#1UNITY AND FAITH PEACE AND PROGRESS Nigeria Marginal Fields Bid Round: Implications, Opportunities and Challenges Engr. Sarki Auwalu, MNSE Director/CEO, Department of Petroleum Resources DEPARTMENT OF PETROLEUM RESOURCES (DPR) Guest Speaker at NAPE Webinar July 8, 2020#2Outline 1 2 DPR and NAPE 3 Marginal Field Operatorship Program 4 Status and Outlook 5 Implications & Opportunities Concluding Thoughts UNITY AND ENTH PLACE AND PROGRESS#3Our Ideas Find Oil & Gas and More... DPR G&G Core to DPR Regulatory Mandate Conservation of Oil & Gas resources Ensure Sustainable Development of Nigeria's Oil & Gas Resources NAPE Association of Petroleum Geologists and related disciplines Promote the study and practice of petroleum geosciences Ensure benefits for members and other stakeholders DPR DEPARTMENT OF PETROLEUM RESOURCES ....Petroleum Regulatory Agency Of Nigeria NIGERIAN ASSOCIATION SINCE PETROLEUM EXPLORATION CORATIONISTS NAPE The Nigerian Association of Petroleum Explorationists UNITY AND ENTH PLACE AND PROGRESS#4- National Aspirations for the Oil & Gas Sector Drivers for Marginal Field Development 1 UPSTREAM 2 MIDSTREAM 3 DOWNSTREAM UNITY AND WITH PLACE AND PROGR Oil Reserves -40 Billion Barrels Grow Gas Reserves 210 TCF by 2030 • Oil Production Capacity 3 Million Barrels Increased Gas Monetization Elimination of Routine Flaring Domestic Gas Supply Sufficiency Power. Commercial. GBIS Domestic Refining Capacity: 50% of Production Price Freedom Optimum Petroleum Products Distribution Networks Petroleum Products Supply: Sufficiency (Fuels, LPG, CNG) DEPARTMENT OF PETROLEUM RESOURCES#5Definitions UNITY AND ENTH PLACE AND PROGRESS Marginal Fields Fundamentals A Marginal field is any field that has reserves booked and reported annually to the Department of Petroleum Resources (DPR) and has remained unproduced for a period of over 10 years. ✓ Fields not considered by license holders for development because of assumed marginal economics. under prevailing conditions. ✓ Fields that have had an exploratory well drilled on the structure and reported as oil and/or discovery for more than 10 years. gas ✓ Fields that present leaseholders consider for farm-out due to portfolio rationalization. ✓ Such field which the President may, from time to time, identify as Marginal Field 5#6Legal & Regulatory Framework UNITY AND ENTIL PLACE AND PROGRESS ACT REGULATIONS GUIDELINES ✰ Petroleum Act 1969 o Petroleum (Amendment) Decree No. 23 of 1996 Marginal Field Operations (Fiscal Regime) Regulations 2005 Guidelines for the Award and Operations of Marginal Fields in Nigeria (2020), and Explanatory Notes GUIDING PROVISIONS President exercises powers under Paragraph 17 of the First Schedule of the Petroleum Act 1969 to cause the farm-out of a Marginal Field ➤ Holder of an OML may farm-out marginal field subject to terms and conditions approved by the President ➤ President reserves the rights to give (or withhold) consent of a farm-out of marginal fields ➤ Marginal field means any field that the President may, from time to time, identify as such. Government reserves the right to withdraw award should an Awardee fail to comply with applicable terms#7Objectives of Marginal Field Programme A 'Win-Win' Value Proposition Government ܀ Nigerians ܀ Nigerian Investors ✰ Foreign Investors Promote Indigenous Participation Generate Employment ท Increase Production A multifarious range of objectives are met by Marginal Field Development Build Technical Capacity UNITY AND TIL PEACE AND PROGRESS Increase Oil & Gas Reserves Encourage Capital Inflow Promote Use of Shared