ABSTRACT
The Niger Delta is Nigeria’s and Africa’s most prol ific producing
basin and has some untapped oil resources because of their marginality.
The development of marginal oil field in Nigeria has now become an
important strategic issue. This is due to the vast availability of these
fields scattered all over the Niger Delta. The Federal Government of
Nigeria in a bid to kick-off indigenous participation in the upstream
sector of the petroleum industry initiated the marginal field program.
This was also to increase Nigeria’s crude oil production. Years after
awards of marginal fields, only a few of the awardees have been able to
see first oil production. This is due to various challenges that
marginal field investors have faced over the years and these challenges
were not properly planned for. An important aspect of any field
development planning exercise is inherent in adequately quantifying
risks and uncertainty, particularly when information availability is
limited.
In this work, a risk management process was employed to quantify risk
and uncertainty in developing marginal fields. This involved planning,
identification, analysing, assessing, treating and monitoring these
risks. A total of 15 risk factors were identified and these risks were
screened to high loss risks in terms of NPV. These risks were lumped up
to seven variables which were used as independent variables for Monte
Carlo simulation used to carry out sensitivities on the investor’s NPV.
Petroleum Profit Tax, Reserves, Oil Prices and rate of decline were
identified as top risk factors on investor’s NPV. Fiscal terms,
reserves, oil price, well production performance, reservoir performance
and well integrity risk factors were discovered as the highest ranked
risks in developing marginal oil fields. A set of guidelines was the
formulated to support decision makers and improve the probability of
success in developing marginal fields in the Niger Delta.
CHAPTER ONE
1.0 INTRODUCTION
1.1 PROBLEM DESCRIPTION
The Niger Delta is situated in the Gulf of Guinea and has prograded
south westward from Eocene to the present forming various depobelts. It
is Africa’s largest and most prolific oil producing basin and also one
of the world’s largest delta systems of tertiary age and covers
an area of about 75,000 km2. Several discovered marginal fields exist
in the onshore delta area which provides attractive opportunity for
development due to presence of multi stacked good quality reservoirs
associated with growth fault related structures (Sahu et al, 2011). The
development of marginal oil fields has become an important strategic
issue in Nigeria. This is because government and indigenous investors
both believe that, acquisition of fields which remained undeveloped or
abandoned for a period of 10 years from major oil companies by
government and re-allocation to intending investors would go a long way
in improving the country's proven and recoverable reserves. Marginal
field operators have then been given fields to develop but majority of
the marginal operators are facing challenges in developing such fields.
These limitations being faced by marginal operators mostly arise
because of improper planning for field development. An important aspect
of any field development planning exercise is inherent in adequately
quantifying risks and uncertainty, particularly when information
availability is limited. For marginal fields, accurate evaluation of the
project downside becomes even more crucial, as different development
options carry a substantial probability of negative net-present-value
and project economic viability relies on oil field risk minimization.
Thus, it is essential to undertake a complete and detailed risk
analysis in order to identify key contributors to uncertainty in field
developments, and determine their combined effect and impact on field
economics. If the risks and uncertainties are better understood, ability
to make good development decisions will be greatly enhanced. These will
then help to mitigate uncertainty and shift to the right and/or narrow
the distribution of recovery and net present-value. The evaluation and
quantification of the effect of key risk factors is sometimes a complex
process because of the multiplicity of combinations in development
options are most times represented by running simulations.
In general, quantitative risk and uncertainty is an important tool
for the regulation of any industrial development, as well as the
decision-making in oil field development investment. Uncertainty
quantification creates value only to the extent that it holds the
possibility of changing a decision that would otherwise be made
differently (Bickel and Bratvold, 2008). Therefore quantifying risks and
uncertainties help a great deal in decision-making. Various methods are
currently used in decision-making in the oil industry. Some of them
are: Worst Case/Best Case Scenario, Tornado Plots, Boston Grid, Expected
Net Present Value, Decision Trees, Monte Carlo Simulation and Real
Options. These methods are characterized by different degrees of
complexity and specific theoretical assumptions. This work will utilise
some of the methods used in decision making to formulate guidelines for
understanding and managing risks for successful marginal field
development in the Niger Delta.