for marginal oilfields in nearly 20 years, according to the Department of Petroleum Resources (DPR). The bid process from announcement to the execution of relevant agreements is expected to last about six months. Oyeyemi Oke, Oil and Gas Lawyer and Partner at A02 Law, shed light on the intricacies of the licensing round during an interview with CNBC Africa. Oke explained that the significant gap of 17 years since the last Marginal Field Bid Round in 2003 was primarily due to various administrations attempting but failing to materialize the process. She emphasized that the current timing is crucial as Nigeria aims to boost its reserves and attract more investments to the oil and gas sector. Despite the absence of the Petroleum Industry Bill, Oke reassured investors that existing legislation provides a robust regulatory framework to guide investments, especially in the marginal field regime. The licensing process involves several stages, starting with companies expressing interest and registering on the DPR portal, followed by pre-qualification based on financial and technical capacities. Subsequently, the DPR will evaluate technical and commercial proposals, leading to a final decision by a committee involving key industry stakeholders. Successful applicants will then proceed to pay signature bonuses and acquire the assets. Marginal fields offer opportunities for smaller indigenous companies to operate economically by minimizing costs and increasing reserves. While these fields may not appeal to major international oil companies (IOCs) due to high production costs, smaller players can leverage their size to ensure viable production. Applicants are expected to demonstrate the ability to produce commercially using cost-effective technologies to maximize returns on investments. However, the licensing round faces challenges with some fields being in dispute, as owners have sought legal injunctions to prevent their assets from being included in the bidding process. The government is obligated to respect court decisions on these matters and refrain from including contested assets in the marginal field pool until the disputes are resolved. Overall, the Marginal Oilfields Licensing Round presents a significant opportunity for Nigeria to revitalize its oil and gas sector, attract investments, and boost production. The successful implementation of this bidding process could potentially lead to increased reserves, enhanced technology utilization, and economic growth in the country's energy industry.