Facilities#8Roadmap of Marginal Field Awards 1999 1999 Two (2) Fields UNITY AND ENITH PEACE AND PROGRESS Thirty (30) Marginal fields -Land (13) Swamp (8) - Offshore (9) 2006 One (1) Field 2003/04 2006 2003/2004 Twenty-Four (24) Fields 2010 Two (2) Fields 2010 2007 2007 One (1) Field 2020 2020 Fifty-Seven (57) Fields#9Marginal Fields Performance - A Global View ~ 2% contribution 2 to National Oil & Gas Reserves Increase of 75% and 100% in Oil & Gas Reserves 16 Producing fields Oil Production Potential (800 - 16,000bopd) UNITY AND FAITH PLACE AND PROGRESS Gas Processing Capacity (~400 MMScfd) Domestic Refining Capacity - 6kbopd (Additional 12kbopd by Q4 2020)#10million bbls OIL RESERVES (MMB) Snapshot of Marginal Field Performance (1) 800 OIL AND GAS RESERVES PERFORMANCE (2005 - 2019) 4500.00 1 Oil Reserves 2 UNITY AND FAITH PLACE AND PROGRESS Gas Reserves 700 600 500 400 300 200 100 30.00 25.00 20.00 15.00 10.00 5.00 4000.00 3500.00 3000.00 2500.00 2000.00 1500.00 1000.00 500.00 0 0.00 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 RESERVES REPORTING YEAR 12P OIL+CONDENSATE RESERVES (MMB) -2P ASSO. GAS + NON-ASSO. GAS RESERVES (BSCF) Marginal Fields Oil & Gas Production (2004-2019) 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 year IOIL GAS GAS RESERVES (BSCF) 2% Contribution 1.6% Contribution 3 4 90.00 Oil Reserves Gas Reserves 80.00 70.00 60.00 50,00 40.00 30.00 20.00 10.00 billion scf 75% Growth 100% Increase 10#11Snapshot of Marginal Field Performance (2) Million BBLS 1,000 900 800 700 600 500 4.00 300 200 100 PRODUCTION COMPARISM CHART (2004 TO 2019) 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 INDIGENOUS OPERATORS (BBLS) MARGINAL FIELDS (BBLS) OTHER PRODUCER(BBLS) 2019 Oil Production Comparison OTHER PRODUCERS 81% INDIGENOUS OPERATORS 16% MARGINAL FIELDS 3% 2019 Gas Production Comparison OTHER PRODUCERS 85% INDIGENOUS OPERATORS 12% MARGINAL FIELDS 3% UNITY AND FATI PEACE AND PROCESS 11#12Record of Achievements of Marginal Fields Reserves and Production Growth Nigerian Content Domestic Energy Impact Security Increased Government Revenue UNITY AND FAITH PLACE AND PROGRESS CSR and Community Engagement 12#13Synopsis of the 2020 Marginal Field Bid Round 화 a اا • 01 Objective UNITY AND FAITH PLACE AND PROGRESS Deepen participation of Nigerian Indigenous Companies in the Upstream segment of the Industry Provide Opportunities for Technical and Financial partnerships for Investors 02 Key principles 03 04 Indigenous Participation Grow Reserves and Optimise the potentials of Assets Wealth Creation & Revenue Growth Resources Attract Credible Investors with Technical and Financial capability Early Asset Development and attainment of production within a short timeframe Structure Electronic-based bidding process#142020 Marginal Field Bid Round -Basis for Sustainability Revocation of inactive and non- performing marginal fields Commencement of 2020 Bid round for marginal fields allocation. Robust and Credible Award process 888 (Ensuring the sustainability of the Marginal Field Programme Ensure Robust Field Development Plans UNITY AND ENTH PLACE AND PROGRESS General Post-Award Conditions ✓ Transfer of Interest Post Award - Awardee can not assign more than 49% interest to another party post-award. ✓ Termination of Rights of Interest Holder - In case of Joint Award, the Minister reserves the right to cancel/withdraw the interest of a party or parties whose failure in meeting their obligations result in the Awardee(s) being unable to progress work on the field. ✓ Protection of Partnerships - The Minister reserves the right to void