Why Marginal Fields Programme Failed

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The Federal Government in 2005 initiated the Marginal Fields Programme (MFP) to encourage indigenous participation in the oil and gas industry in Nigeria. This is after decades of monopoly by the Shell Petroleum Development Company (SPDC) and other international oil companies that came in later.

In a bid round that year (2005) for the 24 marginal fields, the federal government issued 30 licences; out of which only seven marginal fields have been developed and attained production, according to  the Managing Director of Treasure Energy Resource Limited,Dr Eddie Wikina,  a Rivers State-owned oil and gas company.

Wikina explained that with only seven developed marginal fields out of that number, it shows that MFP success rate was less than 30 per cent, therefore the full potential of the programme has not been achieved.

He noted that the objectives of the programme which were to increase Nigerian local participation in the industry and enhance economic growth have only been partially realised and it is not good, he added.

Variety of factors, according to Wikina were attributed to the failure of the MFP, one of which was basing award more on political and patronage considerations rather than on more business related issues. Some companies that were given these licences have father, mother and children as operators which have no know-how on oil business but were awarded marginal fields because they are related to one big politician or the other, he said.

Another factor that has made the MFP a failure is that the operators lacked technical competence, the knowledge of the operating environment, and business and no financial capacity to finance the business. Indigenous oil companies have not broken even in terms of attracting requisite funding and infrastructural capacity to explore these marginal fields. This has defeated the objective of increasing the participation of Nigerians in order to boost the economy of local areas and creating jobs, as the financiers were mostly foreign oil companies.

He explained that the seven functional marginal fields were headed by people with technical competence and financed by foreign companies. Citing Afren and Matt Resources as instances, he said Afren was a United Kingdom Company while Matt Resources was a Canadian Company and they provide technical and functional support  to operators of the functional marginal fields.

Others that have recorded success, he added, headed by technical professionals include platforms, Energia, Mid Western and Britannia-U.

‘Others are deficient in technical capacity. They basically have political patronage and this cannot bring oil from the ground. They are not ready to spend money on technical expertise but run on boards that are  based on family affiliations with no oil and gas experience’, Wikina explained.

He advised that during the next bid round, the Federal Government should play down on patronage and political sentiments and consideration should be given to qualified companies and indigenous persons from oil bearing states. This is the only way, he stated, that they can contribute to the economic development of the states and create jobs.

Explaining further he said an analysis of the current marginal fields awarded shows that only 30 per cent goes to the South South, 24 per cent to the North, 30 per cent to the South West and 15 per cent to the South East. In terms of the major oil blocs the South South which is where the oil is coming from,  has 13 per cent as its quota, North has 29 per cent, South West 30 per cent while the South East gets 19 per cent.

A further breakdown of the quota that goes to the South South shows that most of the ownership belong to those from Delta States while Rivers, Bayelsa and Akwa Ibom States are marginalised.

He urged the Governors of these three South South States to redirect their focus and walk together to see that this imbalance was addressed as this is denying the region  economic development.

He added that marginal field operators should be, based on the Nigerian Content Act, compelled to establish functional offices with decision authority within the state hosting the marginal fields or close to the areas of operations as failure to do this is denying the host states and areas of operations economic development.

He argued that thousands of jobs will be created in the Niger Delta  States which host oil fields if these offices are located within the states, and if dormant oil fields held by major oil companies were released for development and brought to production.

There is this trend that the oil majors and federal government have concentrated on the high-yields fields. For instance, experts are unanimous on the fact that Abia State’s oil and gas potentials were under-exploited as out of 103 oil fields, only about 50 are producing. The Abia case is applicable to most oil fields in the South South.

The TERL boss also pointed out that putting into consideration the suggestions could help address the current spate of militancy and insecurity in the country as it would ensure that the right environment is created to facilitate investment which results in economic growth.