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Business News of Thursday, 29 December 2022

Source: www.punchng.com

Experts advise marginal field winners on financing

PwC Lagos PwC Lagos

PwC Nigeria has advised winners of marginal oilfield licences to seek innovative financing structures as a means of solving the country’s low crude oil production.

The submission was made at the PwC’s stakeholders forum themed ‘Marginal Oilfield Licence: After Winning, What Next?’ recently in Lagos.

In his opening remarks, Partner, Energy, Utilities and Resources and Africa Oil and Gas Leader, Pedro Omontuemhen, noted that several new marginal oilfield license holders who won the recent bid round were keen on moving ahead quickly in the journey to first oil. They stated that developing a marginal oil field is a capital-intensive project that needs innovative sources of financing.

Executive Commissioner, Economic Regulation and Strategic Planning, Nigerian Upstream Petroleum Regulatory Commission, Dr Kelechi Ofoegbu, who represented Chief Executive Officer of NUPRC, Engr Gbenga Komolafe, emphasised that the Petroleum Industry Act was phasing out the marginal field regime with the objective of equalising all oil and gas producers in Nigeria.

“The NUPRC is willing to support any innovative financing arrangements that the industry is evaluating and mediate any disputes among licence holders,” he added.

Sharing his experience as an established operator, Executive Vice Chairman, ND Western Limited, Dr Layi Fatona, advised new marginal oilfield awardees to manage their cost profile and focus on long-term success.

He explained that partnerships are vital to achieving first-oil production in a timely manner, advising marginal operators to prioritise human capital development and strategic partnerships.

Head Client Relations, Anglophone West Africa, AfreximBank, Peter Olowononi, noted that based on clearly defined risk management policies and procedures, the standard practice is to finance projects that are producing oil and gas.

He, however, said Afrexim Bank recently adopted a different approach by working with some marginal field operators on a guarantee-backed facility based on technical expertise provided by competent oil service companies along with the equity contributed by the awardees.

On her part, the Managing Director and Co-founder of Subdrill Services Limited, Aysha Abba, highlighted the need for marginal field licence holders to demonstrate the commercial viability of their crude reserves in order to attract finance.

“Going the extra mile by working with reserve evaluators to generate a Competent Person’s Report can make a huge difference when seeking finance or strategic partnerships”, she said.

She recommended that the marginal field awardees should engage industry-recognised experts to prepare field development plans, and evaluate financing options.