an award if the activities of the parties post-award are aimed at frustrating the basis of the award as evidenced in the technical /commercial services agreement submitted in support of the bid. ✓ Dispute Resolution - All operational and commercial disagreements arising among Awardees or between Awardees and their partner(s) post-award, shall first be referred to the Nigerian Oil and Gas Alternative Dispute Resolution (ADR) Center#15Award Process and Evaluation Criteria Step 1 REGISTRATION AND PRE-QUALIFICATION Step 4 PURCHASE OF FIELD SPECIFIC REPORT Step 2 DATA PRYING Step 5 PURCHASE OF COMPETENT PERSONS DATA REPORT (CPR) Step 3 DATA LEASING Step 6 TECHNICAL AND FINANCIAL BID SUBMISSION Step 7 TECHNICAL AND COMMERCIAL BID EVALUATION Step 8 ANNOUNCEMENT OF WINNERS Step 9 FARM-OUT AGREEMENT NEGOTIATION AND SIGNING UNITY AND FATIL PEACE AND PROGRESS ❖ Evidence of Company's Existence ✰ Evidence of Capability to Pay Applicable Premium ❖ Nigerian Content Plan ❖ Participation of Host Community/State ❖ Nature of Company - E&P, Federal Character Representation ❖ Evidence of Technical and Managerial Capability ❖ Eligibility to Participate - e.g. Records of Indebtedness to Government 15#16Implications of Marginal Fields Development (1) •Ownership of Asset: 01 Marginal fields are owned by operators as sole risk, independent of the host government. This provides for maximum returns to investor. 04 •Low Investment Cost: Lower cost of investment (US$ 50-100 Million) as compared to major capital projects. •Lower Risk of Development: Marginal Fields are usually discovered fields. which significantly reduce risk of development. 03 02 •Early Time to Production: Typically, 18-24 months timeframe possible. UNITY AND FATIL PEACE AND PROGRESS 16#17Implications of Marginal Fields Development (2) •Shared Infrastructure: Common usage of facilities to ensure optimum utilization for crude transportation and export. 05 UNITY AND FAITH PLACE AND PROCESS •Regulatory Support: DPR enforces regulatory practices of general application, but Marginal Field operators will continue to enjoy 06 significant support to enable their growth in line with Government aspirations. 07 •Start Small; Grow Big: Potential for Scalable Development 17#18Meeting the Challenges... Corporate Governance Financial Stewardship Funding Partnerships DEPARTMENT OF PETROLEUM RESOURCES UNITY AND ENTH PLACE AND PROGRESS Security IOCs and Major Synergy with Operators 18#19Opportunities - Winning Strategies and Models Vertical Integration & Diversification Collaboration and Synergy Aggressive Work Programme Implementation Community Relationship Compliance Cost Control and Optimization • Upstream, Midstream and Downstream • Power Generation . . • . . Gas Industrial Hubs Clusters of contiguous fields to aid synergy and collaboration among operators. Appraisal opportunities Field Studies Corporate Social Responsibility (CSR) Regulatory Operational Excellence • Global Best Practices & Benchmarks DEPARTMENT OF PETROLEUM RESOURCES UNITY AND ENTH PLACE AND PROGRESS 19#20Concluding thoughts... 04 Employment opportunities and local content capacity with positive impact on the economy Government will remain focused on the gains of marginal fields program and continuously put measures to sustain the initiative 01 Challenges are being addressed to ensure sustainable development Great Opportunities exist Investments & 02 03 Foreign Direct Investment (FDI) 20 UNITY AND ENTH PLACE AND PROGRESS#21'Nigeria is Open for Business' UNITY AND ENTH PLACE AND PROGRESS 6600 www.dpr.gov.ng DEPARTMENT OF PETROLEUM RESOURCES